What does Profit Per Partner determine? Forum

[hellojd]

As a 1L who is debating between a couple of SA offers, I'm trying to figure out a little bit about financial health / how lucrative the particular firms are. I was wondering where the Profit Per Partner come into the mix? What's a "good" PPP? And also, what is typically the ratio of a new partner salary to the PPP?

Thanks in advance!

[WhirledWorld]

For partners, it's just average income. Of course, the average isn't super informative for firms with many offices, since partners in satellite offices in smaller towns obviously do not make the same as NYC partners. So comparing PPP between a firm like Cravath (basically just one office) and Latham (like 40 offices) isn't super informative.

That said, low PPP (especially declining PPP) can indicate poor financial health and increases risk of partners defecting. Conversely, high or increasing PPP can indicate good financial health and increased chances of landing a big lateral partner.

Otherwise PPP is just another metric strivers use to boast about preftige.

[hephaestus]

It is not a particularly useful number. The more useful standard firm financial number is revenue per lawyer (RPL). PPP allows significant numbers massaging by firms (for example excluding non-equity partners, or of counsel for all equity partnerships). RPL is just revenue/lawyers and is thus less manipulable. The more important information is any information you can find about associate retention and associate life.

[yadiermolina]

Seems to me that PPP is just as much a measure of how much equity partners are exploiting associates and NEPs than financial health. Firm's emphasis on PPP incentivizes more leverage and a generally shittier time for associates. In your situation, concentrate on how the firm treats its associates.

[hellojd]

It is not a particularly useful number. The more useful standard firm financial number is revenue per lawyer (RPL). PPP allows significant numbers massaging by firms (for example excluding non-equity partners, or of counsel for all equity partnerships). RPL is just revenue/lawyers and is thus less manipulable. The more important information is any information you can find about associate retention and associate life.

Thanks for all of your posts! I will look into RPL as well now.

Is there any database related to associate retention, or is this something I just have to ask the firms for?