September 15, 2011 § Leave a comment
The Institute for Inclusion in the Legal Profession (IILP) recently published a report, titled The Business Case for Diversity: Reality or Wishful Thinking?, that has the legal community talking. IILP formed a partnership with the Association of Legal Administrators (ALA) to gather data on the three primary stakeholders in diversity initiatives: corporate clients, law firms, and diverse partners. Specifically, they address the question of whether the business case for diversity is working. The report is regarded as a much needed shift away from the “anecdotal commentary on the subject” to hard data relative to the business case for diversity.
The report ultimately concludes that the business case for diversity is working but also cautions that there exist serious complications affecting the impact and effectiveness of the effort. For example, expectations differ dramatically from one group of stakeholders to the next, giving each group a unique set of problems to overcome. However, there is one hurdle that affects both corporate counsel and minority and women outside counsel alike: attorneys need to develop strategic connections within a company and have meaningful one-on-one interactions with them to forge relationships that could result in business opportunities. Many attorneys report that forming these relationships, or rather not forming them, is holding back progress of diversity and inclusion in the legal profession.
This year, NAMWOLF celebrates its 10th Anniversary as an organization dedicated to diversity and advocating for inclusion. At our upcoming Annual Meeting & Law Firm Expo, I am pleased to say that our organization provides its members with the crucial opportunities they need—now more than ever—to create, develop and maintain those relationships with corporate counsel. IILP’s data suggests opportunities to interact with prospective clients one-on-one is the most effective strategy for developing business relationships, opposed to situations where there are simply a large gathering of attorneys. Over the past several years, NAMWOLF has successfully created an atmosphere of inclusion during our events in the hopes of increasing the exposure and the utilization of minority and women owned law firms. This formula has proven to be tremendously successful for our law firm members and those corporations and public entities who approach the organization seeking diverse outside counsel .
The business case for diversity will continue to be discussed at conferences and examined through studies as we strive to make the legal profession more inclusive. NAMWOLF is just one of several organizations that have made great strides in this effort. For the past 10 years, we have been committed to making our profession better. We will continue to find more ways help bolster the business case of diversity by providing an atmosphere of inclusion for minority and women owned law firms. This is our mission.
June 3, 2011 § Leave a comment
Supplier diversity programs have played a pivotal role in the exponential growth of minority businesses in traditional areas such as construction, janitorial services, security, manufacturing, and distribution. These programs have not, however, provided the same measure of growth and opportunities for minority and women-owned (M/WBE) professional service providers in fields such as public relations, finance, and legal. Some corporations have made strides to improve upon their utilization of M/WBE professional service providers, but this appears to be the exception to the rule. Unfortunately, the identification and utilization of M/WBE professional service providers, specifically legal services, appear to be lagging behind – if not excluded – by most corporations in the application of their supplier diversity programs.
DEVELOPMENT OF SUPPLIER DIVERSITY PROGRAMS
The United States has made verifiable progress in managing and promoting supplier diversity initiatives. Since implementation in 1972, the amount of purchases by National Minority Supplier Diversity Council corporate members from minority businesses has grown from an estimated $86 to $101.1 billion in 2009 in the areas of goods, supplies and general services.¹ The U.S. Department of Commerce’s Minority Business Development Agency reports that minority businesses employed 5.8 million people in 2007 and concluded that minority firms are an “engine of job creation.” However, these programs have not provided the same measure of growth and opportunities across all industries—leaving fields such as public relations, finance, and legal lagging behind.
Chicago United, an advocacy group promoting multiracial leadership in corporate governance, highlights reasons for the underutilization of minority-owned professional service firms in a 2004 report titled “Chicago United’s Professional Services Model (PSM): A Business Management Tool for Large Corporations to Address the Problem of Limited Utilization of Minority Professional Service Firms.” The author writes, “During the 1990s, program rationale began to shift, focusing less on social implications and more on the business case.” This explains why supplier diversity programs have become—or remained—commodity focused: the system is easily quantifiable and produces clear return on investment in support of the business case. Additionally, some professional services tend to be contracted on an as-needed basis with the issue both arising and needing to be rectified quickly. For example, a company cannot predict when they will face a class action law suit or whether they will have to embark on a marketing campaign to protect their corporate image. Due to the unpredictable and time sensitive nature of contracts for professional services, evaluation of a supplier’s diversity position seems tangential to simply identifying a reputable firm quickly from existing suppliers or an in-house referral.
