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While the Am Law 100 reports are still being racked and stacked, one dynamic is already clear: 2018 witnessed little movement in the number of equity partners while their compensation (profits per equity partner) grew strongly; conversely, nonequity partner numbers grew strongly while their compensation was flat. This continues a trend going back over a decade that has been especially pronounced since 2010. To be clear, this is not an artifact of middle and lower tier firms—the data shown are for the 50 most-profitable firms in this year’s Am Law 100.

Law firm traditionalists will decry this dynamic as an erosion of the implicit social contract between firms and their senior lawyers and would-be equity partners. I see it differently: It’s evidence of law firm leaders coming to grips with market reality and managing through the constraints of outmoded traditions.

Following the onset of the global financial crisis in 2008, law firms diddled for a couple of years. This was entirely rational; after the market busts of 1991 and 2000, business returned to rude health in just 12 to 18 months. Alas, not this time. By 2010, it was clear there’d been a permanent shift. Clients were exercising their smarts and their muscle—they moved away from one-stop-shop sourcing from “house” firms to best-of-breed sourcing across many firms; they bulked up their legal departments to take more work in-house; they pushed more work to low-cost and nontraditional providers. They also availed of the shift in market power created by firms rushing headlong into each other’s markets—both practice-wise and geographically (especially New York and London). These moves intensified firm-vs.-firm competition, thereby dampening billing rate increases and enabling clients to achieve ever steeper discounts.

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