In a year of generally positive financial results for Pennsylvania law firms, leadership focused on efficiency, leading to better than average profitability gains for several of them.
Of the 13 Am Law 200 firms founded in Pennsylvania, all but two posted at least a slight gain in profits per equity partner in 2017, compared to the year before. Seven increased PPP by more than 5 percent—the amount of year-over-year PPP growth across the entire Am Law 200.
(While 15 Pennsylvania firms appear on the Am Law 200, year-to-year comparisons do not include Marshall Dennehey Warner Coleman & Goggin or Eckert Seamans Cherin & Mellott, which were not included in last year’s Am Law 200.)
But revenue per lawyer increased by just half a percent on average among firms founded in Pennsylvania, even with double-digit gross revenue gains at Cozen O’Connor and Saul Ewing Arnstein & Lehr. While the majority of firms saw RPL increase year-over-year, three firms saw their RPL dip, including a decline of 15.3 percent at K&L Gates.
But large firm leaders in Pennsylvania say they are focused on growing the bottom line through various means. While a few mention specific cost-cutting measures, many highlight a focus on staffing for efficiency, project management and alternative fee arrangements.
Duane Morris chairman Matt Taylor says practice group heads at his firm have encouraged lawyers to be project managers. The firm as a whole, he says, has adopted a “nimble approach” as clients demand more creativity in billing and fees.
Blank Rome aimed to keep expense growth under 1 percent, and used separate litigation and transactional pricing teams to create better cost predictability for clients, chairman Alan Hoffman says.
Pepper Hamilton managing partner Tom Cole says his firm has been more proactive about offering alternative fee arrangements, giving clients a budget before they ask for it. The firm saw gross revenue decline slightly in 2017, bumping it down from the Am Law 100 to the Second Hundred, but chairman Tom Gallagher says the firm is more focused on “delivering profitable work,” pointing to PPP growth of 14.3 percent.
Reed Smith managing partner Sandy Thomas says the firm has continuously monitored head count against demand since shrinking its lawyer ranks in 2016. The firm aims to increase realization through its client value team.
Despite the push for efficiency, firms are not backing away from making investments.
Pepper Hamilton placed a focus on partner recruitment and talent management in 2017, implementing new C-suite roles to focus on those functions. And Fox Rothschild’s Mark Morris says expenses grew last year, as the firm worked to fit its infrastructure around lateral hires from prior years. Drinker Biddle & Reath chairman Andrew Kassner says he’s looking to grow the firm’s ancillary businesses and consulting services.
A couple firms experienced significant head count growth as well, resulting in gross revenue gains, in a year when law firm merger activity hit an all-time high.
Saul Ewing grew gross revenue by 43 percent after merging with midsize law firm Arnstein & Lehr, bringing the firm’s total head count to about 400.
Cozen O’Connor grew gross revenue by 10.7 percent as it aggressively recruited lateral partners, increasing head count by a net 48 lawyers throughout the year.
Ballard Spahr also benefited from a merger, showing growth in its media law practice after acquiring media boutique Levine Sullivan Koch & Schulz. But the firm is expected to grow by a greater margin this year, after its merger with Midwest-based Lindquist & Vennum became official Jan. 1, adding 107 lawyers to Ballard Spahr.
The two deals came after a merger drought of sorts for Ballard Spahr, whose last significant combination was its 2013 acquisition of Stillman & Friedman, a white-collar and securities litigation boutique.