Caren Ulrich Stacy, CEO of Diversity Lab, started the San Francisco-based company in 2013 when she realized that "law firm leaders wanted to do things better to boost inclusion and diversity, but they didn't seem to know how," she said recently. 

For more than two decades before starting the company that analyzes law firm business practices and fosters data-based experimentation to make the profession more equitable, Stacy had served as head of talent for Arnold & Porter and Cooley. 

As she helped to hire, develop and sometimes fire hundreds of lawyers each year, she saw a pattern. "Lawyers with equal potential were failing at different rates. Some lawyers got the benefit of the doubt when they made mistakes. Others didn't. Some received great work assignments and mentorship from influential partners and others were left without meaningful help. Regrettably, the lack of second chances and opportunities seemed to fall disproportionately on diverse lawyers," Stacy said. 

I asked Stacy about the current landscape for the legal community during the pandemic, her predictions on how diverse lawyers will weather the current storm and the most important thing she would tell law firm leaders right now. 

With everything going on in the world, what is keeping you up at night? 

Similar to everyone else, COVID-19 worries me. As it relates to the legal industry, I am concerned about the recession's effect on diversity in law firms. Data shows that the last recession dramatically unraveled years of progress. Law firms made year-over-year gains in female and racial minority associate representation until the 2008 recession hit. Those gains then stopped abruptly and diversity numbers dipped for the first time in 20 years. In fact, the African American associate population in law firms didn't rebound to prerecession numbers until last year. 

Partner diversity was also adversely impacted. Racial and ethnic diversity in the partnership ranks decreased by 14.3% following the recession. And even though women equity partners only made up 16% of the equity partnership ranks in 2008, 50% of the equity partners who were terminated around that time were women.  

It has taken years to get back to where we were before 2008. If layoffs and other talent decisions are not handled in a radically different way this time, a decade of progress will be lost in an instant.    

Everyone is wondering how bad the economic downturn will be. When we went through the 2009 financial crisis, and before that, you were working at Am Law 100 firms. What insight did you glean back then?

Having been in the trenches of law firms for decades and now with another 10 years of analyzing their data and systems, I have learned that layoffs are subject to the same biases as other talent processes like hiring. When firm leaders select who stays and who goes, they often unconsciously choose to keep the person who looks like them. Since most partners in the upper echelons of firms are white men, this may not bode well for diverse lawyers. And if a diverse associate has fewer billable hours than their go-to associate, the partners may feel justified in their decision. In social science, that's called confirmation bias. But loads of data and research reveal that the diverse lawyer likely has fewer billable hours because he or she is unconsciously being left out of the work allocation process, client meetings and the Thursday afternoon golf game.  

Humans prefer to socialize and work with people who share common traits or backgrounds. This phenomenon holds true in law firms. Research shows that white men tend to give work to other white men. Other genders and races do the same. But this problem is exacerbated if one group controls work allocation. For instance, if [most] partners with large books of business who control the lion's share of work are white male partners, then black associates and white women will get less work. Data shows this is systematically happening in many law firms. 

Similar biases seep into the performance review process. Dr. Arin Reeves' research showed that the same memo when thought to be written by a black man versus a white man, although exactly the same, gets lower marks. When it comes time for layoffs, diverse lawyers bear the brunt of these work allocation and performance review biases. Although unconscious and not done out of malice, it's incredibly harmful. 

There is a way to combat this issue, but it's not about fixing humans through one-off unconscious bias trainings. People's biases don't change easily or immediately. Instead, it's about fixing systems and processes so that the humans involved can make better, more fair decisions for the benefit of everyone. 

What's the most important thing you'd tell law firm and legal department leaders right now, knowing they are dealing with a lot of moving parts? 

