Revenue Per Lawyer v. Profits Per Partner Forum

[liLtuneChi]

So I'm checking out the new Am Law 200 numbers and 2 firms stuck out to me. Munger Tolles and Williams and Connolly.

Both are in the top 20 when it comes to RPL. W&C (7) at $1.18 million and Munger (17) at $1.04 million. Yet when I look at Profits Per Partner both are not even in the top 60. Munger (62) is at $1.22 million and W&C (64) is at $1.215 million.

Other firms like are able to get PPP double or sometimes triple what their RPL is. Quinn Emanuel is able to turn $1.205 million in RPL to $3.62 million in PPP.

My question is: does anyone know what Munger and W&C are doing with the extra money that isn't going to the partners? I'm sure it isn't coming back to the associates in bonuses because W&C doesn't pay any and I've heard that Munger is actually below market sometimes.

[Renzo]

So I'm checking out the new Am Law 200 numbers and 2 firms stuck out to me. Munger Tolles and Williams and Connolly.

Both are in the top 20 when it comes to RPL. W&C (7) at $1.18 million and Munger (17) at $1.04 million. Yet when I look at Profits Per Partner both are not even in the top 60. Munger (62) is at $1.22 million and W&C (64) is at $1.215 million.

Other firms like are able to get PPP double or sometimes triple what their RPL is. Quinn Emanuel is able to turn $1.205 million in RPL to $3.62 million in PPP.

My question is: does anyone know what Munger and W&C are doing with the extra money that isn't going to the partners? I'm sure it isn't coming back to the associates in bonuses because W&C doesn't pay any and I've heard that Munger is actually below market sometimes.

1) W&C doesn't have bonuses because they pay a higher base-pay, so the take-home pay (bonus +base) is higher than other peer firms.

2) If two firms have identical number of attorneys, and identical revenues, but one has more partners than the other, the PPP will be lowwer, while the RPL will be the same.

[thesealocust]

Check you leverage (as usual, beaten by Renzo).

Also, the work the firms do is very different. W&C does a lot of white collar, and there just aren't the same dollars on the table doing white collar defense as there is doing transactional work for banks or plaintiffs-side major litigation.

[liLtuneChi]

thanks for the feedback guys

so is the difference in PPP between Irell vs. Munger solely the result of leverage?

Irell RPL/PPP = $1.39 million / $2.93 million
Munger RPL/PPP = $1.04 million / $1.22 million

Irell - 59 partners 125 associates (184 lawyers total)
Munger - 93 partners 88 associates (181 lawyers total)

I'm not great at math but Irell's RPL is 35% greater than Munger but its PPP is 140% greater. I don't think Munger having 60% more partners than Irell is enough to explain the 140% gap in terms of PPP.

[tothePAIN]

The OP is a flame. See his post history and other threads.

[FantasticMrFox]

The OP is a flame. See his post history and other threads.

ok. i really think he was asking a genuine question in this thread though.

[Wavelet]

thanks for the feedback guys

so is the difference in PPP between Irell vs. Munger solely the result of leverage?

Irell RPL/PPP = $1.39 million / $2.93 million
Munger RPL/PPP = $1.04 million / $1.22 million

Irell - 59 partners 125 associates (184 lawyers total)
Munger - 93 partners 88 associates (181 lawyers total)

I'm not great at math but Irell's RPL is 35% greater than Munger but its PPP is 140% greater. I don't think Munger having 60% more partners than Irell is enough to explain the 140% gap in terms of PPP.

You shouldn't downplay the 35% difference in RPL. Since law firms have mostly fixed costs, each marginal dollar above those costs is pure profit for the partners. Suppose, for example, that an associate costs the firm $500,000/year (salary, healthcare, office space, secretary, etc). Assume, for the time being, that revenue per associate equals revenue per lawyer. Then while there is a 35% difference in revenue, there is a 65% difference in profits:

Irell Profits Per Associate = $1.39 million - $500K = $0.89 million
Munger Profits Per Associate = $1.04 million - $500K = $0.54 million

Obviously revenue per associate is not equal to revenue per lawyer; it's going to be lower. But that only strengthens the point: the lower the revenue per associate, the more a 35% difference makes. (Try the calculation after cutting revenue per associate to 75% of RPL, for example).

So - not solely the result of higher leverage, but rather the result of higher leverage and higher RPL. Finally, remember that profits equals revenue less costs. I don't know a lot about commercial real estate, but I imagine Irell pays less for its Century City and Newport Beach offices than Munger does for its downtown LA and SF offices.

[seriouslyinformative]

My question is: does anyone know what Munger and W&C are doing with the extra money that isn't going to the partners?

