UPDATE, June 12, 2014, 4:45 p.m., EDT: Here’s Dentons’ response to our column. We’ve detailed our methodology in the seventh paragraph below.
It’s a complaint we hear from time to time here at The American Lawyer: That one of the metrics we use to assess law firm health—average profits per equity partner, a.k.a. PPP—has caused lawyers to become obsessed with money, tipped off clients to just how much their attorneys make and generally wrecked any congeniality that existed in Big Law.
In fact, stories posted today by Reuters and the ABA Journal note that Dentons, a verein that ranks No. 14 among the Am Law 100 top-grossing firms, has decided it will no longer report that measure for our annual survey of Big Law financials.
“While we understand that our position will encounter criticism, and encourage the creative number crunching that others love to engage in, we nevertheless think that our position is in the best interests of our firm, our clients and the profession as a whole,” according to a letter to us from the firm’s Global CEO Elliott Portnoy and Global Chair Joe Andrew.
I’m going to suspend any question of an ulterior motive here—that Dentons didn’t report its latest global PPP figure because, by our estimates, that number would have shown an overall PPP decline year over year of 20 percent, the worst showing in the Am Law 100. (The firm did send out a press release earlier this year with the news that U.S. PPP was up 4.8 percent.)
Let’s talk about the measure itself. Average profits per equity partner is one indicator of a firm’s profitability. Of course, there are caveats: PPP is an average, not the range, of partner pay. And to some extent firms can manipulate PPP based on who they define as an equity partner. PPP is also not the only metric we measure. We’ve often said that revenue per lawyer (RPL) is actually a better indication of a firm’s general health. (For Dentons, global RPL was down 22.5 percent last year, we estimate. RPL for the firm’s U.S. attorneys was up 1.4 percent, according to the firm’s press release.)
Still, for a company like ours that covers the business of law and is committed to the transparency of such information, PPP is a pretty important indicator to track. We will continue to cover the financial results of major law firms.