The psychological obstacles to achieving diversity in the legal profession
Charles P. Edwards.
Last year, I wrote that the legal profession’s failure to retain women and minorities was not a “hard problem,” but rather a character flaw. My intent was not to imply malice; many partners at law firms genuinely want their diversity numbers to improve. Still, facts are facts.
But this year is different, right? Surely, the events of 2020 have provided the impetus for change. How could they not?
The answer lies in the difference between philosophy and psychology. Philosophy sets our goals, but psychology dictates our path. While there is hope that the events of this year will bring change, there are a number of psychological effects that still stand in the way. How many times have you said, “I’m going to do X,” only to quickly fall back on the habits that failed to produce X?
But first, the numbers
The American Lawyer’s May 2020 Diversity Scorecard reports that over the past 10 years, the total number of minority attorneys at law firms grew by an average of .9% per year. Yet, over that same time period, minority attorneys have seen only a 3.9% increase among the country’s largest firms. In the recent ABA report entitled, Left Out and Left Behind, the authors’ note says, “There is one statistic, however, that has not changed over the course of 20 years: Women of color represent approximately 2% of all equity partners at large law firms.”
A 2019 ABA report entitled, Walking out the Door, notes that while women have made up 45-50% of law school graduates for years, they account for just 20% of law firm equity partners and less than 25% of management committee members, practice group leaders and office leaders.
If we all agree on this diversity goal, or at least its direction, why can’t we make more progress? To answer that, let’s look at some of some psychological factors standing in the way of progress.
Lack of agency
When I wrote last year that the legal profession’s women and minority problem was a character problem, I meant this: These are choices. Many firms are doing a good job of finding and hiring women and minorities. But, for some reason choices are being made, or not made, that are hampering long-term progress and diversity at the top. And, we’re letting this happen year after year. Why?
There is a phenomenon in psychology known as the “bystander effect,” which observes that people are less likely to come to the aid of someone when others are around. The bystander effect partly explains why so many lawyers have not stepped up to respond to the lack of progress on diversity in their firms. There are plenty of well-intentioned and good lawyers who are effectively bystanders in the failure to retain women and minorities. They stand by while women and minority lawyers leave firms and leave the private practice of law altogether.
This isn’t necessarily malicious or intentional. But, when there are many of us, there is an inclination to feel that “we” should do something, while waiting for someone else to act. Or, we blame management, because it ultimately is “their” responsibility.
Like the animals in Orwell’s Animal Farm, all numbers are equal, but some are more equal than others. The most important numbers have a dollar sign. A firm’s numbers of women and minorities are less equal to some other numbers, most notably profits-per-partner or profits-per-equity-partner.
This is of course both wrong and shortsighted. There is no necessary correlation between the number of women and minority lawyers in a firm and its profitability, and certainly no negative correlation. If anything, there is evidence that increasing diversity increases firm revenues, which should lead to increased profitability, all other things being equal. So, what gives?
To answer that, you need to understand law firm economics. A law firm’s profitability is not really what matters. What matters, at least to most firm leaders and “rainmakers,” is individual compensation. That is related to profit, because the profits of the firm are distributed to the partners each year as compensation. But profits and profitability aren’t the important metric; who gets what is what counts.
The abandonment of “lockstep” compensation systems could be hailed as moving the needle on diversity, as older, incumbent lawyers are more likely to be white men. But that isn’t why these systems are being abandoned. Firms are moving away from lockstep compensation systems in order to keep and attract top producers. While some firms have undoubtedly used changes in their compensation systems to increase diversity, the lack of meaningful change in the overall numbers suggest this has merely reshuffled the deck chairs on the profession’s Titanic.
Lockstep systems have been out of favor long enough that this proof is in the pudding. The legal placement firm Major, Lindsey & Africa recently reported that the pay gap between male and female partners actually increased from 24% 10 years ago, to 35% in 2018, but this gap disappeared when originations and billing rates were taken into account. Production-based (output) compensation models don’t necessarily adjust for inequities in inputs.