My advice for law firm leaders is double down on diversity and inclusion efforts during the recession. Put that on the priority list alongside revenue generation, client demands and technology support. Consider doing three things right away: First, pay attention to who is and isn't getting work in the downturn. Ask a partner in each practice group to monitor work allocation to ensure your diverse lawyers are getting their fair share. Second, ensure that all associates and new partners, especially your diverse lawyers, have an assigned partner who can answer their questions and direct them in this uncertain time. And third, do frequent pulse surveys of all lawyers to check in on how they are doing personally and professionally, and what they need to effectively support the firm and its clients. Slice and dice the survey responses by gender, race and other demographics to be sure everyone is feeling equally supported. 

The 2008 recession had a devastating impact on diversity in law firms. Firms have spent years trying to rebuild their diverse workforces from the earlier recession damage. With layoffs or other short-term economic decisions that disproportionately impact diverse talent in the works again, firms could easily repeat history if they are not thoughtful and vigilant. 

And my advice for legal department leaders is this: You hold the cards in this crisis. You have the power to reward firms that manage their talent and sustain their diverse workforces, and to punish the ones that don't. Use your power for the good of diversity and inclusion in law. Don't let firms backslide. Require them to take actions like becoming Mansfield Rule certified and continuing to participate in LCLD's Pathways Program for diverse midlevel lawyers. Take those same actions for the benefit of your own teams, too. 

You've said that diverse attorneys were over represented during the mass layoffs of 2009. Do you predict it will be the same this time? Or if not, what will be different? 

If history repeats itself, [layoffs] will disproportionately impact diverse lawyers. The last recession offers evidence to prove it. We have no reason to believe that layoffs will be more fair or equitable this go-round, unless firm leaders pay attention to the issues that caused the inequities in the first place. 

But I'm hopeful that the enlightened firm leaders who learned from the last recession are more focused on these issues now. It's also clear to me and these firms that clients are watching and backing their directives for greater diversity with rewards and consequences. A general counsel of a major tech company told me recently that they plan to compare and contrast their outside counsel firms' diversity before and after this crisis. He wants to know who's paying attention in both the good and the bad times. He wants to reward those firms who prioritize diversity even when there are other major pressures. 

Interestingly, we have seen a few firms taking a different approach this time. Instead of layoffs, some firms are temporarily cutting or holding back pay, or eliminating 401(k) matching for everyone to weather the storm. Several firms are also offering "retooling and retraining" options to transition talent from sluggish practice areas to high-growth areas. This crisis is collective — and so is the solution for these firms.  

Earlier, you talked about the need to fix systems. The Mansfield Rule has garnered a lot of buy-in. Why do you think the legal profession has been receptive? 

Mansfield Rule is a systems fix. I believe it's been successful because its premise is simple and comes across as fair to most people: consider a diverse body of lawyers when you hire, put a team together for pitches, promote to partner, or appoint new leaders. 

Instead of telling humans they are flawed and asking them to change behaviors, it is set as a standard policy or new process for all leaders with an easy-to-understand checklist of to-dos when they make decisions. The [Mansfield] Rule builds transparency into the process by asking the leaders to indicate who they considered. It builds in accountability through the certification process by asking the firm to share their data and decisions at two main checkpoints each year. 

And it builds in rewards, which is one of the most important elements. Certified law firms have the opportunity to send their newly promoted diverse partners to client forums each year to nurture relationships with influential in-house counsel who make outside counsel buying decisions.  

At the same time, there are still people who think that anything outside of billable hours is fluff. Besides the idea of a moral imperative, how does one make the case for diversity in a recession?

People who think anything outside of billable hours is fluff have clearly not paid any attention to the clear signals that clients are sending to law firms on the importance of diversity and inclusion. We've witnessed numerous [moves]: an outside counsel diversity pledge signed by more than 200 general counsel, 28 general counsel publicly supporting and backing the five law firms that committed to and funded the $5M Move the Needle Fund and HP's holdback of fees for firms that don't staff their matters with diverse teams. Legal departments are backing their words about the need for greater diversity with real money. In a recession, as long as clients hold steady on this pressure, the case is made loud and clear.