THE NEGATIVE RESULT
In the legal community, many M/WBE firms suffer from a lack of opportunity to develop relationships with in-house counsel who are decision-makers. The Chicago United position paper reports on the important role existing relationships play in selecting professional services—relationships sometimes generations old—calling the subsequent disadvantage to M/WBE firms “profound”. The author based this analysis on a series of candid discussions with executive and senior-level managers in major national corporations revealing that they chose firms however they wanted and did not have to report “how much or with whom they were spending their dollars.” The fact that purchases were with majority firms indicates that executives often choose firms from within their ranks of personal or professional contacts. This creates a potential problem, however, where relationship connectivity—rather than a formal evaluation of capacity, cost, and capability—produces a perception of value for a firm that may or may not be accurate. This method creates an atmosphere where M/WBE law firms are often excluded from fairly competing for opportunities to showcase their legal expertise.
There is inconsistency and unconscious bias in evaluating minority firms as well. Some believe that because most M/WBEs are smaller and younger firms than majority owned law firms, they often lack the capacity to compete effectively for contracts. According to Reginald T. Williams, who is credited by some as coining the phrase “supplier diversity”, there exists an inherent perception that minority firms put companies’ reputations at risk and executives who have discretionary spending authority are clearly more comfortable with majority firms.² There are two indicators that this perception is influenced by an unconscious bias: (1) companies do not question the capacity of small, majority owned boutique firms and (2) empirical findings on affirmative action procurement programs indicate that it is not capacity but rather discriminatory barriers that limit M/WBE growth in the marketplace.³
Research produced by The Hackett Group shows that companies that focus on supplier diversity generate 133% greater return on investment than businesses who do not. Such companies spend an average of 20% less on their buying operations and have procurement teams half the size of their peers whose supplier programs are not as diverse.
The emergence of supplier diversity programs and professionals has had a tremendous impact on increasing the awareness, viability and inclusion of M/WBEs in corporate America. However, many corporations still lack focus on increasing diversity and inclusion with respect to their procurement of professional services. The business case for the utilization of M/WBE professional service providers is the same, if not more beneficial, as it is for the utilization of M/WBE suppliers of goods and/or distribution services. An effective and innovative supplier diversity program must include a focus on professional services. It is often easier for companies to simply continue the methods of the past when retaining professional services, especially when the results have been largely positive. However, companies should consider the tremendous value and benefits that will be obtained by re-examining and re-focusing their methods on hiring diverse professional service providers. The failure to do so will continue the perpetuation of exclusion and bias many M/WBEs confront while competing for opportunities. The positive impact on a company that utilizes M/WBE professional service providers will be measured by increased value, diverse perspectives and a genuine reputation for inclusiveness.
REFERENCES & SUGGESTED READING:
²2008. “The Man Who Coined the Phrase ‘Supplier Diversity’.” Engage UK 006. Accessed May 10, 2011. http://www.purdue.edu/supplierdiversity/pdf/EngageCoverReggieWilliams.pdf
³Bates, Timothy. 2001. “Minority Business Access to Mainstream Markets.” Journal of Urban Affairs 23:41-56. Accessed May 10, 2011. doi: 10.1111/0735-2166.00074
Chicago United. 2004. “Chicago United’s Professional Services Model (PSM): A Business Management Tool for Large Corporation to Address the Problem of Limited Utilization of Minority Professional Service Firms.” http://www.chicago-united.org/PSM_Position_Paper.pdf
“The Hackett Group: Supplier Diversity Does Not Drive Increased Costs.” The Hackett Group. Accessed May 10, 2011. http://www.thehackettgroup.com/about/alerts/alerts_2006/alert_08172006.jsp
April 19, 2011 § Leave a comment
In an article to LawMarketing.com in December, 2010, Larry Bodine summarized information from the ACC/Serengeti Managing Outside Counsel Survey. The survey reports approximately 180 law department’s insight on managing work with outside counsel. Based on the survey results, Bodine made suggestions to law firms for increasing their business with in-house legal departments. I want to highlight some key points from Bodine’s summary that I think have special meaning for NAMWOLF members as M/WBE law firms.
