HP Inc. Chief Legal Officer Kim Rivera’s promise to withhold fees for outside law firms that don’t meet diversity goals has achieved results, with 95% now meeting the standards.
Rivera’s legal department was one of the first to give financial teeth to diversity requests for outside counsel. The company’s initiative, implemented in phases starting in 2017, required most of its firms to staff at least one diverse attorney on HP matters or face a 10% cut in fees.
“Our initiative is meant to make sure that opportunity at that business is spread more evenly to folks,” said Rivera, who added that about 46% of the company’s outside firms met the standard three years ago. The initiative also requires quarterly reports on each firm’s diversity statistics.
The company’s legal shop said they withhold fees for one or two out of 60 participating firms each quarter. Those firms are able to earn back the withheld fees as soon as they prove compliance with the diversity standards, which the company said often happens in the following quarter.
Bloomberg Law is conducting a Q&A series highlighting some of the legal industry’s most important relationships: the often fruitful but sometimes complicated connections between general counsel and their outside law firms. We’re talking with general counsel across industries about how they select outside lawyers and handle issues like billing, fees, and tracking performance.
Rivera is also the president of strategy and business management for HP Inc. She joined the company, based in Palo Alto, Calif., in 2015 after six years as the chief legal officer of DaVita Health Care Partners and three as the associate general counsel for The Clorox Company. She began her career at Jones Day.
She spoke with Bloomberg Law about her call for more uniform approaches to measuring outside firms’ diversity and how working on pro bono projects with outside counsel can help build stronger connections.
This conversation has been edited for clarity and length.
Bloomberg Law: Tell me about how your diversity mandate works.
Kim Rivera: When we set up the initiative, we wanted to make sure that we had a way to be clear with folks what the expectations were. We track and measure key things around how our matters are being staffed and that includes: Who’s on the team? What work do they perform on the team? Are they playing strategic roles? Are they in charge or getting credit for the relationship? The way that law firm partners gain credibility and traction in their careers and in their firms is by having a book of business, so our initiative is meant to make sure that opportunity at that business is spread more evenly to folks.
BL: Do you think other in-house departments should emulate what you’ve done?
KR: I am encouraging folks because I think it works. And it’s a good practice. Frankly, in the current environment, I think people are hopefully less resistant to the notion that as clients, we can be more demanding in terms of the pace and innovation and aggressiveness that firms are taking with regard to diversity and inclusion. I’m also working with other GCs to try and persuade them that the more we can adopt more uniform approaches, the more we can drive progress, because then it makes consistent, clear expectations that firms can scale around.
I know lots of GCs that take different approaches, different incentives, different programs. That creates a lot of complexity for firms. What I think is needed is to create a new set of common standards and incentives that firms can work towards and be transparent about, and create strong economic incentives and strong client-based incentives for them to really take more aggressive action around their diversity and inclusion efforts. To me, that means finding a way not just to recruit and develop more diverse attorneys, but it means to alter the management and equity partnership of the firms to include more underrepresented minorities and to reflect society and the community and, frankly, the clients that they’re working for.
BL: HP primarily works with 10 outside firms. Why and how did you choose them?
KR: The fact that we have the work concentrated in these firms largely is a result of a couple of things. One, we have a fairly large in-house department, and so we handle a lot of things on our own. The things that go outside tend to be very large, complex, and can be expensive, but they’re not so numerous. It’s everything from patent litigation, to labor and employment litigation, to government regulatory matters, to complex commercial agreements, acquisitions, divestitures. It runs the gamut. So you have a handful of firms that are doing those types of things, which is how the work ends up getting more concentrated there. But there are lots of other firms handling all kinds of other things. It just is at a more modest scale.
There are lots of small and medium firms that we work with, but when I think about the total spend of the department, probably 10 firms account for the bulk of our work and maybe 60% of our spend.
Certainly we look at how they’re doing on the diversity mandates that we have laid out, the quality of the results, the cost, frankly, how well they do with managing budgets, and the quality of collaboration and relationships with the people at all levels that they’re working with. Those are, in essence, the criteria.
BL: How do you build those relationships, and how do you maintain them during this pandemic?
KR: Informally, it requires that everything not be about billable time, that there will be some time invested in just building the relationship. It doesn’t have to be hours and hours of your time, but it’s maintaining that kind of continuity of connections, that thread, and looking for opportunities to collaborate or work on things like diversity, like social justice, like pro bono.
But it also means having an annual dialogue where you evaluate the performance of the firm, and you have candid dialogue about how the firm did on not just handling the matter, not just handling the budget, but also the quality of the working relationship, the quality of the output, the quality of the collaboration, and to have a systematic rigorous way to do that across your department and across the firms and to look at those results and have follow up discussions. It’s important to be clear about expectations and clear about what it is you want to do.
I do think it is harder in the pandemic but I also think that it is about the quality of the discussion and dialogue and putting some intentionality and thought into it. Even on video, you can do more than just talk transactionally about a piece of work. You can check in, you can have a dialogue, you can share resources, you can just have an exchange.
BL: What are some examples of pro bono work that your team does with your outside firms?
KR: We do partner with firms to staff projects around legal aid, immigration reform, prison reform. We partner with them on things like Street Law to help make sure that young people are thinking about careers in law. We work with Urban Debate League. Those are all areas where we get outside prompts to help put together programming and that gives the lawyers an opportunity to know each other and work together.
It’s important to be active in the community that we’re in, and most people are very enthusiastic about doing it. When you do a legal clinic together, or do Urban Debate League, or you do Street Law, you have a chance to really work with and bond with lawyers from other companies, but also from your outside firms over a shared interest: the sheer dedication to helping young people learn about the law, learn about careers in the law, learn about the skills and capabilities that you need if you want to pursue a career in the law. They’re fun events. They have a professional aspect, they have a community aspect, they have a social aspect.