The Value in Diversity

The CCCBA is committed to increasing diversity in the legal profession. To this end, we are developing programs to support local firms in their efforts to become more diverse. Still, some pose the question, why should law firms be concerned about diversity? Well, there are many sound reasons, but let’s just look at one today: Financial success.

McKinsey & Company, the global management consulting firm, recently released their white paper, “Diversity Matters,” which explains the financial and practical benefits of diversity to corporations. I believe these lessons apply equally well to the legal profession.

First, let’s take a look at the current make up of the legal profession. Although men and women graduate from law school in roughly equal numbers, the ABA revealed in its 2014 report “A Current Glance at Women in the Law,” that women comprise only about 34 percent of lawyers and, in private practice, make up only about 20 percent of partners and 17 percent of equity partners.

According to the National Association of Law Placement, racial/ethnic minorities make up less than 6 percent of equity partners, although they comprise about 39 percent of all lawyers. While minorities and women make up a significant part of the legal profession, they are not advancing to leadership roles in proportion to their numbers.

The lack of women and minorities in leadership positions represents a financial loss for law firms. According to the McKinsey report, there is a direct correlation between diversity and financial performance. The report explains that companies that are in the top quartile for racial diversity are 35 percent more likely to achieve superior financial results than their fourth quartile competitors. Those that are more gender diverse are 15 percent more likely to achieve superior financial results.

The international management consulting firm, Boston Consulting Group, also looked at the financial success of diverse companies and found that for each 1 percent increase in gender diversity, companies achieve a 3 percent gain in revenue, and a 9 percent gain for each 1 percent increase in racial diversity. Such figures represent significant opportunities for law firms that should not be overlooked.

What is driving the financial benefits? According to McKinsey, there are a number of reasons. First, diversity gives firms an advantage in recruiting top talent in competitive markets. It is important to recruit from the broadest pool possible, particularly when so many tech companies are also competing for top talent. A firm with diverse leadership can open doors to additional sources of talent and provide advantages in the recruiting process.

Additionally, diverse firms are more successful at retaining talent. Employees report greater satisfaction in diverse companies. This satisfaction results in less conflict among employees and greater employee retention. Considering the cost of employee turnover, employee retention is a significant benefit to companies and firms.

For companies in which minorities make up at least 15 percent of the workforce, their minority employees perform better, with more confidence and with greater self-esteem—ultimately making them more comfortable in their positions. This success also helps to break down prejudices in the workplace that may be barriers to minority success.

McKinsey also reports that by becoming more diverse, companies align themselves more closely with their potential customer base. Firms will be better positioned to develop relationships with diverse decision-makers outside the firm, since they will be better able to understand the customer perspective and adapt accordingly.

Diversity has an impact on decision-making and innovation. One researcher has found that heterogeneous teams are more likely to come up with broad array of arguments based on their personal experiences and offer alternative solutions in a timely fashion. A supporting article by the Center for Talent Innovation reported a correlation between diversity and better decision-making. Without diversity of ideas that come from diversity of experience, there can be little innovation.

Understanding some of the causes of the lack of women and minorities in leadership can help lead to the solution. While there may be many causes for the lack of diversity in law firms, McKinsey’s report presents three causes from recent behavioral economics and social psychology studies.

First, “implicit stereotypes” in which leaders associate particular groups of people with certain traits (for example, that men do math well and women handle creative matters) can affect hiring decisions.
Second, “ingroup favoritism” in which individuals prefer to work with people of the same gender, nationality or race. Third, “outgroup homogeneity bias” in which individuals see their preferred group as more diverse than their “outgroup,” whom they see as very similar to each other.

So how can firms become more diverse? It starts with planning. McKinsey suggests firms should plan for diversity by creating value propositions and setting targets, but not quotas, for diversity. Then assess where the firm is today—in terms of numbers and mindset.

Next, create initiatives directed at achieving diversity—consider alternative work hours to accommodate working parents or business development goals that might better attract certain groups—and make sure those initiatives are shared with members of the firm through a clear and consistent message. It is important that the firm appreciates the value of diversity and leadership supports it.

Finally, we all need to be aware of and fight unconscious bias which can undermine all of our best efforts. A link to the full white paper and its suggestions can be found at

In a state like California, which is becoming ever more diverse, it doesn’t make sense to let an opportunity to create value slip through our fingers. In the same way we invest in technology and develop business plans to build our practices, we can enhance the value of our firms and practices by planning for diversity and putting strategies in place to achieve those goals.