October 4, 2006
Midsized Firms Have Available Capacity and a Pricing Advantage
Altman Weil has been conducting an annual Survey of Law Firm Economics since 1972. Its survey for 2005 contains information from 285 law firms. The survey indicates associate income gains outpaced increases in partner compensation. Given the associate compensation bump occurring in the current year, 2006 is likely to show more of the same. Altman Weil slices and dices their annual survey in many ways, and it has been one of the more popular sources for benchmarking one’s own performance against others. You can read more about the survey in their August news release or purchase the survey by going to the Altman Weil Publications, Inc. product page.
When you compare survey results, there is always a little “apples and oranges” problem because different surveys slice things differently. Nevertheless, I thought it would be interesting to compare some of the Altman Weil news release numbers to those in the Juris® Law Firm Economic Survey. The Juris survey for 2005 combined information from 274 firms compared to the 285 in Altman Weil’s, so the sample sizes are the same for all practical purposes. The Juris survey does differ through its emphasis on midsized law firms; whereas, Altman Weil's survey includes firms with 150+ attorneys. The billing rate and billing hours reported in the news release for partners was for equity partners with 21+ years of experience and for associates with 4-5 years of experience.
Partner compensation from the Juris survey is the average of all firms surveyed. The top quartile in the Juris survey earned more than twice the average. What is striking is that midsized firm partners are on a par with firms in the Altman Weil survey as far as compensation is concerned, but midsized firms appear to be significantly more competitive in terms of billing rates. It follows that they must have a materially lower cost structure given comparable partner compensation numbers. The implication is that midsized firms have competitive pricing for competing with large firms and may very well have more pricing increase room.
Partners are working harder in midsized firms surveyed by Juris, Inc., and they are less skilled at fully utilizing associates. Improvements in scheduling and delegation would fall directly to the bottom line, partner compensation, for midsized firms.
Considering the lower billing rates and the lower associate billable hours, in the Juris survey compared to the Altman Weil news release numbers, one must conclude that midsized firms have both available capacity and the opportunity to improve pricing. Improving either or both would materially increase partner income.
You can purchase or learn more about the Juris survey by going toJuris® Law Firm Economic Survey.
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 Compensation, Operations by Tom Collins