2012 Financial Metrics of Am Law 100. Forum

[MoltenWings]

Here it is: http://www.americanlawyer.com/PubArticl ... slreturn=1

i don't have access. however you can still see the chart on http://www.americanlawyer.com/PubArticl ... 2543778912

anyone have subscription?

[Cavalier]

It doesn't take too long to create an account that can view half the articles there.

[Anonymous User]

I'd like to see Partner profits, etc posted if anyone can somehow do that

[Old Gregg]

You're welcome, shitbags:

PPP
1) Wachtell
2) Quinn
3) S&C
4) Cahill
5) Cravath
6) Paul Weiss
7) K&E
Cleary
9) Simpson
10) Milbank

RPL
1) Wachtell
2) S&C
3) Boies Schiller
4) K&E
5) W&C
6) Cravath
7) Davis Polk
Skadden
9) Simpson
10) Cahill

Value Per Lawyer
1) Wachtell
2) Quinn
3) K&E
4) S&C
5) Cahill
6) Gibson
7) Milbank
Boies
9) Simpson
10) Latham

[jawsthegreat]

What does Value per lawyer measure(besides the obvious)?

[bdubs]

What does Value per lawyer measure(besides the obvious)?

?? It measures profit (compensation paid to all partners) divided by total lawyers.

The awesome part of VPL is that it is net of associate compensation. So those that pay above Cravath generate more profit per lawyer even after sharing the wealth with their associates. That shows good financial health at Wachtell, K&E, and Boies, not that anyone really needs confirmation that those firms are financially healthy.

[Reprisal]

Protip: work for a firm that appears lower on the PPP than on RPL

High RPL but a poor PPP / RPL ratio indicates that the firm creates value with each attorney, but is less of a naked Ponzi scheme.

[englawyer]

What does Value per lawyer measure(besides the obvious)?

?? It measures profit (compensation paid to all partners) divided by total lawyers.

The awesome part of VPL is that it is net of associate compensation. So those that pay above Cravath generate more profit per lawyer even after sharing the wealth with their associates. That shows good financial health at Wachtell, K&E, and Boies, not that anyone really needs confirmation that those firms are financially healthy.

VPL = RPL-CPL

so then Cost Per Lawyer = RPL - VPL. Cost Per Lawyer I would think is a rough proxy for the quality of offices, support staff, salaries, etc. no (from an associate's perspective).

[Reprisal]

I bet plaintiff firms would destroy these numbers. See Quinn & Emmanuel near the top of the chart.

[rayiner]

What does Value per lawyer measure(besides the obvious)?

?? It measures profit (compensation paid to all partners) divided by total lawyers.

The awesome part of VPL is that it is net of associate compensation. So those that pay above Cravath generate more profit per lawyer even after sharing the wealth with their associates. That shows good financial health at Wachtell, K&E, and Boies, not that anyone really needs confirmation that those firms are financially healthy.

VPL = RPL-CPL

so then Cost Per Lawyer = RPL - VPL. Cost Per Lawyer I would think is a rough proxy for the quality of offices, support staff, salaries, etc. no (from an associate's perspective).

As an associate, what you really care about is RPL. High RPL = firm is bringing in money. It might mean they're working associates to the bone in the process, but that's not necessarily a bad thing--it means people have work, clients aren't balking at the # of hours billed on their projects, etc. Common problems like difficulties collecting or clients not wanting to pay junior associates will directly hit the RPL in a way that's hard to hide.

[Cavalier]

Protip: work for a firm that appears lower on the PPP than on RPL

High RPL but a poor PPP / RPL ratio indicates that the firm creates value with each attorney, but is less of a naked Ponzi scheme.

This doesn't make sense to me. Only a handful of firms have lower PPP than RPL, and none of those firms are top firms.

[bdubs]

As an associate, what you really care about is RPL. High RPL = firm is bringing in money. It might mean they're working associates to the bone in the process, but that's not necessarily a bad thing--it means people have work, clients aren't balking at the # of hours billed on their projects, etc. Common problems like difficulties collecting or clients not wanting to pay junior associates will directly hit the RPL in a way that's hard to hide.

This makes sense if you're choosing between firms that seem unstable. It makes less sense when choosing between firms that are all stable and highly profitable.

