Partner/associate ratio at law firm: what does it mean? Forum

[Anonymous User]

Forgive my ignorance...If, say, the partner/associate ratio is 5:1 at one law firm, compared to the partner/associate of 1:5 at another firm, does it mean that the latter has more business than the first firm? Does it mean that the first firm is still developing? Does it mean anything? Any insight would be appreciated!

[PKSebben]

I'm not sure why your post is anonymous, but more highly leveraged firms are more susceptible during downturns. Wachtell is a huge outlier, but generally easier for a firm to generate high revenue with high leverage, so long as they have the rainmakers.

[Renzo]

I'm not sure why your post is anonymous, but more highly leveraged firms are more susceptible during downturns. Wachtell is a huge outlier, but generally easier for a firm to generate high revenue with high leverage, so long as they have the rainmakers.

As long as this means "susceptible to fire the leverage" I'm on board. However, it's actually easier for a leveraged firm to come through a downturn in good financial shape for the same reason.

[Anonymous User]

I'm not sure why your post is anonymous, but more highly leveraged firms are more susceptible during downturns. Wachtell is a huge outlier, but generally easier for a firm to generate high revenue with high leverage, so long as they have the rainmakers.

What does "highly leveraged" mean? Does it mean that the partner/associate ratio is high (e.g. 30 partners, 3 associates)? Or the other way around?

[imchuckbass58]

High leverage (i.e., a high number of associates for a given number of partners) magnifies the profitability of a firm in both upswings and downturns. Think about it this way: Associates are (in the short run) fixed costs. In good times, the more associates per partner you have with billing at rates above their salaries, the more profits per partner you have. In bad times, when associates generate less revenue because of low utilization, you still have to pay their salaries. So the more associates you have per partner, the lower profits per partner.

In a more general sense, higher leverage generally (but not always) means shittier work, all other things equal, especially as a junior. Take writing a motion for summary judgment. If the typical team at your firm is just one partner and one associate (i.e., 1:1 leverage), chances are you would draft significant portions of the motion, with your work revised and overseen by the partner. If your firm has 3 associates and one partner working on the brief, chances are the junior associate is putting together appendices and doing random research tasks, while the more senior associates do the substantive work.

[imchuckbass58]

High leverage (i.e., a high number of associates for a given number of partners) magnifies the profitability of a firm in both upswings and downturns. Think about it this way: Associates are (in the short run) fixed costs. In good times, the more associates per partner you have with billing at rates above their salaries, the more profits per partner you have. In bad times, when associates generate less revenue because of low utilization, you still have to pay their salaries. So the more associates you have per partner, the lower profits per partner.

Also, higher leverage generally means shittier work, all other things equal, especially as a junior. Take writing a motion for summary judgment. If the typical team at your firm is just one partner and one associate (i.e., 1:1 leverage), chances are you would draft significant portions of the motion, with your work revised and overseen by the partner. If your firm has 3 associates and one partner working on the brief, chances are the junior associate is putting together appendices and doing random research tasks, while the more senior associates do the substantive work.

Finally, all other things equal, it is easier to make partner at a firm with low leverage. Fewer associates competing for the same number of partnership slots.

[Renzo]

I'm not sure why your post is anonymous, but more highly leveraged firms are more susceptible during downturns. Wachtell is a huge outlier, but generally easier for a firm to generate high revenue with high leverage, so long as they have the rainmakers.

What does "highly leveraged" mean? Does it mean that the partner/associate ratio is high (e.g. 30 partners, 3 associates)? Or the other way around?

Partners only outnumber associates in very small firms; when people talk about leverage it's the ration of associates to a partner.

[Other25BeforeYou]

I'm not sure why your post is anonymous, but more highly leveraged firms are more susceptible during downturns. Wachtell is a huge outlier, but generally easier for a firm to generate high revenue with high leverage, so long as they have the rainmakers.

What does "highly leveraged" mean? Does it mean that the partner/associate ratio is high (e.g. 30 partners, 3 associates)? Or the other way around?

Partners only outnumber associates in very small firms; when people talk about leverage it's the ration of associates to a partner.

That's not true. Partners outnumber associates at tons and tons of NLJ 250 firms, which hardly qualify as "very small."

[drylo]

I'm not sure why your post is anonymous, but more highly leveraged firms are more susceptible during downturns. Wachtell is a huge outlier, but generally easier for a firm to generate high revenue with high leverage, so long as they have the rainmakers.

What does "highly leveraged" mean? Does it mean that the partner/associate ratio is high (e.g. 30 partners, 3 associates)? Or the other way around?

Partners only outnumber associates in very small firms; when people talk about leverage it's the ration of associates to a partner.

That's not true. Partners outnumber associates at tons and tons of NLJ 250 firms, which hardly qualify as "very small."

Renzo's statement is probably true if we are talking about equity partners only. There may be a few NLJ 250 firms who have more equity partners than other lawyers, but not very many.

[Renzo]

That's not true. Partners outnumber associates at tons and tons of NLJ 250 firms, which hardly qualify as "very small."

Renzo's statement is probably true if we are talking about equity partners only. There may be a few NLJ 250 firms who have more equity partners than other lawyers, but not very many.

Indeed, I was talking about equity partners, and if there are any I'd be surprised. But, I digress; my response to the OP's question stands: "leverage" is associates being leveraged by a partner.

