What to take away from PPP?

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What to take away from PPP?

Postby Anonymous User » Thu Sep 29, 2011 2:09 pm

Do the numbers say anything useful at all for SAs / entering junior associates?

On one hand, the numbers sometimes make sense. Wachtell, SullCrom, and Cravath—firms considered by all to be incredibly profitable—are all in the top four. But how much should be read into them? Cadwalader has a higher PPP number than Skadden or Davis Polk. Ropes & Gray and Sidley Austin are beat out by firms like Paul Hastings and Linklaters. WilmerHale is lower than Morgan Lewis and Herbert Smith. MoFo is beat by Greenberg.

Should we just be completely ignoring these numbers?

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Re: What to take away from PPP?

Postby Anonymous User » Thu Sep 29, 2011 4:40 pm

I've heard that the "grind" or the intensity or the lack of life ---- that all these things are more prevalent the higher up you go on PPP. It's a very rough guesstimate, but basically it's a theory that the more you are driven by profits per partner, the less important it comes to treat associates as fellow humans rather than just cogs to spin your money wheel.

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Re: What to take away from PPP?

Postby Anonymous User » Thu Sep 29, 2011 4:50 pm

You should ignore them completely, except to the extent that a firm might be exhibiting consistent drops in PPP, which might be an indication that partners might leave. PPP is a function of many different things: billing rates, mix of practice groups, leverage, expenses, and other factors that really aren't relevant to an associate. Even PPP drops can mean different things. If a firm is expanding into new markets, expenses might be higher and thus PPP might be lower, but that's not necessarily a bad thing for the firm or for an associate.

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Re: What to take away from PPP?

Postby Rock Chalk » Thu Sep 29, 2011 6:35 pm

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Last edited by Rock Chalk on Thu May 24, 2012 7:24 pm, edited 1 time in total.

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Re: What to take away from PPP?

Postby imchuckbass58 » Thu Sep 29, 2011 6:52 pm

The only real reason you should be concerned with PPP as an associate is if it has been dropping. If this is the case, either (1) there's a big risk that top partners will start jumping ship with their business, destabilizing the firm, or (2) an increasingly large share will go to partners with big books, straining the internal culture.

Another possible reason you should be concerned with PPP is that at least within markets, it indicates the firm can attract top partners with lots of top-flight clients. However it's an imperfect measure (i.e., this only matters if the difference in PPP is pretty large, and some firms buck the trend). So if you see that the firm has great partners and clients despite somewhat lower PPP, don't let it bother you.

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Re: What to take away from PPP?

Postby Anonymous User » Thu Sep 29, 2011 7:26 pm

Where can I find my firm's PPP? [Wachtell]

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Re: What to take away from PPP?

Postby Anonymous User » Fri Sep 30, 2011 12:23 am

I think it's a pointless measure for associates.

A firm with a lower PPP might actually be better for a young associate because the smaller ticket items are the ones most likely to allow a junior person to have a lot of responsibility. PPP is a very NYC-centric stat, in my opinion, because the big partners there are doing big deals, probably less relevant for litigation.

Keep in mind that the rainmakers are going to be taken care of at all of these firms and the service partners will not be. The fallacy of "partners leaving if PPP falls too low" is egregious. The partners able to leave with their business are rainmakers- they arent going anywhere because they are always going to be taken care of. It's the service partners that get screwed. A service partner might make $400k at some of these firms whereas a rainmaker can make $2-3m or more. Firm management is probably in the $9-15m range. If you're a rainmaker, you're getting paid wherever you are, PPP means nada.

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Re: What to take away from PPP?

Postby Anonymous User » Fri Sep 30, 2011 12:29 am

Anonymous User wrote:I think it's a pointless measure for associates.

A firm with a lower PPP might actually be better for a young associate because the smaller ticket items are the ones most likely to allow a junior person to have a lot of responsibility. PPP is a very NYC-centric stat, in my opinion, because the big partners there are doing big deals, probably less relevant for litigation.

