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Why Are Law Firms Failing on Diversity?


Why Are Law Firms Failing on Diversity?

A new study finds that the trend toward external hiring may be partly to blame.
Six hands are clasped in friendship - all white
Black lawyers are more likely to feel “socially isolated” at their firms, which limits their access to connections that might help them find jobs elsewhere. | iStock/andresr

U.S. law firms have a diversity problem, and it’s not going away. In a report for the American Bar Association meeting in August, outgoing president Paulette Brown wrote, ­“I have grown weary of discussing statistics that have not changed in decades and wondering why strategies used have not made our profession fully inclusive. ... It is unacceptable for law to be the least diverse of all comparable professions.”

The numbers are indeed dismaying: 88% of practicing lawyers are white, and the percentage is higher at the upper levels of the field. African-Americans, in particular, experience greater attrition at every stage of the career ladder, accounting for 7% of students admitted to law schools in 2011 but only 4.3% of law firm associates and 2% of partners.

Why has progress in the legal industry been so slow, in spite of all the resolutions, initiatives, and blue-ribbon panels? Adina Sterling, assistant professor at the Stanford Graduate School of Business, says one surprising factor may be increased mobility in the legal labor market.

It’s Who You Know

“Thirty years ago, law firms grew their talent in-house,” Sterling says. “They’d bring in a crop of associates and then, after seven or eight years, promote the top performers and dismiss the rest. Today, as in many other industries, they’re more likely to hire senior talent away from competing firms. For lawyers, that means the ability to move between employers is key to getting ahead.”

Economists generally assume that market mobility leads to more career opportunities and better outcomes for all. But, as Sterling points out, that ignores the role of information and uncertainty in job matching. Since firms now lack experience with potential hires, social networks have become a crucial intermediary — a source of contacts, advice, referrals, and influence for both parties.

So if black lawyers have less access to those networks, Sterling says, the new business model may put them at a disadvantage. To test that theory, she, along with Christopher Rider of Georgetown University and David Tan of the University of Washington, traced the experience of some 1,400 lawyers to see how they fared on the market after they became unemployed when their firms dissolved.

What they found, as reported in a recent paper published in the book Diversity in Practice, is that white lawyers were significantly more likely than nonwhites to find a new job and black lawyers were the least likely to be rehired. Further, among all those who regained employment, whites were more likely to join the most prestigious companies.

“Race is associated with where people ended up,” Sterling says. “We can’t say for certain what caused that, but it’s consistent with there being a race-based difference in lateral mobility.” Tellingly, 88% of white lawyers joined their new firm together with one or more former colleagues, suggesting that social relationships may have played a role. Blacks were more likely to move solo.

“What it looks like is that black lawyers were not as well connected in their firms,” Sterling says. “So when disaster hit, they had less social support and fewer resources to draw on.” And, of course, that same lack of “social capital” would hinder career advancement in ordinary circumstances.

A Natural Experiment

Sterling’s findings could help explain the stubborn persistence of racial disparities. It may well be that law firms are trying to ensure equal opportunity internally, but that the space between firms, bridged by invisible and ungoverned social networks, serves as a biased filter on the flow of talent.

Firms can’t manufacture relationships. It’s up to individuals to forge those essential connections. But companies can create opportunities and foster a culture that makes it possible.
Adina Sterling

Access to networks has always been an issue, of course, but the effect is bound to be larger now that lateral hiring has become strategically vital to companies’ growth and competitiveness. In 2001, 20% of all partner hires by Am Law 200 firms (the highest-grossing firms in the U.S.) were from other top-200 firms. By 2009, that figure had risen to nearly 50%.

However, disadvantages in lateral mobility are hard to document. The reasons that one person is hired over another are not made public, and the pool of lawyers on the job market is generally not a representative sample, since it includes many who failed up-or-out promotions. That makes it hard to draw inferences from their success or failure to gain new employment.

But Sterling and her co-authors realized that the sudden failure of six big law firms during the recession of 2008–09 offered a unique window for study — what she calls “a natural experiment of sorts.” It created a large sample of job hunters, covering everyone from first-year associates to senior partners, all displaced for the same reason and at roughly the same time.

The researchers identified all 1,459 lawyers employed by the six firms and gathered biographical information on them. Then they tracked each one to see if they were rehired by a major law firm. After controlling for other factors that might affect outcomes — gender, experience, location, law school prestige, practice area, and so on— they were able assess the influence of race on hiring.

Overall, black lawyers were 9% less likely than lawyers of other racial groups to regain employment, and black associates were 16% less likely. White partners had the best odds of regaining employment. It also varied by city: While racial effects were minimal in Los Angeles and Washington, D.C., black associates in Philadelphia were 28% less likely to land a new job.

Building Social Capital

“We find that black lawyers are less successful in changing employers,” Sterling says. “So the trend toward lateral hiring and careers that span multiple employers may well be reducing diversity, especially at the senior level.” The higher the rate of turnover, in fact, the more homogeneous law firms will become over time.

And the fact that those who do switch employers are less likely to move with co-workers suggests that black lawyers may face challenges in building the internal working relationships that lead to job referrals. That’s consistent with some previous work, including a 2013 study that found that African-American female lawyers felt socially isolated in their firms.

So what can be done? Clearly, it’s not enough for firms to recruit a diverse batch of associates out of law school. Ongoing effort is needed to ensure that they are fully integrated into the life of the firm. “A focus on helping lawyers develop social capital would probably disproportionately benefit African-Americans,” Sterling says.

That’s not easy to do, she warns. “Firms can’t manufacture relationships. Lots of research shows that traditional mentoring programs aren’t very successful. It’s these informal sources of support and relationships that matter, and it’s up to the individuals to forge those connections. But what companies can do is create opportunities and foster a culture that makes it possible.”

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