DIVERSITY NEWS: OUR NEW CLIENT, NEWS FOR NAMWOLF FIRMS, AND
THE PROFITABILITY OF DIVERSITY
1. The Axelrod Firm Welcomes Blue Cross And Blue Shield Association As A Client
The Axelrod Firm is proud to be the Blue Cross and Blue Shield Association (BCBSA) local counsel in Pennsylvania. BCBSA is the national coordinating body for the federation of Blue Cross and Blue Shield (BCBS) Companies. The 38 independent and locally operated BCBS companies enhance the health and wellness of the people and communities they serve by delivering innovative and competitively priced healthcare products and services, pioneering new ways to reward doctors, hospitals, and other healthcare providers for coordinated, quality care, and supporting programs and events that promote wellness. The Axelrod Firm, PC, a Philadelphia-based law firm, is a member of the National Association of Minority and Women Owned Law Firms. At The Axelrod Firm, we focus on business and the bottom line. We help businesses and non-profit organizations with their commercial, employment, appellate, and general and product liability litigation needs.
2.Information That Helps Women And Minority-Owned Law Firms Expand Their Business: Revealing The Law Firm Selection Process Among Corporations With Procurement Teams
Corporate procurement specialists focus on delivering high quality goods and services at a sensible cost that works best for the corporation and its vendors. In the past, procurement teams focused on obtaining fungible goods for their companies, goods like computers and office equipment. Nowadays, procurement specialists are expanding the breadth of their work. In some companies, procurement teams are getting involved in counsel selection. Sheryl Axelrod moderated the panel “Drawing Back The Curtain: Revealing The Law Firm Selection Process Among Corporations With Procurement Teams” at the October Annual Meeting of the National Association of Minority and Women Owned Law Firms (NAMWOLF) in Atlanta, Georgia. This is a summary of some of the tips the panelists gave to the approximately 300 lawyers in the audience.
Many large corporations used to choose their legal representatives from preferred counsel lists. Overwhelmingly, the firms on those lists were traditional large law firms. Women and minority-owned firms did not get the chance to work with the corporations. That is changing and part of the reason it is changing is because of the introduction of procurement teams in the counsel selection process. These numbers put the scope of the phenomenon into context.
“58 percent … said that the procurement or supply management departments have been involved in the purchasing of legal services for three or more years.”
Thus, many of the largest companies’ procurement teams are becoming involved in counsel selection. Designing an appropriate way to introduce cost into the selection process is complex, and takes time. The fact many of the largest companies have been in the space for three or more years suggests they are increasingly maturing their processes.
Sheryl moderated panelists Mark E. “Rick” Richardson III, Vice President and Associate General Counsel of GlaxoSmithKline (GSK), Justin Ergler, Sourcing Group Manager, Legal Services Procurement for GSK, and David Klemm, Director in Global Procurement for Legal, Financial, and Professional Services at Merck & Co, Inc. Each of them was clear: while price is a factor in their selection of counsel, price is not determinative. GSK and Merck are also selective in the firms they invite to bid for work. Each invited firm: (1) has a depth of experience in the subject matter, (2) has a reputation for excellence, and (3) practices in the jurisdiction at issue. The quality of the firms is thus assured before bidding ever starts.
The fact cost is taken into account in the bidding process gives NAMWOLF member law firms a great shot of getting work. NAMWOLF firms have a competitive advantage. While most of the founders of NAMWOLF firms came from traditional large law firms, NAMWOLF firms deliver outstanding services at a fraction of the overhead. Thus, when competing against traditional large law firms for work, NAMWOLF firms can draft leaner bids.
The panelists suggested the following tips for firms bidding on work:
(1) Ask questions. Find out the bidding rules and how the process will work;
(2) If you have assumptions, articulate what they are. Get the scope of the project clarified up front;
(3) Put thought and creativity into your bid. Think about the best way to approach the case. This is your firm’s chance to shine, to show in-house counsel a savvy approach that distingishes you from your competitors;
(4) Staff the case in a way that demonstrates your firm’s depth of experience and knowledge in the field;
(5) Assemble a diverse group of the most talented people for the project; and
(6) Think about the potential for a speedy resolution. If there is a way the case could be quickly ended, build that possibility into your bid.The Axelrod Firm thanks Rick, Justin, and David for their outstanding leadership. Thanks to Rick and Justin’s work, GSK has partnered with a number of NAMWOLF firms. Rick has been such a terrific supporter of NAWMOLF, he was awarded NAMWOLF’s coveted Award for Outstanding Service by an Advisory Council Member. Thanks to David’s leadership, Merck has become engaged in NAMWOLF as well, committing personnel to the Annual Meeting and sponsoring a reception to begin to develop relationships with NAMWOLF member law firms. The Axelrod Firm applauds Rick, Justin, and David for their work, and thanks them for the time and attention they gave to making the panel a success. They did an excellent job, and it was a pleasure to work with them.
