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Corporate Law Departments

How corporate law departments can maximize opportunities for diverse law firms while meeting their own needs

Thomson Reuters Institute  Insights, Thought Leadership & Engagement

· 5 minute read

Thomson Reuters Institute  Insights, Thought Leadership & Engagement

· 5 minute read

Corporate law departments can greatly influence diversity, equity & inclusion strategies in the legal industry through their selection of outside counsel

Over the past year, there has been increasing pressure on corporate law departments to follow through on their commitment to diversity, equity, and inclusion (DEI). For example, the Coca-Cola company took concretes steps by creating new standards when utilizing outside counsel for their corporate law matters. Now, at least 30% of new matters must be staffed with diverse attorneys, with at least half of that billable time going to Black lawyers in particular.

Some in the industry consider this to be a historic move, especially the provision stating that Coca-Cola will withhold a non-refundable 30% of fees from those law firms that fail to meet diverse staffing metrics. Most corporate law departments haven’t gone that far, but they are looking to ramp up their DEI strategies and are working towards more aggressive goals.

In fact, other law departments are taking an added approach to achieving equity in legal opportunities by working with the National Association of Minority & Women Owned Law Firms (NAMWOLF) to better promote minority- and women-owned firms. Former NAMWOLF CEO Joel Stern noted that the “most effective way for corporations to increase diversity in the legal profession is to increase their retention of minority and women-owned law firms.”

In our continuing series on the role corporate law departments can play in DEI strategies both internally and with their external law firms, we now look at tangible steps that law departments can take in their selection of outside counsel to help diversify the legal profession. (In part one of a three-part series, we looked at the critical role law department operations staff can play in the execution of a legal group’s DEI strategy.)

Creating a “Best in Class” DEI program

Many law department leaders are realizing that the best way to staff their legal matters is through actively choosing a diverse law firm. NAMWOLF has more than 195 law firms with highly talented attorneys who come from diverse backgrounds; it also uses a rigorous and detailed vetting process to determine law firm admission and then provides corporations and public entities access to those vetted firms.

Former NAMWOLF CEO Joel Stern

NAMWOLF’s value proposition is that these firms should be given a chance to compete for a law department’s legal work because of the incredible quality the firms bring and the outstanding value they deliver. “Hire them because you are getting equal, if not better quality from lawyers who have exhibited excellence in the legal profession,” Stern said.

It is one thing to employ large or big law firms that hire and staff legal matters with diverse lawyers; it is another, however, to utilize smaller, diverse law firms in staffing matters. These two objectives don’t need to be at odds, Stern said, adding that large corporations can make a commitment to both big firm diversity and supplier diversity.

Stern said he spends a lot of time educating law departments on how to be cognizant of giving minority and women-owned businesses the opportunity to compete for and win business, arguing that women and minorities have been historically disadvantaged. “When they leave big law firms and show entrepreneurial courage to start their own practice, the good corporate citizen should give them the opportunity to showcase their wares,” he said.

Barriers for firms owned by lawyers from underrepresented groups

At the end of the day, corporations want to the right thing, but behind every corporate law departments is a human being with human tendencies. Stern said he advises departments in two areas to help improve relations with a new firm: first, be aware of incumbency bias; and second, consider staffing a law firm relationship partner.

Combating incumbency bias

Unfortunately, buyers of legal services sometimes have incumbency bias, meaning that corporations which sign up new law firms tend to have an unconscious bias towards their previous firms based simply on familiarity, and not on racial, sexual orientation, or gender prejudice.

Clearly, corporate law departments want to support diversity initiatives, but they don’t want to see a big difference between the performance of their previous firm and that of their new, diverse firm. Because of the familiarity with their previous firms, law departments may hold the new firm to a higher, more rigorous standard. “They like the incumbent,” Stern explained. “[The previous firm] knows how you like to be billed, whether you care if there are typos in your memos, they know you must have an executive summary of memos more than eight pages long, and where you like to go to lunch — they know everything about you.”

The best way to stop this incumbency bias is to recognize it at the beginning of the relationship and acclimate the new firm to your culture, he said, noting that such programs as the Walmart Ready program which focuses on training outside counsel on Walmart’s business and culture, help with this effort.

Appointing a law firm relationship partner

Law department leaders should also consider identifying a dedicated relationship manager within the department to serve as a liaison with the new law firm. By identifying a dedicated relationship manager to play this role, a department will be able to better foster its relationship with the member firms.

It is critical that the relationship manager be responsible for understanding how the department makes decisions to retain and terminate law firms, and they also should work to ensure that lawyers within the department who make such decisions are considering diverse firms.

“We know the first three to six months [of a relationship] can be tricky to acclimate into the corporate environment because the firm is new,” Stern stressed. “But if they are set up for success, we know these firms can deliver.”

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