What does the casual reader learn glancing through Allen & Overy’s (A&O’s) newly-published annual report? Quite a bit. While there was some smirking when then senior partner Guy Beringer last year criticised the reliance on profits per equity partner (PEP) as the fundamental measure of industry success, the firm’s report has attempted to flesh out his concept.
In particular, A&O tries to measure its level of foreign investment and non-salaried spending on developing staff. In the former case, A&O has created a metric based on investment in foreign offices over five years defined as the subsidy those offices require to achieve their partner distributions. It’s not surprising that A&O came up with this given the wrangling it once faced over its New York practice, which only a few years back required an eight-figure subsidy after partner drawings. Under this metric the firm estimates that it has spent £100m growing foreign offices over five years. More ambitiously, the firm attempts to quantify its cumulative return on investment (ROI) based on foreign offices’ subsequent contribution to central profits after partner drawings. The firm estimates that last year its outlay resulted in a cumulative annual ROI of 14%, while this has fallen to 10% in 2008 as the firm starts investing heavily again (see page 4). How rigorous these measures are is hard to say and you certainly couldn’t imagine them replacing the elegant efficiency of PEP any time soon. But they are a surprisingly meaty attempt to deliver on the wider performance mantra that flows through the report. This encompasses detailed information on diversity, pro bono, corporate social responsibility (CSR) and client work (did you know the average age of A&O’s support staff is 36?).
