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In most industries, including law, the failure to develop new products is fatal. Economic development is driven by product development: New products create new opportunities, expand businesses, and forge industries.  However, as technologies make things more efficient, this cycle must be repeated to ensure that new people and ideas are continually engaged and employed.  Critically, continually delivering excellent and innovative products and expertise requires a breadth of insight that can only be created through diverse leadership.  Why?  Because insight into customer perspective requires leadership composition that mirrors ever-diversifying customer composition.

            Numerous studies make clear that entities with more diverse workforces and, more importantly, leadership, out-perform their peers.  As reported by McKinsey & Company: [C]ompanies in the top quartile for gender or racial and ethnic diversity are more likely to have financial returns above their nation al industry medians.  Companies in the bottom quartile in these dimensions are statistically less likely to achieve above-average returns.  And diversity is probably a competitive differentiator that shifts market share toward more diverse companies over time.1

                This disparity can be directly traced to the competitive advantage inherent to diversity in developing new products and creating new lines of business.  And, like every industry, law firms must take advantage of diversity in order to effectively engage in new product development.  Our customers do not sign engagement letters with practice areas, they are investing in lawyers and expertise – these are our “legal products.”  However, to make sure that our products are attractive to our clients we must leverage the competitive advantage of diversity, specifically in firm leadership.  Leadership diversity creates diversity of thought, which spurs new – and different – opportunities, products and industries.  Thus, when analyzing how best to develop new legal products, understanding the competitive advantage of diversity – using the broadest possible definition – is critical.


What is the competitive advantage of diversity?

            Look at the successful in our region and you will see that the diversification of their workforce and leadership is a critical driver to on-going success.  These industry leaders recognize the strategic benefits of diversity, including:

Ÿ    Better understanding of customer needs and markets

Ÿ    Better communication with customers

  • Ability to attract, recruit and retain top talent
  • Eligibility to participate in programs focused on diverse businesses
  • Enhanced corporate image, and public goodwill
  • Different perspectives on problem-solving and decision-making


Clearly, successful companies recognize that building effective and diverse internal and external networks, especially in leadership, is critical to developing new products and spurring economic development for their businesses and regions.


Is this really an issue for the legal profession?

            Despite the clear relationship between diversity and business success, the vast majority of corporate boards and executive suites are comprised of mostly white men.  To prove this point, in April 2016, a Harvard Business Review study provided this shocking statistic: “There are more CEOs of large U.S. companies who are named David (4.5%) than there are CEOs who are women (4.1%) – and David isn’t even the most common first name among CEOs. (That would be John at 5.3%)”2

                This reality is the same, if not more pronounced, in law firms (though we may have more diversity of first names).  Per a Law360 survey, there is “a bleak outlook for diversity in the legal profession – less than 15% of attorneys at U.S. law firms surveyed by Law360 are minorities.  Even fewer partners – less than 9% – identify as minorities.”3  This lack of diversity means that as an industry we are failing to reflect our clients’ values and priorities, and, as importantly, it means we are failing to take advantage of the competitive advantage of diversity.  As noted in “the High Cost of Big Law’s Lack of Diversity: “[C]orporations want to partner with law firms that have similar priorities.  Corporate clients spend 25% more with legal teams that they consider “very diverse” than they spend with teams they see as “not at all diverse” or strictly male, according to legal research firm Acritas.  So the sluggish-to-nonexistent progress reflected in Law360”s 2016 Diversity Snapshot does not bode well for he future of firms that fail to move the needle.

Competitive advantage will be derived by “those firms that invest in diversity and understand the changing landscape,” says Tom Sager, former general counsel at DuPont Co. and now a partner at Ballard Spahr LLP.  “The demographics are so obvious to all now, and to be successful, over time you’re going to have to be a leader in this space, particularly as corporations wise up and understand that a lot of the work they do with the external world is done through their law firms.”4

                Our diversity failures mean we aren’t serving our clients to the best of our ability and we are stagnating as an industry.  As another former in-house lawyer plainly stated, “corporations don’t just want to hire a law firm – they want to form a relationship that can add value to the corporation’s brand, and law firms add value when they are more diverse.”5 That said, becoming more diverse cannot be seen as a way to satisfy RFP requirements, it is much harder than that.  It requires hiring, developing, and promoting diverse attorneys so they can provide insight into how an industry’s client population (as well as our client’s clients) is diversifying and how we can meet that groups’ varying needs.  Thus, we must incorporate into leadership people with different backgrounds to ensure we see the world through multiple lenses and build better legal and business strategies for our clients.


How can our industry create its competitive advantage?

