Newly released research has shown that 25% of corporate legal departments now use diversity data when selecting which law firms they work with.
Law firms that fail to improve the diversity of their teams were more likely to lose out on instructions from corporates, the study by Thomson Reuters showed.
In addition, nearly half (46%) of corporate legal departments now assess the data security arrangements law firms have in place.
The 2022 Legal Department Operations Index also revealed that 14% of corporate legal departments intended to implement diversity and inclusion programmes to improve their performance over the next year, while one third (33%) of departments have established them in the last two years. A further 12% have had diversity and inclusion initiatives in place for more than two years already.
Hillary McNally, general manager, corporate legal at Thomson Reuters said diversity and inclusion was becoming an ever-greater priority for in-house legal teams worldwide. “In a year’s time,” she added, “the majority of corporate legal departments will have D&I initiatives in place. This should have wide-ranging impacts both within these departments and for law firms with corporate clients.”
McNally predicted that as newly established diversity and inclusion initiatives became more sophisticated in their use of data, it was likely more would start to look at the diversity progress of the law firms they work with. Those that scored less favourably “may find themselves losing out to competitors with better D&I credentials” she said.
The research also found that corporates were increasingly looking at ways of controlling their legal costs as the economic outlook became more uncertain. Just under a third (32%) of corporates were looking to increase their use of alternative fee arrangements, such as fee caps and fixed fee arrangements, to give greater cost certainty.
Only 4% of firms were looking to reduce their use of such arrangements, the study found. Last year’s research revealed that 23% of corporates were looking to increase the use of alternative fee arrangements and 6% looking to decrease.
McNally said: “As corporate budgets tighten across the globe, in-house legal departments are taking a closer look at spending and at the value they get from their external legal advisers.”
“Law firms that are more prepared to provide greater fee security through alternative fee arrangements are likely to have the edge over those that are unwilling to be flexible.”
Another area where corporate legal departments were scoring law firms’ performance was data security. The survey showed that 46% of corporates now placed a high priority on making sure the data security arrangements of any external counsel are satisfactory.
Last month research was released by the Social Mobility Foundation that suggested law firms were very slow to alter their recruitment policies to attract people from more diverse backgrounds.
Another study from specialist legal sector inclusion consultancy extense, revealed that just 90 out of 13,000 (0.69%) partners at firms in England and Wales were black and identified five measures that law firms could implement to improve diversity at senior levels. These are: tying executive compensation to diversity and inclusion outcomes, support for the ”nuanced needs and talents acutely faced by black talent”; sponsorship programmes to target underrepresented talent; and delegating work and career development opportunities equitably through use of algorithmic technology.
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