3. A Discussion About The Profitability Of Diversity
On October 26, 2012, Sheryl Axelrod addressed the crowd at the Pennsylvania Bar Association’s Annual Diversity Summit: “Diversity and Inclusion: Making it Work,” in Pittsburgh, Pennsylvania. Sheryl was invited to do so as a result of her article, “The Dollars and Sense of Diversity.” The article was the cover story of The Pennsylvania Lawyer, the magazine for the Pennsylvania Bar Association and its 28,000 members. The piece was written in response to the Institute for Inclusion in the Legal Profession report, “The Business Case for Diversity: Reality or Wishful Thinking?” The authors of the IILP report concluded that the business case for diversity is at best weak and difficult to understand. At over 90 pages and packed with a stunning array of data, the report was widely viewed as the definitive text on the subject, but it does not directly speak to the business case for diversity. In less than 2,500 words in “The Dollars and Sense of Diversity,” Sheryl outlined the data showing that the business case for diversity is neither weak nor difficult to understand. It is clear and convincing. Some of the major studies discussed in the article are as follows.
A. More Women In Leadership, More Revenues And Customers
Diversity pays. According to a research report in Catalyst, Inc. in 2011 by Nancy M. Carter and Harvey M. Wagner entitled “The Bottom Line: Corporate Performance and Women’s Representation on Boards (2004-2008),” the financial returns of companies with three or more women on the board are striking. They outperform companies with all male board members by 60% in return on invested capital, 84% in return on sales, and 60% in return on equity.
An examination in Catalyst, Inc., “2010 Catalyst Census: Fortune 500 Women Executive Officers and Top Earners,” found that as you move from Fortune 100 companies to their slightly less successful Fortune 200 counterparts, the number of women on the board decreases from 18 percent to 16.7 percent. Fortune 300 companies have slightly fewer women on the board, 14.9 percent, and so on down to Fortune 500 companies. As the percentage of women on the boards of Fortune 100-500 companies drops, so does the success of the companies.
This squares with evidence that women make better leaders. As Brian S. Moskal wrote in “Women Make Better Managers” in Industry Week in 1997, “women’s effectiveness as managers, leaders, and teammates outstrips the abilities of their male counterparts in 28 of 31 managerial skill areas — including the challenging areas of meeting deadlines, keeping productivity high, and generating new ideas.” The conclusion was based on a study of more than 900 managers at top corporations.
B. More People Of Color In Leadership, More Revenues And Customers
According to Cedric Herring’s research in “Does Diversity Pay?: Race, Gender, and the Business Case for Diversity” in the American Sociological Review, on average, the most racially diverse companies bring in nearly 15 times more revenues than the least racially diverse. In fact, Herring found that racial diversity is a better determinant of sales revenue and customer numbers than company size, age, or number of employees at a worksite.
C. Diversity: The Potential For Much Higher Law Firm Profits
A comprehensive study by Douglas E. Brayley and Eric S. Nguyen, authors of “Good Business: A Market-Based Argument for Law Firm Diversity” in The Journal of the Legal Profession in 2009, shows that these same metrics apply to law firms. Looking at data from the 200 highest-grossing law firms (the AmLaw 200), highly diverse firms report, on average, higher profits per partner and revenue per lawyer than the rest of the AmLaw 200 firms.
Even controlling for hours, location, and firm size, the study found that “differences in diversity are significantly correlated with differences in financial performance.” In fact, according to the study, “a firm ranked in the top quarter in the diversity rankings will generate more than $100,000 of additional profit per partner than a peer firm of the same size in the same city, with the same hours and leverage but a diversity ranking in the bottom quarter of firms.” These figures are based on the current state of the legal profession, in which AmLaw200 firms could have far better diversity records. Consider how much more monies truly diverse and inclusive law firms could make. Diversity is a strategic advantage. If law firms want to see their client base and revenues rise, law firms should not only recruit diverse talent, but retain it.The reason diversity works is that when a company’s leadership becomes more diverse, far more changes than the fact the people in it become a melting pot microcosm of their community. The company actually performs better. According to Scott E. Page, author of the 2007 book The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools, and Societies, on almost every measure, greater racially, ethnically, and culturally diverse workplace teams function more effectively than more homogenous teams.
D. Companies That Don’t Diversify Face Greater Exposure
Diversity not only holds great potential to increase law firm profitability; openness to candidates from diverse backgrounds — for employment, raises, bonuses, equity, etc. — is essential to minimizing a law firm’s exposure. In January 2010, the Equal Employment Opportunity Commission sued a New York law firm for alleged age discrimination. The case should be a wake-up call to law firms engaging in discriminatory practices. A great way companies can lower their exposure is by implementing policies and practices to lessen the chance women and minorities will be passed over for opportunities they deserve or treated less favorably otherwise in the terms and conditions of their employment.