This would be more of an issue if compensation in law wasn't highly transparent, but it is (everyone knows Boies & Wachtell pay big $$, and K&E pays bigger bonuses than Cravath).

I don't understand why you would care if K&E or Boies has lower RPL than S&C though, it's not like there is a big risk of too little work at either of them.

[rayiner]

As an associate, what you really care about is RPL. High RPL = firm is bringing in money. It might mean they're working associates to the bone in the process, but that's not necessarily a bad thing--it means people have work, clients aren't balking at the # of hours billed on their projects, etc. Common problems like difficulties collecting or clients not wanting to pay junior associates will directly hit the RPL in a way that's hard to hide.

This makes sense if you're choosing between firms that seem unstable. It makes less sense when choosing between firms that are all stable and highly profitable.

This isn't really an issue because compensation in law is highly transparent (everyone knows Boies & Wachtell pay big $$, and K&E pays bigger bonuses than Cravath).

I don't understand why you would care if K&E or Boies has lower RPL than S&C though, it's not like there is a risk of too little work at either of them.

Looking at financial metrics doesn't make much sense at all when choosing between highly stable firms. It becomes relevant when you're looking at firms with high PPP but middling RPL (Cadwalader, etc).

[Julio_El_Chavo]

I can't believe Milbank is top 10 in PPP. What a god awful shitty place to work as an associate.

[Anonymous User]

I can't believe Milbank is top 10 in PPP. What a god awful shitty place to work as an associate.

whats so bad about working at milbank? they seem to have great programs for mid-level associates.

and how the hell did quinn's gross revenue jump over 30%?

[Julio_El_Chavo]

I can't believe Milbank is top 10 in PPP. What a god awful shitty place to work as an associate.

whats so bad about working at milbank? they seem to have great programs for mid-level associates.

and how the hell did quinn's gross revenue jump over 30%?

Anecdotal, of course: I've heard more horror stories about Milbank than any other firm. Partners habitually screaming at associates, dehumanizing them, etc. Partners are BY FAR the greediest of any firm in the US. It's really not even close. It's more like a collection of fiefdoms protecting their closely-guarded clients than a law firm.

[NinerFan]

Protip: work for a firm that appears lower on the PPP than on RPL

High RPL but a poor PPP / RPL ratio indicates that the firm creates value with each attorney, but is less of a naked Ponzi scheme.

This doesn't make sense to me. Only a handful of firms have lower PPP than RPL, and none of those firms are top firms.

Don't think that's what he meant. He was talking about ratio of PPP to RPL. If PPP is 4m and RPL is 1m, that might have certain implications versus a firm with PPP of 1.5m and RPL of 750k.

What does it mean? Beats me, but I think that's what he was conveying.

[Magnificent]

Protip: work for a firm that appears lower on the PPP than on RPL

High RPL but a poor PPP / RPL ratio indicates that the firm creates value with each attorney, but is less of a naked Ponzi scheme.

This doesn't make sense to me. Only a handful of firms have lower PPP than RPL, and none of those firms are top firms.

W&C and Munger come to mind as firms with RPL that is higher or about the same as PPP. I don't know exactly what it means either but it seems better than being at a firm with PPP 2x higher than RPL. That means they are soaking their associates without actually giving some of the profits back to the firm. Although neither W&C or Munger are known for giving huge bonuses, they do give their attorneys free lunches and many other perks.

I don't know if firms with PPP 3-4x higher than RPL are quite as generous.

[Anonymous User]

so what metric should we be looking at for financial stability?

[Old Gregg]

When it comes to RPL, however, faithful readers will know that this is one of my favorite all-purpose law firm “performance” measures. Why? First of all, it’s hard to fudge either the numerator or the denominator. (Sure, you can play games with FTE’s and so forth, but frankly most firms aren’t that focused on this metric to go to the bother.) So what’s the RPL story?
To the extent it’s disclosed, or calculable, I view RPL as something of a rough proxy for “quality of practice.” By that I simply mean that the more clients are willing to pay you, on average, for a lawyer-year’s worth of time from your firm, the higher the value clients place on what you do for them. At the margins and in the short run, this may be influenced by tweaking hourly rates or recognition percentages, but over the long run and in extremely revealing ways, the trend of your firm’s RPL (vis-a-vis your peer group, as always–discipline, people!), be it up or down or sideways, tells an enormously important and almost incontrovertible story about the trajectory of your practice. You can be going up-market, down-market, or staying-market, but RPL, over time, won’t lie.