Bodine relays good news for law firms: under 1/3 of law departments reported that they engaged in convergence and the number of RFPs jumped from 20% to 25%. But counter to that good news is data stating law firms were unable to substantially raise their fees and that in-house departments project zero increase in spending for 2011. While In-house law departments are increasingly looking for ways to get more out of their budget, competition for their work is greater.
I see this challenge as a golden opportunity for NAMWOLF law firm members for two reasons: we offer superior value/service and competitive rates . After the 2009 introduction of the ACC Value Challenge, Serengeti’s Vice President of Strategic Development stated in an interview with European GC, “This increased level of scrutiny is being driven by necessity: reducing outside legal spending has jumped to the top of the most pressing issues facing law departments, ahead of compliance concerns which predominated for several years.” NAMWOLF firms are value added, meaning they offer the same high-level experience and service, if not better, than a majority firm. By focusing on value we can better appeal to in-house departments on a budget.
NAMWOLF firms are value-added by nature of their diverse background and multiple perspectives. We offer more creative solutions to client challenges, but we do ourselves a disservice if we stop there. As noted above, the issue of compliance or supplier diversity has become secondary to the issue of the bottom line. According to Bodine, the most common expectations of outside firms are as follows.
- Encourage alternative dispute resolution.
- Require associates to have a minimum level of experience.
- Technology requirements—such as putting matter information on a client-centric site used by multiple firms—not a patchwork of individual law firm extranets.
- Impose policies regarding diversity of service providers.
- Require discounts from standard rates.
- Take ownership of work product.
- Require budgets for all projects.
- Prohibit any change of assigned lawyers without client consent.
- Limit Travel Expenses.
- Expect early case assignments.
Willingness and flexibility in regard to the above expectations of in-house departments combined with the value that M/WBE law firms inherently provide will increase your chance of cultivating long-lasting, mutually-beneficial relationships with in-house counsel.
Concern with value in selecting outside legal counsel has persisted and articles on the topic are ubiquitous. For example, new ACC chair J. Gonzalez-Pita listed the ACC Value Challenge initiative as one of four long-term organizational goals that he will inherit and continue to address, stating the initiative seeks—among other things—to move law firms away from the billable hour and more toward providing value. Relevant to this statement, Bodine’s final point for law firms to consider is that alternative fee use is growing and that “resistance of law firms to alternative fees is much greater than at companies.” It is likely that firms feel this type of project management is merely a tool to restrict billable hours, but is it possible that alternative fee structures could force your firm to be more efficient and, therefore, more profitable?
Some argue that law firms might have something to gain from alternative billing arrangements. An ACC Docket, December 2010, article explored the issue of potential advantages for firms who embrace corporate interest in alternative billing: competitive advantage, improved resource planning/budgeting, and a boost up the value chain—a boost “from pure legal advisor to business counselor.” It’s helpful to know that the most common types of work for which in-house counsel consider alternative fees are routine high volume matters, small litigation matters, and large business transactions. Willingness and flexibility in the matter of billing will likely increase the overall value of your services in the eyes of in-house legal departments.
Companies and public entities support NAMWOLF’s mission for a variety of reasons. Many organizations are seeking to improve their diversity platform, while others are searching for diverse perspectives. Regardless of the motivation that brings them to NAMWOLF, the key to their continued patronage is the value our firms provide to their organizations. The strength and longevity of NAMWOLF is directly linked to the focus and dedication of our law firms on providing exceptional service. I encourage each of our law firm members to actively promote themselves as ‘value-added with diverse perspectives’ and seize every opportunity to create real, effective partnerships with your clients. This is who we are. This is what we do.
References and Suggested Reading:
Bodine, Larry. (Dec. 14, 2010). Clients are happier, but offer less legal work with a tiny fee increase. Retrieved from http://www.lawmarketing.com/pages/articles.asp.
Rousing the silent majority. European GC 1 (15), 3-4.
The new chair at ACC: continuing the tradition while blazing new paths. The Metropolitan Corporate Counsel 19 (1), 1,49.