The compensation game is zero-sum. In order to give more credit to women and minority attorneys, other attorneys need to take less. OK, so why doesn’t that happen?
As behavioral psychologists Daniel Kahneman and Amos Tversky’s showed in their “loss aversion” principle, the subjective weight of penalties is larger than that of rewards. So, while there was, no doubt, great pleasure among law firm partners when they obtained their current level of compensation, the fear and pain of losing it are much worse.
Loss aversion also explains the “status-quo bias,” which is our tendency to prefer things to stay the same. Change is scary. I might lose what I have gained, no matter how large or small that is, and no matter the prospects for more gain from change.
Law firms and other organizations perpetuate the status-quo bias by using words like “culture.” Proposals for change are met with statements like “that isn’t how we do things” or “that goes against our culture.” What they often mean is, “I’ve benefited from this system, and I’m afraid I’ll lose what I have gained.”
Some of the results aren’t caused by overt bias, but by inertia that locks in past bias. The best predictor of success in the U.S. has become the zip code from which you came. If you grew up in the “right” place, went to the “right” school, belonged to the “right” country club, where you met the “right” people, chances are you are successful. And, nothing begets success like success. None of this is malicious, but it locks in past gains and creates a flywheel for future gains.
Two books have been published recently on the negative effects of America’s “meritocracy”—ironically, by professors at Yale and Harvard. The subtitle of Daniel Markovits’ The Meritocracy Trap exposes its conclusion: “How America’s Foundational Myth Feeds Inequality, Dismantles the Middle Class, and Devours the Elite.” The same is true of the title of Michael Sandel’s more recent book, The Tyranny of Merit: What’s Become of the Common Good?
What do we do?
As individuals, we need to recognize the bystander effect in ourselves and push against it. As groups, we must foster and socialize the need to act and the expectation for action. The calls to action published by many law firms in the first half of this year are a good start. But it will be interesting to see whether and how those firms fulfill those calls.
Some research suggests that making decisions for our future selves reduces loss aversion. We convince ourselves to eat less sugar by visualizing our healthier and happier future sugarless selves. We put money into a retirement for our future selves. We reframe a cost today as an investment in some better future state.
Many rainmakers and law firm leaders are nearing retirement. The replacement of pensions with 401(k) plans means these lawyers aren’t necessarily incentivized to create a better future for their law firms; they are instead incentivized to maximize current profit distributions and contributions to their own retirement accounts. Again, rational choices, but with collective consequences.
Some law firms have tried to solve this dilemma by placing age limits on leadership roles. Many law firms also have mandatory retirement, but the baby boomers have put pressure on that with the desire and ability to keep working into their 60s and 70s. This presents challenges for law firms, but it also presents an opportunity.
Boomer retirements, even at their slower and unpredictable pace, represent the largest transfer of power in the history of the legal profession. Now is the time for incoming leaders to put their philosophy ahead of their psychology, decide what is important and what will be important over the next 10 years, and manage the transfer of the credit that becomes available from retiring boomers in ways that are consistent with those goals.
To be fair, progress is being made. Perhaps we should be content with that, assuring ourselves that as long as our moral arc is bending toward justice we have done our part. Or, maybe as the profession most closely associated with justice, we have an obligation to grab hold of the arc and bend it a little closer and a little faster toward justice—to bring this ship into port, not merely to continue steering it toward land.
Bending the arc isn’t easy. Loss aversion, the bystander effect, bias/lock-in and other psychological effects will stand in our way. And, if we fail, it won’t be because we didn’t know what needed to be done; it will be because we didn’t do what needed to be done.
Charles P. Edwards has been practicing law for more than 25 years. He is a partner at Barnes & Thornburg in its Indianapolis office, where he has had various leadership positions. His legal writings can be found on the firm’s insurance blog at btpolicyholderprotection.com, and his personal musings can be found on Medium.
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