--adamsmithesq

[imchuckbass58]

Yeah, PPP is hugely influenced by things like what you count as "partners" (there are nonequity partners at quinn and K&E, for example), and also by leverage (higher leverage = higher PPP, all else equal). But RPL is really hard to manipulate unless you're playing tricks with revenue recognition, which (1) is borderline unethical - see Dewey, and (2) can't be done over for years on end.

Edit: On the leverage point, one of the reasons why Paul Weiss and Quinn have really high PPP but middling (for top firms) RPL is that both have armies (100+ at PW) of staff attorneys and more associates than normal, making leverage pretty high. This is partially the nature of their work - you can leverage a litigation matter a lot more than transactional work because of all the doc review, privilege log work, etc.

[Anonymous User]

Yeah, PPP is hugely influenced by things like what you count as "partners" (there are nonequity partners at quinn and K&E, for example), and also by leverage (higher leverage = higher PPP, all else equal). But RPL is really hard to manipulate unless you're playing tricks with revenue recognition, which (1) is borderline unethical - see Dewey, and (2) can't be done over for years on end.

I don't see how it matters at K&E or Quinn. Neither of them counts non-equity partners in their PPP calculations (at least AMLAW doesn't), and even if it did, that would dramatically drop their PPP. I really don't see the relevance of this statement.

[RVP11]

Yeah, PPP is hugely influenced by things like what you count as "partners" (there are nonequity partners at quinn and K&E, for example), and also by leverage (higher leverage = higher PPP, all else equal). But RPL is really hard to manipulate unless you're playing tricks with revenue recognition, which (1) is borderline unethical - see Dewey, and (2) can't be done over for years on end.

I don't see how it matters at K&E or Quinn. Neither of them counts non-equity partners in their PPP calculations (at least AMLAW doesn't), and even if it did, that would dramatically drop their PPP. I really don't see the relevance of this statement.

Having non-equity partners helps hide your true leverage ratio. And leverage is what gets you the high PPP.

[Anonymous User]

Yeah, PPP is hugely influenced by things like what you count as "partners" (there are nonequity partners at quinn and K&E, for example), and also by leverage (higher leverage = higher PPP, all else equal). But RPL is really hard to manipulate unless you're playing tricks with revenue recognition, which (1) is borderline unethical - see Dewey, and (2) can't be done over for years on end.

I don't see how it matters at K&E or Quinn. Neither of them counts non-equity partners in their PPP calculations (at least AMLAW doesn't), and even if it did, that would dramatically drop their PPP. I really don't see the relevance of this statement.

Having non-equity partners helps hide your true leverage ratio. And leverage is what gets you the high PPP.

From the firm's marketing materials, sure, but AMLAW calculates the leverage ratio by excluding non-equity partners. And they calculate PPP based on equity partners. And if they included non-equity partners in their calculation, having $3mm PPP and counting non-equity partners is pretty fucking impressive.

[imchuckbass58]

I don't see how it matters at K&E or Quinn. Neither of them counts non-equity partners in their PPP calculations (at least AMLAW doesn't), and even if it did, that would dramatically drop their PPP. I really don't see the relevance of this statement.

They're not supposed to count non-equity partners in their PPP calculations, but the data is self-reported, so firms can fudge the numbers. Even to the degree they don't fudge outright, there's the tough question of what counts as an equity partner. What happens if you have profit-tied compensation but aren't given equity? Does that count as an equity partner? For instance, dla piper used to make income partners contribute capital and had them share partially in firm profits, but I sure bet they didn't count in the denominator for PPP: http://www.law.com/jsp/nlj/PubArticleNL ... slreturn=1

It's widely acknowledge that many firms fudge these numbers, and the difference between amlaw statistics and lender statistics demonstrates this. Steven Harper (former K&E partner), has a good post about this: http://thebellyofthebeast.wordpress.com ... lated-ppp/

To be clear, I have no specific reason to believe Quinn and K&E are fudging their numbers, but it's much easier to do when you have a two-tier partnership. If all your partners are equity partners, you can't fudge the numbers.