Biglaw, Money, Partner Issues, Partner Profits, Wells Fargo

Law Firm Performance In 2013 So Far — Plus Disturbing Data On Partner Productivity

The new data on Biglaw’s performance in the first half of 2013, mentioned earlier in Morning Docket, shouldn’t surprise anyone. For the first half of 2013 (January through June), when compared to the same period in 2012, gross revenue is up slightly (by 1.5 percent), average hours per lawyer are down slightly (by 2.5 percent), and expenses are up slightly (by 3.5 percent). This is a pretty typical report card in the “new normal” — up a little on this metric, down a little on that metric, and overall basically running in place.

But the survey, from Wells Fargo Private Bank’s Legal Specialty Group, did contain a few interesting tidbits — including depressing information about partner productivity….

First, the trend of stratification in Biglaw continues, as noted in Am Law Daily:

As has been the case for the past few years, a small number of top performers significantly outpace the averages, [Wells Fargo senior director Jeff] Grossman says. One firm in the survey reported a nearly 35 percent revenue boost in the first half of the year, he says, with the least successful firm recording revenue down almost 20 percent.

We’d sure to love to learn the law firm names behind those numbers. You rarely see double-digit revenue moves these days.

And here is the disturbing data about partner productivity (or lack thereof):

Grossman said he also expects firms to continue asking underproductive partners to leave. In data collected on 2012 productivity, the bank found that a third of law firm partners billed 1,400 hours or fewer last year. That compares to the average 1,600 hours each that lawyers across all seniority levels are on track to bill this year, which is still down from the 1,640-hour average hit last year.

Billing under 1400 hours a year? Even if billable-hours expectations have come down in the wake of the Great Recession, and even if partners can’t churn hours out as easily as associates, billing sub-1400 still seems abysmally slow. An associate billing at that low a level for a sustained period of time would not be long for this world.

The way that law firms continue to keep underproductive partners on the payroll supports Anonymous Partner’s theory that Biglaw actually goes to great lengths to protect its run-of-the-mill service partners (contrary to the narrative in which service partners are underappreciated and rainmakers are over-rewarded). As Anonymous Partner puts it, observers of Biglaw should “[f]ocus less on how it treats its big rainmakers, and more on how drastic the efforts are that it needs to undertake in order to protect its middle class (especially its older equity service partners).”

All this talk of older members of the middle class makes me think of Social Security. And maybe Social Security isn’t a bad metaphor for Biglaw: it has been great for so many years, and it will be just fine for a number of years to come, but how much longer can it go on?

UPDATE (12:55 p.m.): Here is what managing partner turned law firm consultant Ed Reeser has to say about Jeff Grossman’s claim that underperforming partners are “the biggest challenge the industry faces”:

Not sure that I agree with this. The issue is whether the firm is paying fairly for these partners and their contribution. Many of these folks have their compensation share adjusted so that they are not being paid more than they deliver to the partner profits pool. As long as that is managed, they are not a “drag.” One cannot confuse contribution to profits with gross production. In most large law firms, over half the equity partners, the lower half, are typically net contributors to the pool, and in some firms it is more than two-thirds. That is not a “losing” model for the top one-third!

Bank Says Firms on Track for Anemic Growth in 2013 [Am Law Daily via Morning Docket]

Earlier: Which Way Will You Run? Some Thoughts On The New Republic Article About Mayer Brown
Biglaw’s Unwritten Purpose
From the Department of Pleasant Surprises: Biglaw’s Solid Performance in 2012

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