June 14, 2006
Law Firm Survey Shows Link between Leverage and Partner Income
Stephen Collins, President of Juris, Inc. and I paired up to present preliminary results of the Juris® Annual Survey of Law Firm Economics during the ALM’s June 8 Los Angeles business forum for law firms. The information presented was preliminary and unaudited. The audit survey results should be available in a few weeks.
If one looks at a law firm as a business for providing legal services, survey results imply that the most important role for their partner owners is to bring in business and delegate the work to non-partner legal professionals. The law firm that places partner individual productivity as a higher priority limits the long term income of all partner owners.
Consider the chart below:
Mid-sized law firms in the top 20% based on per-partner income had 1.7 associates to every partner. Those at the bottom in terms of partner income had only 1 associate for every two partners. The chart clearly reflects the dominate role of leverage in determining per partner income. It is worth pointing out that even the best (the top performing 20% of mid-sized law firms) had only a 1.7 to 1 ratio of associates to partners versus the 2.7 to 1 enjoyed by AmLaw 200 law firms. That difference goes a long way to explain why AmLaw 200 partner incomes are materially higher than those enjoyed by the best of the mid-size firms.
Let me add that leverage does not depend on the billable hour nor does it require exploitation of the young. It is simple economics. For a law firm, people are required to generate work. Work generates revenue regardless of how that work is priced. Likewise, the more revenue producers per partner, the more income partners can enjoy.
Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.
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Filed under Law Firm Bus Model, Leverage by Tom Collins