            In analyzing this problem for all businesses, the Harvard Business Review authors observed: Despite the ever-growing business case for diversity, roughly 85% of board members and executives are white men.  This doesn’t mean that companies haven’t tried to change.  Many have started investing hundreds of millions of dollars on diversity initiatives each year.  But the biggest challenge seems to be figuring out how to overcome unconscious biases that get in the way of these well-intention programs.6

                The Harvard Business Review study – supported by many others – advocates deliberate action to change the status quo:  “When there was only one woman or minority candidate in a pool for four finalists, their odds of being hired were statistically zero.  But when we created a new status quo among the finalist candidates by adding just one more woman or minority candidate, the decision makers actually considered hiring a woman or minority candidate….Managers need to know that working to get one woman or minority considered for a position might be futile, because the odds are likely slim if they are the lone woman or nonwhite candidate.  But if managers can change the status quo of the finalist pool by including two women, then the women have a fighting chance.”7

                These conclusions follow the results of earlier research regarding how diversity can defeat price bubbles.8 That study found that any market dominated by one ethnicity led to worse decisions but, market diversity – even simply having more than one ethnicity – led to more scrutiny and challenging of decisions and ideas, less overconfidence and better outcomes.

Decision making, especially hiring and promotion decision, often follows the path of least resistance.  When we are considering potential leaders we often hire people whose background and views are similar to ours; meaning they often look like the historically homogeneous decision makers.  This unfortunate predisposition creates a barrier to innovation and a loss of competitive advantage, which kills organizations.  Accordingly, law firms must deliberately be creative and innovative when apportioning leadership opportunities.  For example, before hiring decisions are made, consider the diversity of the candidate pool.  If everyone with whom you are meeting looks the same – which often means they look like you – you are losing a potential competitive advantage.

Thus, to truly grow, businesses – including law firms must utilize the competitive advantage of diversity.  This requires analysis of important issues:

  • What new products and services can be developed to create new industries and employment opportunities?
  • Where, and from whom, are new ideas coming from?
  • Do we understand how demographic trends are affecting economic realities?


In our global, multicultural, business market, diversity is an increasing priority among clients’ business strategies.  So, to diversify our client offerings, we must diversify the leadership that creates, directs, and provides expertise and commercial insight.  Failing to do so will cause our industry to stagnate.  To stay relevant and competitive in an increasing flat market, firms must develop new strategies to compete and approach the market in different and innovative ways.  In the long run, considering, hiring, and developing more diverse leaders will help law firms develop new products, grow their business, and serve clients better.


1 “Why Diversity Matters” by Vivian Hunt, Dennis Layton & Sara Princ; McKinsey & Company (January 2015) (http://www.mckinsey.com/business-functions/organization/our-insights/why-diversity-matters).


2 “If There’s Only One Woman in Your Candidate Pool, There’s Statistically No Chance She’ll Be Hired” By Stefanie K. Johnson, David R. Hekman, and Elsa T. Chan, Harvard Business Review (April 26, 2016) (https://hbr.org/2016/04/if-theres-only-one-woman-in-your-candidate-pool-theres-statistically-no-chance-shell-be-hired)

3 “Law 360’s 2016 Law Firm Diversity Snapshot,” Law360 (May 19, 2016) (https://www.law360.com/articles/797823/law360-s-2016-law-firm-diversity-snapshot)


4 “The High Cost Of Big Law’s Lack Of Diversity” by Melissa Maleske, Law360, Chicago (May 17, 2016) (https://www.law360.com/articles/795768/the-high-cost-of-biglaw-s-lack-of-diversity)


5 Id.


6 “If There’s Only One Woman in Your Candidate Pool, There’s Statistically No Chance She’ll Be Hired” By Stefanie K. Johnson, David R. Hekman, and Elsa T. Chan, Harvard Business Review (April 26, 2016) (https://hbr.org/2016/04/if-theres-only-one-woman-in-your-candidate-pool-theres-statistically-no-chance-shell-be-hired)



7 Id.


8 “Ethnic Diversity Deflates Price Bubbles” By David Stark and Sheen Levine, Proceedings of the National Academy of Sciences (December 30, 2014) (http://www.pnas.org/content/111/52/18524.full)



profile picture of Richik Sarkar, Esq.

Mr. Sarkar handles many special projects, litigation and risk/crisis management for his clients at McGlinchey Stafford.

Richik Sarkar is a member of McGlinchey Stafford PLLC with a broad, varied practice in which he handles and directs: (1) litigation, (2) special projects such as organizational updates, policies, strategies, and investigations, and (3) risk and crisis management; for a variety of clients across several industries, ranging from sports and media agencies to local, regional, and global companies and financial institutions.  He has been a CMBA member since 1998.  He can be reached at (216) 378-4994.


Republished with permission from the Cleveland Metropolitan Bar Association