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WHAT WE’RE WATCHING
WORKING THE MARGINS - Pop quiz, hotshot: How do you calculate the value of a partner’s practice? If you said, “Based on the revenue it brings in,” thanks for playing—but no. Well, at least not anymore. As Law.com’s Andrew Maloney reports, law firms are increasingly focusing on profitability when setting and evaluating partner compensation, which means taking a hard look at metrics like realization rates, frequency of discounts and the degree of leverage. “I can tell you it was always a frustration among the managing partners that we dealt with—some of the very successful partners didn’t care about what their book was and what profitability was. In their minds, they had a $10 million practice, and they wanted to be compensated as such,” said Jeffrey Lowe, global practice leader for Major Lindsey & Africa’s law firm practice. “And management finally learned how to go back to them and say, ‘Yeah, it’s a $10 million practice, but it costs us $8 million to service.”
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