More than ever, AmLaw 200 firms are feeling the pressure to improve profitability. The recent downturn in the M&A and other transactional work that firms have traditionally relied on to bolster revenue has reduced profits per partner and manifested in several dramatic ways, including the dissolution or merger out-of-existence of several prominent and old firms. Law firms seeking to grow revenue, but frustrated in their efforts to do so internally, are paying big dollars to bring in lateral partners perceived to have clients. As a result, the lateral partner market has never been busier and the competition for talent is fierce. Law firm partners who feel that their own compensation is being unfairly dragged down by underperforming partners at their firms are taking full advantage of this frothy lateral market.
All this is exacerbated by the increasing public nature of law firm and per-partner profitability. Numerous law-related periodicals now regularly publish revenue and profits per partner statistics. The ability for AmLaw firms to both retain and bring in the best new legal talent depends on their ability to present consistently strong numbers. Indeed, in this market any material drop in the numbers can be calamitous—it may lead to departures and, in some extreme cases, start a partner departure death spiral.
