Workplace diversity has evolved from a societal pressure to a commercial one, especially in professional services like accounting, consulting, and law. Clients seek service providers whose values align with their own, and diversity is a key factor. However, a recent study published in the Strategic Management Journal has found that such moves towards diversity may not be as impressive or broad-based as advertised.
The study analysed 167 top US law firms, around 1,400 buyers, and 1,506 firm-year observations over a 12-year period (2002 to 2014). It found that while law firms recruit more females owing to the gender diversity preference of prospective clients, this shows up only in the non-equity ranks of law firms that have a two-tier structure. This suggests that firms may bolster the lower rungs of partnership tiers to send diversity signals to prospective clients while still not disrupting the higher echelon of a firm that lacks diversity.
“The study’s findings also suggest that law firms may substitute racial diversity for gender diversity when signalling value alignment with buyers of their services,” said study co-author Lionel Paolella, Associate Professor in Strategy & Organisation at Cambridge Judge Business School. This suggests that firms act strategically regarding diversity management in ways that “emit diversity-conforming signals”.
The study also found an inverse relationship between pro bono activities of law firms (often on behalf of charities or others who could not normally afford a corporate law firm’s fees) and diversity. This suggests another substitution effect among two activities that can be costly to law firms: pro bono work and diversity efforts.
The study clearly confirms the connection between law firms’ presentation of their diversity drives and the preferences of prospective clients’ own values and how they present themselves to key stakeholders. However, clients should be wary of the fine print. A highly select diverse team put in front of a client may not represent the law firm as a whole, and the presentation at such a meeting may mask some trade-offs in diversity and other pro-social activities that – if uncovered – could cast doubt that an alignment of values really exists between buyer and seller.
As one law firm partner is quoted in the study, “If we are aware that diversity is a high priority for a particular client, for example, then it will be even more important than it normally is to put a diverse team in front of them.”
The study, entitled “A rivalry-based theory of gender diversity”, was co-authored by John Kenneth Mawdsley of HEC Paris, Lionel Paolella of Cambridge Judge Business School, and Rodolphe Durand of HEC Paris. It has implications far more broadly, including for other professional services and the buyer-seller relationship in general.