Keep in mind that the rainmakers are going to be taken care of at all of these firms and the service partners will not be. The fallacy of "partners leaving if PPP falls too low" is egregious. The partners able to leave with their business are rainmakers- they arent going anywhere because they are always going to be taken care of. It's the service partners that get screwed. A service partner might make $400k at some of these firms whereas a rainmaker can make $2-3m or more. Firm management is probably in the $9-15m range. If you're a rainmaker, you're getting paid wherever you are, PPP means nada.


Lots of firms are lock-step. Partners get paid based on their seniority. Even Skadden and Latham are modified lock-step. The internal stress in such firms is that rainmaker partners will leave for a non-lock-step firm that can "take care" of them.

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Re: What to take away from PPP?

Postby Anonymous User » Fri Sep 30, 2011 12:42 am

Why on earth would a rainmaker stay at a lockstep firm? I'd be out of there so fast.

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Re: What to take away from PPP?

Postby Old Gregg » Fri Sep 30, 2011 12:44 am

Firm management is probably in the $9-15m range. If you're a rainmaker, you're getting paid wherever you are, PPP means nada.


Yes... but firms with higher PPP can offer, on average, a higher salary to that partner than firms with lower PPP. At some point, there's going to be a price that the former is willing to pay that the latter isn't. Not that hard to understand. :roll:

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Re: What to take away from PPP?

Postby quakeroats » Fri Sep 30, 2011 1:15 am

Ignore it completely. It's a manipulated figure. Use RPL if you need the best measure publicly available.

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Re: What to take away from PPP?

Postby Anonymous User » Fri Sep 30, 2011 1:50 am

Anonymous User wrote:Why on earth would a rainmaker stay at a lockstep firm? I'd be out of there so fast.


The top lockstep firms tend to have institutional clients and a firm culture that elevates the firm over the individual. The role of partners at these firms is more about cultivating the firm's relationship with these clients than it is about "making it rain" per se. Goldman Sachs isn't going to follow a single partner from Sullivan to another firm. Moreover, these firms tend to have a broad range of top-notch practices. If a client utilizes a firm's tax, bankruptcy, and real estate practices in addition to their M&A practice, they won't necessarily follow an M&A partner to another client. Finally, at lockstep firms several partners may do work for a major client, and the client won't probably follow just one of them to another firm.

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Re: What to take away from PPP?

Postby imchuckbass58 » Fri Sep 30, 2011 9:31 am

Anonymous User wrote:The fallacy of "partners leaving if PPP falls too low" is egregious.


Ummmm....seriously?

Howrey:
-"Pearlstein observes that when Howrey’s average partner profits took a downward turn, the partnership — which wasn’t really a partnership in the way most people understand that concept — found that its “bonds of loyalty [were] not strong enough to hold Howrey together.”" (http://thebellyofthebeast.wordpress.com ... versation/)
-"In retrospect, what may be most surprising about the firm's demise is how many partners stayed as long as they did. It was only when profits fell for a second year running that partners with big books of business began leaving." (http://www.law.com/jsp/tal/PubArticleTA ... 2494943787)

Heller Ehrman:
-"As Heller’s profits have lagged, competitors have increasingly been able to pick off their top talent by offering them fatter paychecks. Defections by partners–called shareholders at Heller — have begat more defections, creating almost a run-on-the-bank type scenario." (http://blogs.wsj.com/law/2008/09/15/a-d ... er-ehrman/)
-"Who would walk away from a $1 million-a-year partnership over 3 percent? But looking at competitors who saw a boom year in 2007, Heller’s results felt meager to some partners." (http://www.newdorf.com/what-happened-to ... -whos-next)

Brobeck:
-"The firm's strategy of betting on technology clients to compensate the firm's lawyers imploded as the lawyers' equity shares became worthless, work dried up and partners with traditional clients or portable business darted to other firms" (http://en.wikipedia.org/wiki/Brobeck,_P ... 6_Harrison)

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Re: What to take away from PPP?