[logan]

That's not true. Partners outnumber associates at tons and tons of NLJ 250 firms, which hardly qualify as "very small."

Really? I thought this was not so, and that as was suggested above, only a handful of NLJ250 firms have more partners than associates. Can you name a few of the firms you have in mind?

I don't know about NLJ 250, but looking at the AmLaw 200, only 7 firms have more partners than associates, and only a couple of those have more equity partners than associates.

[Renzo]

That's not true. Partners outnumber associates at tons and tons of NLJ 250 firms, which hardly qualify as "very small."

Really? I thought this was not so, and that as was suggested above, only a handful of NLJ250 firms have more partners than associates. Can you name a few of the firms you have in mind?

I don't know about NLJ 250, but looking at the AmLaw 200, only 7 firms have more partners than associates, and only a couple of those have more equity partners than associates.

You're doing it wrong, then. Pick eight random firms in the V100, and'll bring you data to show you there are more than that.

[logan]

That's not true. Partners outnumber associates at tons and tons of NLJ 250 firms, which hardly qualify as "very small."

Really? I thought this was not so, and that as was suggested above, only a handful of NLJ250 firms have more partners than associates. Can you name a few of the firms you have in mind?

I don't know about NLJ 250, but looking at the AmLaw 200, only 7 firms have more partners than associates, and only a couple of those have more equity partners than associates.

You're doing it wrong, then. Pick eight random firms in the V100, and'll bring you data to show you there are more than that.

Well now I'm just confused.

[Renzo]

Well now I'm just confused.

Look at the NALP forms. For example, Cleary NY has 93 partners (all equity, but you'd only know this through some research), 380 associates, 19 Of Counsel, 5 staff attorneys, and 14 "other" (might be recruiting staff, managing attorneys, etc).

EDIT: My bad. I misread and inverted your post. I thought you were supporting the above poster who said that reverse-leveraged firms abound.

[Renzo]

Well now I'm just confused.

Look at the NALP forms. For example, Cleary NY has 93 partners (all equity, but you'd only know this through some research), 380 associates, 19 Of Counsel, 5 staff attorneys, and 14 "other" (might be recruiting staff, managing attorneys, etc).

Now I'm confused. The Cleary NY data shows that that office has far more associates than partners. Logan and others, including myself, had -- at least I thought -- asserted that nearly all NLJ250 firms look the same way. I can't think of any law firms, small botiques aside, for which the opposite is true.

See edit, supra. I can't read.

[Other25BeforeYou]

That's not true. Partners outnumber associates at tons and tons of NLJ 250 firms, which hardly qualify as "very small."

Really? I thought this was not so, and that as was suggested above, only a handful of NLJ250 firms have more partners than associates. Can you name a few of the firms you have in mind?

I don't know about NLJ 250, but looking at the AmLaw 200, only 7 firms have more partners than associates, and only a couple of those have more equity partners than associates.

You're doing it wrong, then. Pick eight random firms in the V100, and'll bring you data to show you there are more than that.

http://www.ilrg.com/nlj250/attorneys/desc/4

I started there randomly. 38 of the 50 firms on the page have more partners than associates.

EDIT: Kept counting. More than 100 firms in the NLJ 250 have more partners than associates. Examples include Greenberg Traurig, K & L Gates, Reed Smith, Holland & Knight, Seyfarth Shaw, Fox Rothschild, and Nixon Peabody.

[Anonymous User]

I wonder what this means as well. Various explanations have been given, but I wonder why a firm would end up with many more partners than associates. On one hand, it would seem more beneficial for an associate seeking to make partner. At the same time, might it perhaps mean that a firm is in a tenuous financial position and the associates were the first to go?

[seriouslyinformative]

Are you guys sure these lists aren't including non-equity partners?

[Renzo]

Are you guys sure these lists aren't including non-equity partners?

They do include non-equity partners for the firms that have them. But I'm not sure how the compensation scheme changes the analysis when you're talking about gearing ratios.

[seriouslyinformative]

Are you guys sure these lists aren't including non-equity partners?

They do include non-equity partners for the firms that have them. But I'm not sure how the compensation scheme changes the analysis when you're talking about gearing ratios.

It changes the analysis because they're just partners by name, not by function...

[Renzo]

Are you guys sure these lists aren't including non-equity partners?

They do include non-equity partners for the firms that have them. But I'm not sure how the compensation scheme changes the analysis when you're talking about gearing ratios.

It changes the analysis because they're just partners by name, not by function...

No, they're partners in name, function, and job security, but not in paycheck.

[seriouslyinformative]

No, they're partners in name, function, and job security, but not in paycheck.

LOL nope. Just in name.

[PKSebben]

No, they're partners in name, function, and job security, but not in paycheck.

LOL nope. Just in name.

Yup.

[Renzo]

No, they're partners in name, function, and job security, but not in paycheck.

LOL nope. Just in name.

Yup.

Yeah, I see fucktons of non-equity partners on doc review.

[PKSebben]

No, they're partners in name, function, and job security, but not in paycheck.

LOL nope. Just in name.

Yup.

Yeah, I see fucktons of non-equity partners on doc review.

You're a stupid fuck. When's the last time you saw an 8th year do doc review? The comparison is between a senior associate with the same skills. The bump to partner for these people is to facilitate a billing rate jump. At my firm a Senior Associate has been made non-equity partner and NOTHING CHANGED. Not even his office.