Diversity has become an expanding focus in the legal field as firms recognize the importance and value of hiring and retaining associates of underrepresented communities. According to a recent survey conducted by the National Association of Law Placement (NALP), 45% of associates are women and 23% are minorities. However, there is still work to be done to increase diversity at the firm leadership level. A 2018 NALP survey found that only 19% of all equity partners are women, only 6.6% are racial/ethnic minorities, less than 3% are LGBTQ+, while less than 0.5% of partners self-reported having a disability. Although these numbers are higher than in previous years, many firms now recognize that the commitment to diversity must also extend to firm leadership teams with an emphasis on elevating and promoting partners and counsel.

Diversity in firm leadership can increase retention of underrepresented associates. Law firms have made admirable strides in the hiring of summer associate classes and entry level lawyers from traditionally underrepresented communities, but retention of these associates remains a key area for improvement. A diverse firm management team shows associates that they are valued at all levels of the firm hierarchy, and there are clear opportunities for them to progress. Additionally, having such a leadership team demonstrates to new associates that they have someone to whom they can relate, directly impacting satisfaction, productivity and retention. A leadership team that reflects the incoming associate classes demonstrates that firms truly value diversity and are committed to advancing underrepresented associates.

Diversity in firm management translates to a more diverse firm from the top down, which is better not only for the firm's culture, but also for its business. Diverse teams bring a variety of perspectives to complex problems, and help to address the shortfalls that accompany group thinking where everyone approaches the problem in the same manner. Teams comprised only of people with similar backgrounds and skills can lead to poor performance and dissatisfied clients. A 2015 study by McKinsey, titled "Why Diversity Matters," which covered 366 public companies in multiple countries across a range of industries, found that companies in the top quartile for racial and ethnic representation, as well as gender diversity, were more likely to have financial returns above their respective national industry medians. Meanwhile, companies in the bottom quartile for gender, ethnicity and race were found to be lagging behind their competitors. A larger survey of over 1,700 companies, conducted by the Boston Consulting Group in 2018, found that companies with diverse management teams reported a 9% increase in earnings.

In recognition of the prior lack of diversity at the highest levels of the legal profession, and the benefits that such leadership can offer, the Mansfield Rule was created in 2017 with the goal of increasing the number of women and minority candidates in law firm leadership positions. The current iteration of the Mansfield Rule measures whether law firms have affirmatively considered at least 30% women, racial and ethnic minority, LGBTQ+ and lawyers with disabilities for critical leadership and governance roles, including equity partner promotions, formal client pitch opportunities and senior associate (with four years of experience or more) lateral positions. During the Mansfield 2.0 program, which ran from July 2018 through July 2019, 79% of the participating firms reported that their lateral partner hiring pool was more diverse following adoption of the Mansfield Rule, and 76% said their equity partner promotions pool was more diverse. In addition to a more representative hiring pool, 65% of participating firms promoted a higher percentage of diverse lawyers into equity partnership and 78% of participating firms hired a higher percentage of diverse lateral senior associates. As firms continue to push for more diverse leadership teams, they will create not only a stronger internal organization, but also produce better results for their clients.

Corporate legal departments also recognize the need for diverse teams to bring valuable solutions to their problems, and increasingly, these law firm clients are making changes themselves and pushing law firms to change with them. A version of the Mansfield Rule has been adopted by legal departments. The Mansfield Rule for legal departments measures whether legal departments have affirmatively considered women, racial and ethnic minority, LGBTQ+ and attorneys with disability for at least 50% of the candidate pool for the legal department's top roles, plum assignments and for outside counsel representation.

In 2019, more than 170 general counsel and corporate legal officers signed an open letter to law firm partners stating that their companies will prioritize their spending on firms who commit to diversity and inclusion. The letter noted that partnership classes remain "largely male and largely white" and there is an expectation that "outside law firms will reflect the diversity of the legal community and the companies and customers they serve."

Corporate clients are emphasizing the need for improved representation in partnership through direct programs. For example, Microsoft's Law Diversity Program incentivizes diverse representation on Microsoft matters and within firms themselves. Under the program, participating firms receive a bonus at the end of the year if they reach a quantifiable diversity goal. Microsoft reported that since its inception in 2008, participating firms increased the percentage of hours worked by diverse lawyers on Microsoft matters from 33.6% to 58.3% and diverse representation on management committees increased from 31.2% to 39.7%.

Another approach to ensuring diversity in outside counsel, adopted by Hewlett-Packard (HP), is a diversity holdback mandate where 10% of fees to firms are cut if they do not meet HP's diversity standards. These standards require firms to have "at least one diverse firm relationship partner regularly engaged with HP on billing and staffing issues" or "at least one woman and one racially/ethnically diverse attorney, each performing or managing at least 10% of the billable hours worked on HP matters."

Although the Microsoft and HP policies represent the two ends of the spectrum for ensuring diversity in their outside counsel, corporate clients have found other ways to ensure diversity in law firms. Many companies have signed on to the American Bar Association's (ABA) Resolution 113, which urges law firms to create opportunities for diverse attorneys and for legal departments to assist in facilitating these opportunities through their purchasing power. Some companies may include diversity at the partnership and senior associate level as an explicit requirement when making hiring decisions while other clients ask firms to become Mansfield Rule certified within a specific number of years to continue their relationship. Corporate clients are continuing to call for more widespread representation in the legal teams working on their matters and companies will continue to implement their own specific policies and procedures to ensure diversity in their outside counsel and firm management.

As law school classes become more diverse (currently, the ABA reports that 54% of first year law students are women and 31% are minority students) associates will gravitate toward and remain at firms with diverse leadership teams. Firms that do not promote diversity in their leadership teams will not only offer their clients less effective teams, but may lose a significant portion of their clients' business. Investment in diverse firm leadership is essential to competing in the present, and preparing for the future.

Kelliann H. Payne is a partner in Hogan Lovells' global regulatory practice group. Erkang Ai is a senior associate at the firm and Christine Zimmerman is an associate with the firm. They are all based out of the firm's Philadelphia office.