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Law Firm Profits Per Partner – The Elephant in the Room

The practice of law is one of the “3 great professions.” These are theology for the preservation of the spirit, medicine for the preservation of the body, and law for the preservation of civilization. I was taught that axiom in law school and have since validated it for myself. The practice of law is indeed a great and honorable profession, until it’s not.

What makes the practice of law less great and honorable than it should or could be? What’s at the core of most of the internal complaining and complaints, against Big Law especially? What’s the primary reason so many lawyers exit the practice, report bona fide lack of wellbeing, or worse? What’s the elephant in the room that’s never really discussed? The short answer is: When the law firm management’s emphasis has shifted too far to the business side of the practice. More specifically, when profits per partner (PPP) become a significant concern and focus of the practice.

Pentateuque by Fabien Mrelle | Image Credit: My Modern Met

Now, let’s not anyone be unreasonable and jump to hyperbolic responses, like, “If we don’t maximize PPP or show year-over-year growth we’ll go out of business.” Maximizing PPP is not law anywhere, it’s simply a management choice. And as others have observed, anyone who believes that you can have infinite growth in a finite environment is either a madman or an economist.

Certainly an organization needs to show a profit at the end of the day or it doesn’t stay in business. But law firms that are driven and managed by the voluntary ethic of maximizing PPP create cultures that range from merely draining to actively toxic. In these cultures, the practice of law is a profession in name only. So why create and run those kinds of law firms at all?

Pentateuque by Fabien Mrelle | Image Credit: My Modern Met

Here’s a reflection question for you. Does your firm release its PPPs for publication? Why? Beyond the power play with your buddies at other firms (should your PPP number be bigger, of course), what’s the friggin’ point of this comparison? Whatever message the firm thinks it’s sending, the message most clearly received by the clients is that they’re overpaying the firm and a message most clearly received by the associates is that next year they need to bill more hours so the firm can stay in this futile pissing contest.

I’m honored and privileged to be a lawyer. My legal roles so far include summer clerk, law clerk, associate, director, partner, and co-founder/managing member. My early and foundational years include Big Law, which didn’t always focus on maximizing PPP. But when it did, firm life sucked the life out of me and everyone around me.

Pentateuque by Fabien Mrelle | Image Credit: My Modern Met

What does maximize PPP feel like to associates? It feels like the statue Pentateuque (weight of the world on your shoulders) by the French artist Fabien Mrelle pictured above. What does maximize PPP look like to associates? I have two examples from personal experience. One example is of a managing partner telling us associates to suck up a billing hours increase because “law is a plantation system and you’re all very well paid.” I wrote about that experience here. Another example from a different firm is of a partner referring to us associates as fungible billing units (FBUs). I wrote about that experience here. Both firms soon suffered mightily as a direct result of their PPP perspectives. Other firms suffer mightily, they just haven’t yet learned the lesson that their focus on PPP is the elephant in the room that is at the core of their struggles.

In light of the seriousness of the PPP elephant in the room, the heat the Paul Hastings firm is currently receiving over a simple list is sadly laughable. This controversy centers on a fairly benign list of Big Law non-negotiable expectations of performance by associates. The list was, reportedly, presented by a senior associate at a training program for the firm, then leaded. The list is mostly standard operating procedure no matter what profession you’re in. People criticizing the senior associate, or the list, or Paul Hastings likely haven’t spent meaningful time in professional life.

Beyond just acknowledging the PPP elephant in the room, law firm management can take at least a couple of tangible steps to greatly improve their respective cultures:

  • Stop making public and publishing the firm’s PPP, if you do.

  • Stop thinking PPP is the primary reason for your law firm’s existence, if you do.

  • Shift from an ethic of maximizing PPP to an ethic of mutuality. Yes, the firm continues to make a profit and the partners are well compensated, but not at the detrimental expense of others in the firm.

  • Consider placing an enough-ratio on partner compensation. For example, tie and limit partner bonuses (profits beyond earned billings) to a 4:1 ratio of average staff salary. If the average full-time staff salary is $80k then the maximum partner bonus is $320k. That partner bonus too low? I understand. Raise the average staff salary, not the ratio.

When law firm management starts addressing the PPP elephant in the room by, for example, making the changes recommended here, it can expect firm profits to increase and firm drama to decrease. Yes. Really. Like the great and honorable firm practicing law that it could and should be.

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