Despite years of public statements, monitoring programmes, and much else besides, there has been scant evidence to this point that major companies would ever penalise or walk away from legal services providers on the basis of poor diversity.

A small stream of companies have started to change the terms of engagement with legal providers, and are putting real money on the line for diversity:

“HP Inc.’s chief legal officer and general counsel, Kim Rivera, warned law firm partners in a recent letter that U.S. firms could see 10 percent of their fees withheld if they fall short of the company’s diversity requirements.”

“Novartis has agreed diversity and inclusion targets with its new roster of preferred global and US law firm advisers and will withhold 15% of their fees if they are not met.”

“Telecoms giant BT has come up with a novel way to encourage its panel law firms to be more diverse [...]: a guaranteed renewal for the firm with the best diversity and inclusion record.”

What we’re seeing is that the prospect of losing (now quantifiable) revenue for being too white and male has ignited a new wave of activity. Diversity can no longer be the domain of a single department or working group. The whole partnership has a stake in knowing how they’re doing compared to the sector, and drawing up detailed plans of how to improve.

While some law firms have already been taking serious action on ethnic diversity in recent years, others are more recently embarking on their journey, encouraged by a clear direction of travel in social attitudes and public policy.

Our UK clients in particular are anticipating the introduction of something similar to the mandatory gender pay gap reporting, but instead about ethnicity.

In this article we introduce the emerging best practices around diversity analytics, and share our view of what the real pioneers are doing: which is going beyond lip service and opening up their HR data to clients directly, demonstrating a deeper commitment to their diversity agenda.

The objective is to understand where you currently are, what you’ve done well, what you need to work on, contextualised with what good looks like in your peer group and which challenges are shared across the sector.

• How does ethnic diversity vary with seniority at our firm? And how do we compare to the market average?
• Is our recruitment - both at graduate level and among lateral hires - helping or hindering our diversity ambitions?
• Are we retaining BAME trainees, particularly at NQ level, and losing BAME employees through attrition equally compared to White colleagues?
• Are our promotion rates fair, particularly to the partnership?
• How does the experience vary by the constituent demographic populations (e.g. Black, Asian, Mixed Ethnicity)?

The ‘Sir Roger Bannister’ Effect

For each of our analyses we include the data point for ‘Best Performing Firm’. See image below.

We think showing people what’s been achieved so far is an important part of lifting ambitions for the sector overall.

Too often we are faced with apathy about what’s possible and what’s within the control of a law firm. Senior leaders may blame the education system, the hiring market or the culture across the legal sector. We want to make it impossible to drag your feet and mutter ‘everyone has this problem’.

So we make sure to highlight ‘the score to beat’.

Nobody thought running a 4-minute mile was possible, until they saw Sir Roger do it.

• How does the experience of Fee earners compare with Business Services staff?
• Which areas are most/least attractive to junior BAME colleagues?
• Do BAME employees attend training at the same rate?
• Which of the firm’s recruitment channels and practices are best for attracting diverse groups?
• How do intersectional individuals experience barriers in the firm? In particular how do gender and social class interact with ethnicity?

Headcount is only part of the story

While investigating ins and outs is a great jumping-off point, focusing too much on it can distract from a number of other challenges related to tokenism and equality of opportunity.

Using a blend of HR, finance and matters data, law firms can identify common issues including:

• Employees from minority ethnicities working fewer billable hours or a different balance of billable hours vs. investment hours
• Different spread of opportunities to be client-facing
• Unequal allocation of high-value or high-prestige matters. See image below.
• Write offs and discounts falling disproportionately

The real pioneers of ethnicity diversity reporting are now producing tailored reports for each of their major clients.

While the firm’s motivation is typically to demonstrate a higher level of commitment to diversity than competitors, best practice is to keep the reporting as objective and authentic as possible.

But it shouldn't be considered a one-way street. Law firms have deep and long-standing partnerships with their clients. People and ideas are a revolving door. Clients influence culture as much as anything else. 

Client-specific reporting is about finding ways that the firm and the client can work together, to make shared progress and to strengthen their partnership in future.

We are increasingly prepared to talk about ethnic diversity - and the challenges around it - frankly, openly and in a professional context.

Since 2015 Pirical has been working with legal and professional services firms to introduce decisions based on data instead of those driven by hunches, opinions, and old ideas.

We have helped dozens of clients to kick-off major culture change projects, to retire counterproductive practices and programmes, to set smart but ambitious targets, and to form bold cross-sector collaborations at the most senior levels.

To learn more about what many consider to be the most significant diversity initiative happening right now in the legal sector please see the BAME Benchmark page or contact us directly.

We’re used to helping clients at the start of their journey, and can provide advice about data collection and management too.