On the surface, at least, it’s the same happy story. New records galore: Gross revenue up 11.4 percent, profits per partner up 13.4 percent, revenue per lawyer up 7.3 percent, which is to say, at a clip exceeding the annual hike in billing rates. Times are so good for the men and women who own Am Law 100 firms that those who snared profits of a mere million dollars were below par: The mean was $1.2 million; the average among firms headquartered in New York, an astonishing $2.05 million.

The gleaming top-line numbers tell only part of the story. Amid the glee, here are three lessons worth considering:

Partnership has changed, irrevocably. Since 2000, in boom times and bust, only one significant Am Law 100 category dropped steadily: the percentage of equity partners. Last year, equity partners accounted for just 25 percent of the lawyers in Am Law 100 firms, down from 28 percent in 2000. It’s not that some firms aren’t making equity partners-over the same period, there has been a 16 percent increase. But head count has grown by 31 percent, and the category of salaried, nonequity partners has more than doubled.

The averages mask harsher changes. This year, 39 firms shrank or held steady the number of equity partners. Another 15 reported increases of three or less. While the numbers may be the same, the faces aren’t. As Elizabeth Goldberg reports, some of the most successful firms are churning through partners. Since 2004, 18 percent of Dechert’s partners have left, as have 25 percent of Cadwalader, Wickersham & Taft’s, and 17 percent of Morrison & Foerster’s.

There are only 20 one-tier partnerships left in The Am Law 100. On average, they are more lucrative than their multitier counterparts. But, as Andrew Longstreth reports, even they are under attack from competitors seeking to woo their stars with the promise of off-the-lockstep rewards.

The new rules of partnership? Tenure is dead. Produce (at an attractive rate) or perish.

The rich are richer, and the next tiers are becoming one. The drive for high-value, price-insensitive work continues to consume Am Law 100 firms. On the revenue per lawyer chart, the best measure of how successfully firms attract premium work, the top quintile is pulling away from the rest of the firms, even as the difference between the second and third quintiles begins to disappear. The gap between the first tier and the others has been growing since 2002. In 2006 the average revenue per lawyer of the second tier was 82 percent of the first tier. This year it dropped to 77 percent. By contrast, the average revenue per lawyer of the third tier was 91 percent of the second tier.

The first tier is largely made up of New York firms, a handful of premium-billing national powerhouses, and a couple of litigation pureplays. The second and third tiers consist mostly of national firms that have expanded aggressively over the last decade and ratcheted up their services and billing rates. This year, 31 firms-a record number-fall into the national category, and by next year, more, such as Reed Smith, will follow. (We define national firms as those that have fewer than 45 percent of their lawyers in any single region.)

These firms were built on the premise that the future belonged to firms that had a collection of powerful niche practices they could ply across the nation and around the globe. So far they have been proven correct. But few of these firms any longer breathe aloud their desire to overturn the New York landscape. They have seen the mountaintop and know they can’t get there.

Firms are on a treadmill paved with gold. There is no better predictor of where a firm will finish the year than its position at the start. For all the effort, all the partners pushed over the side, all the sales stratagems hatched, consultants hired, and associates recruited, the relative strength of most firms simply doesn’t change very much. Leaving aside Wiley Rein, which enjoyed a one-shot contingency windfall, only 11 firms improved their year-to-year quintile ranks. Four of those were newcomers to The Am Law 100, the most notable of which was Quinn Emanuel Urquhart Oliver & Hedges. Previously a Second Hundred firm, Quinn grew enough in the past year to both join The Am Law 100 (a list based on gross revenue) and land in the top quintile in revenue per lawyer. Quinn’s lawyers had a different idea from those at the national firms-they’d seek only high-end litigation-and the will to execute it ["The Mighty Quinn," June 2006]. Sometimes there are rewards for not following the herd.

Top Design
How Dechert has risen into the first tier of profitability.
By Julie Triedman
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Beating The Spread
Firms hunting for stars reexamine partner compensation.
Elizabeth Goldberg
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The Charts