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Big Law has surpassed its pre-recession levels of profitability. Of the 100 firms in the new Am Law ranking, 78 reported 2017 profits per equity partner (PPP) levels that are higher (even adjusted for inflation) than their levels in 2007, the year before the Great Recession’s onset, according to data from ALM Intelligence’s Legal Compass.

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We compared the 2007 and 2017 performance metrics of these firms to identify those that have led this resurgence and how they’ve done it. Two observations from this comparison stand out. First, the notion that Big Law is bifurcating into haves and have-nots based on size or profitability is simply wrong; stronger (and weaker) performances are recorded by firms of all sizes and profitability levels. Second, responding to the market’s new normal, many firms have managed their way to higher profits rather than simply letting the rising tide lift them. Only 20 of the 78 firms that raised PPP also grew revenue, lawyer head count and their partnership faster than the economy; the other 58 worked their way to higher PPP by combining equity partner reductions, higher leverage and lowered cost-per-lawyer.

These two observations are interrelated. The variability in performance across firm size and profitability mirrors the variation in the way firms manage lawyer numbers and costs. This variation in how managed a firm is has profound implications. More management creates higher profitability, which firms use to lure commercially powerful partners from less-profitable rivals. It suggests Big Law will bifurcate based not on size or profitability ranking but on the intensity of basic management. It’s important that partners everywhere take this to heart: If partners want their firms to be secure and vital, they should look for profitability to rise, and thus cede greater management control to firm leaders.

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