The U.S. Department of Labor defines diversity as “the infinite range of individuals’ unique attributes and experiences such as ethnicity, gender, age, and disability.” Implementing diversity in the workplace requires cooperation between diverse people. That is not easy. According to Sandra Susan Smith of the University of California, Berkeley, in her article “Race and Trust,” “people are more likely to express greater trust in, and act trustworthy toward, those they perceive to be like themselves.” While diversity has its obstacles, data show diversity significantly benefits businesses financially.
According to the Catalyst Information Center in its article “Why Diversity Matters,” Fortune 500 companies with the most women on their boards outperformed those with the least by 66 percent in return on invested capital, 42 percent in return on sales, and 53 percent in return on equity. Another Catalyst study, “The Bottom Line: Corporate Performance and Women’s Representation on Boards,” concluded that companies with three or more women on the board of directors financially outperformed companies with zero women on the board of directors by 84 percent. Further, a McKinsey & Company report stated that racial diversity correlates with profitability, that ethnically diverse executive teams are 33 percent more profitable than their more homogeneous counterparts, and that ethnically diverse boards of directors are 43 percent more profitable than less diverse boards. Lastly, a 2019 Federal Reserve Bank of San Francisco study calculated that the country’s output would have been $2.6 trillion greater if the gap between white men and everyone else were closed. In short, the numbers speak volumes when it comes to the greater revenues of diverse businesses.
Obstacles to Diversity
When diverse leadership teams so greatly outperform non-diverse teams financially, why is diversity among leadership teams so scarce? Perhaps because diverse teams are wrongly perceived as less competent and less productive than their homogeneous counterparts. When it comes to simple tasks, the evidence that diverse teams outperform non-diverse teams is limited. However, diverse teams have proven to be more effective in performing complex tasks, as presented by Scott E. Page in his book The Diversity Bonus.
Productive diversity is not achieved arbitrarily. According to Page, “we cannot convene a random collection of diverse people and expect diversity bonuses.” Building a diverse team is more complicated and requires carefully considering other, more complicated factors, such as a candidate’s personal experience and identity. A person’s identity is informed by the person’s race, ethnicity, gender, sexual orientation, physical ability, and age, among other factors.
Lack of trust is another obstacle to diversity in the workplace, including the legal workplace. As mentioned above, people are more likely to trust those perceived to be similar to themselves. Page noted that “familiarity and trust advantage homogenous teams over diverse teams.” Heidi Gardner of Harvard Law School’s Center on the Legal Profession stated in her article “Collaboration in Law Firms” that “[t]he single most important factor in fostering collaboration is fostering trust, both relational and competency-based, among all those in the firm.” Gardner’s study considered the lack of competency trust among attorneys of different practice areas and jurisdictions. If we add identity diversity to the mix, developing trust becomes more challenging. The risk averse ethos of the legal profession and clients may also be contributing to a bias toward the use of familiar legal teams, rather than trust in ones that incorporate less familiar diverse members.
Despite the obstacles and biases, the benefits of cross-practice diversity and of identity diversity are substantial. In fact, the growing complexities of globalization and new legal challenges call for diverse legal teams.
Complex Global Clients
The economy continues to globalize and become more complex. Global businesses face constantly changing regulatory frameworks, bureaucracy, environmental challenges, labor requirements, and technology, to name a few challenges. According to Gökçe Sargut and Rita Gunther McGrath’s article “Learning to Live with Complexity” published in 2011 in the Harvard Business Review, “it is very difficult, if not impossible, for an individual decision maker to see an entire complex system.” Robust collaboration is key.
Businesses are adapting to promote collaboration, including by designing open and flexible workspaces to foster interaction, innovation, and trust, as trust is essential for collaboration. As Paul J. Zak explains in his 2017 Harvard Business Review article, “The Neuroscience of Trust,” workers at companies where trust is high report 106 percent greater energy in the office, 74 percent lower stress levels, 76 percent greater engagement, and 50 percent more productivity than their peers at low-trust businesses.
The legal issues of global business are complex. They transcend practice areas and jurisdictions. As Gardner explained, providing legal services to such global businesses requires the collaboration of attorneys with broad ranges of expertise and specialization. When, in addition to specialized knowledge, diverse attorneys contribute their relevant identity-based knowledge and perspectives, their teams become better at understanding and solving their global clients’ complex legal needs.
In sum, ensuring inclusion and diversity in transactional legal teams is not only the right thing to do. Diversity clearly improves performance and profitability. It appears that businesses have recognized this; more and more legal work is being diverted from Big Law, which tends to be less adaptable and less diverse. The work is going to smaller women- and minority-owned law firms because of their quality, flexibility, and diversity. As Sheryl Axelrod discussed in her article “Oh, The Times of Inequality, They Are A-Changin,’” major businesses trust the work quality and the efficiency that minority-owned and diverse law firms have to offer. Diversity in law firms should be viewed as an asset, not a liability. Diversity is great for business.
C. Jeffrey Leung is a Texas attorney at the firm Wong Fleming, a NAMWOLF member law firm, with offices across the United States. Roberto Portillo Togno is an attorney at Drohan Lee LLP, a NAMWOLF member law firm, in New York, New York.
This article is part of a special edition of the Woman Advocate Committee's newsletter following the theme Diversity: It Makes Teams Better and featuring a diverse team of writers from National Association of Minority and Women Owned Law Firms (NAMWOLF) member law firms. This edition of the newsletter was organized and edited by Sheryl L. Axelrod—president of The Axelrod Firm, PC, a NAMWOLF member law firm, in Philadelphia, Pennsylvania— and Sandy Sakamoto—partner at LimNexus LLP, a NAMWOLF member law firm, in Los Angeles and San Francisco, California; Washington, D.C.; and Wilmington, Delaware.
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