Postby Anonymous User » Fri Sep 30, 2011 11:29 am

imchuckbass58 wrote:
Anonymous User wrote:The fallacy of "partners leaving if PPP falls too low" is egregious.


Ummmm....seriously?

Howrey:
-"Pearlstein observes that when Howrey’s average partner profits took a downward turn, the partnership — which wasn’t really a partnership in the way most people understand that concept — found that its “bonds of loyalty [were] not strong enough to hold Howrey together.”" (http://thebellyofthebeast.wordpress.com ... versation/)
-"In retrospect, what may be most surprising about the firm's demise is how many partners stayed as long as they did. It was only when profits fell for a second year running that partners with big books of business began leaving." (http://www.law.com/jsp/tal/PubArticleTA ... 2494943787)

Heller Ehrman:
-"As Heller’s profits have lagged, competitors have increasingly been able to pick off their top talent by offering them fatter paychecks. Defections by partners–called shareholders at Heller — have begat more defections, creating almost a run-on-the-bank type scenario." (http://blogs.wsj.com/law/2008/09/15/a-d ... er-ehrman/)
-"Who would walk away from a $1 million-a-year partnership over 3 percent? But looking at competitors who saw a boom year in 2007, Heller’s results felt meager to some partners." (http://www.newdorf.com/what-happened-to ... -whos-next)

Brobeck:
-"The firm's strategy of betting on technology clients to compensate the firm's lawyers imploded as the lawyers' equity shares became worthless, work dried up and partners with traditional clients or portable business darted to other firms" (http://en.wikipedia.org/wiki/Brobeck,_P ... 6_Harrison)


I agree, partners don't like their PPPs to shrink. Pay is a demotivator, especially when there is inequity with the firm across the street.

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Re: What to take away from PPP?

Postby shmoo597 » Fri Sep 30, 2011 2:47 pm

Actually, it can be a useful measure.

Use it in tandem with RPL. If a firm has a low RPL but high PPP, it means the firm is highly leveraged - that there are a few partners who make massive profits off the back of an army of associates. The same RPL but a with a lower PPP means that there are more partners relative to associates.

From an associates point of view, I think the latter is better. Less leverage is better. It means, generally speaking, that you're less expendable and will be more integral to the cases/deals you're working on and less of a cog in the machine. All else being equal (and RPL being equal), I'd rather work at a firm with a 2:1 associate to partner ratio then a firm with a 4:1 ratio.

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Re: What to take away from PPP?

Postby NotoriousIIED » Fri Sep 30, 2011 3:00 pm

I think it is hard to glean any hard take aways from public-private partnerships at this juncture.

Some have been beneficial, such as the leasing of the Indiana State Tollroad which provided a much needed cash infusion to an economically depressed state. Others, such as Chicago's parking meter lease, has been less beneficial and generated significant taxpayer angst.

Regardless of one's opinion on the matter, I think they are here to stay. In an era of dwindling government budgets and increased costs, you can rest assured that more governments will be clinging to PPP's as a way to right sinking ships.

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Re: What to take away from PPP?

Postby Anonymous User » Sat Oct 01, 2011 3:35 pm

shmoo597 wrote:Actually, it can be a useful measure.

Use it in tandem with RPL. If a firm has a low RPL but high PPP, it means the firm is highly leveraged - that there are a few partners who make massive profits off the back of an army of associates.


If you are interested in leverage, just compute the leverage (the Am Law 100 publishes the # of equity partners). PPP has other sorts of things mixed in there, particularly expenses. Rent is a huge expense, on the same order as associate salaries. For a big firm in midtown, rent might comprise over 20% of its expenses, and could be cut in half by moving to downtown, increasing PPP by 10%. Firms don't all do this, because location and commutability/walkability from desirable places to live is a form of indirect compensation to employees and (especially) partners.




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