There isn't any extra money. If you look at gross revenue rankings, Munger and W&C aren't anywhere near the top. There are just way fewer associates at these firms, meaning that gross revenue is divided up among fewer lawyers.

[thesealocust]

Also, and much more importantly, RPL and PPP are borderline meaningless for associates. One could argue that RPL is relevant in a year-over-year fashion, as that data might provide a very general indication of a firm's financial health. But otherwise, the two figures are just much more relevant to partners' interests than associates'. In fact, PPP is sometimes inversely related to associates' interests, in that some firms have used layoffs to increase PPP (e.g., CWT).

I think this is only true within the narrow band of firms you're probably used to thinking about. If you add the caveat "so long as your RPL is at or near a million dollars" what you wrote is true - but otherwise RPL and PPP are great (but rough) indicators of the type of work a firm does / relative prestige / relative potential exit options, especially holding practice area and geography constant.

[Renzo]

Also, and much more importantly, RPL and PPP are borderline meaningless for associates. One could argue that RPL is relevant in a year-over-year fashion, as that data might provide a very general indication of a firm's financial health. But otherwise, the two figures are just much more relevant to partners' interests than associates'. In fact, PPP is sometimes inversely related to associates' interests, in that some firms have used layoffs to increase PPP (e.g., CWT).

Additionally, a firm with extremely high RPL or PPP can be one deal away from folding, and a vice-versa. A firm could be talking about dissolving, and a Dupont/Danisco merger falls in their laps, and all the sudden they are leading the league in PPP/RPL.

[thesealocust]

Also, and much more importantly, RPL and PPP are borderline meaningless for associates. One could argue that RPL is relevant in a year-over-year fashion, as that data might provide a very general indication of a firm's financial health. But otherwise, the two figures are just much more relevant to partners' interests than associates'. In fact, PPP is sometimes inversely related to associates' interests, in that some firms have used layoffs to increase PPP (e.g., CWT).

Additionally, a firm with extremely high RPL or PPP can be one deal away from folding, and a vice-versa. A firm could be talking about dissolving, and a Dupont/Danisco merger falls in their laps, and all the sudden they are leading the league in PPP/RPL.

Can fees for a single transaction really be that high? I'm googling that merger right now to see what the deal is. It'd really change my view of the industry / league tables if one deal could swing it so heavily (not skeptical, just curious).

[Renzo]

Also, and much more importantly, RPL and PPP are borderline meaningless for associates. One could argue that RPL is relevant in a year-over-year fashion, as that data might provide a very general indication of a firm's financial health. But otherwise, the two figures are just much more relevant to partners' interests than associates'. In fact, PPP is sometimes inversely related to associates' interests, in that some firms have used layoffs to increase PPP (e.g., CWT).

Additionally, a firm with extremely high RPL or PPP can be one deal away from folding, and a vice-versa. A firm could be talking about dissolving, and a Dupont/Danisco merger falls in their laps, and all the sudden they are leading the league in PPP/RPL.

Can fees for a single transaction really be that high? I'm googling that merger right now to see what the deal is. It'd really change my view of the industry / league tables if one deal could swing it so heavily (not skeptical, just curious).

I was talking to a sr. assoc. at a V50 firm (to remain nameless) who said this essentially happened there. The firm was on the verge of collapse, a HEYOOOGE matter came in that kept the firm afloat while they poach a couple practice groups that brought business with them, and now they're all in the money.

[thesealocust]

So what you're saying is, once you get to a law firm, it's like a live-action Mad Men fanfic all the time?

[Renzo]

Man Men fanfic

These are words?

[thesealocust]

Man Men fanfic

These are words?

Mad Men = cool drama about advertising agency that often involves "zOMG we need clients or our business will blow up" and suave antics / bedding secretaries to make it happen.

fanfic = fan fiction = people who take a fictional world / characters (Mad Men, Harry Potter, whatever) and write their own stories.

...no. No they're not words

I am going to my corner now.

[Renzo]

Man Men fanfic

These are words?

Mad Men = cool drama about advertising agency that often involves "zOMG we need clients or our business will blow up" and suave antics / bedding secretaries to make it happen.

fanfic = fan fiction = people who take a fictional world / characters (Mad Men, Harry Potter, whatever) and write their own stories.

...no. No they're not words

I am going to my corner now.

Oh, I know Mad Men. But Man Men sounded either crazy cool or terrifyingly gay-rotic.

[thesealocust]

Oh, I know Mad Men. But Man Men sounded either crazy cool or terrifyingly gay-rotic.

Ah, didn't see my typo. I type like a drunken sailor would type if he had a reason to be typing after all that drinking.