May 8, 2014
Last week, The American Lawyer released a study tracking billable hours at the nation’s top 100 largest law firms. Using that metric, it found that revenue among this group rose 5.4 percent over 2012, coming to a total of $77.4 billion.
That is good news for some Large Law firms, but unfortunately, not for all of them.
The same study found that the top 20 largest law firms, which ALM dubbed “The Super Rich,” prospered, but the other 80 languished. Their revenue increased a mere 2.2 percent and profit-per-partner ratio rose just 0.02 percent. In fact, 25 percent of firms actually saw a decrease in revenue.
Clearly, what emerges from this study is a very prismatic picture. Let’s take a look at some of the facets:
- ALM itself called the overall results “middling.” So, even when the Super Rich firms are included, the nation’s 100 largest law firms’ financial performance is less than stellar.
- Aric Press, ALM’s chief editor, commented to the New York Times that in the past year, many of the law firms in the study had trimmed their ranks of equity partners. Had they not done so, he observed, the financial picture would have been even less positive, since there would not have been a cost savings. One has to wonder what happens next after all the low-hanging fruit has been picked.
- The Super Rich law firms are almost all New York law firms catering to the financial and banking institutions. This suggests that even setting aside size, it is a very specific group of law firms – and only the firms of the type in that group – that are keeping up.
- The non-Super Rich 80 law firms are “treading water,” as The Wall Street Journal put it, and some of them are even faring more poorly than they did last year. To put it mildly, that ought to be a concern and an indication that Large Law firms are far from out of the woods yet.
So, when the picture presented by this study is assessed as a whole, it seems appropriate to be mildly encouraged by the overall 5.4 percent increase in revenue. A continued attention to the need for Large Law firms to adapt to a changed legal landscape and new clients demands, however, seems justified by some of the study’s less-positive findings.