The ratio of lawyers to partners at the largest New Jersey firms has been dropping for the past three years, an indication that firms are putting more reliance on partners as billing engines.
A Law Journal survey of the 20 biggest firms shows there are 2.4 lawyers per partner at bellwether firms, down from 2.52 in 2005.
The decline parallels that reported on Tuesday by the National Association for Law Placement, which found a national drop to 2.21 this year from 2.24 in 2005.
Managing partners at New Jersey firms, along with consultants and analysts who study the legal profession, say there has been a restructuring of law firm staffing, due both to organizational economies and client demands.
They say the traditional pyramidal structure of law firms is changing due to increased expectations by corporate clients that senior lawyers will handle the work. Gone are the days when rainmakers can simply hand off to associates.
“There’s much greater pressure on law firms today,” says Joel Rose, a law firm management consultant in Cherry Hill, who says rainmakers at a typical large firm are expected to bill 1,500 or 1,600 hours a year, in addition to their client networking activities.
As a result, fewer associates are needed, so the lawyer-to-partner ratio – also known as “leverage” – drops.
Another major change is an increase in nonequity partnership as an alternative to the “up or out” system in which associates used to make partner or were asked to leave. Since nonequity partners are “partners” for purposes of the Law Journal and NALP surveys, they make for a net rise in partners, reducing the lawyer-to-partner ratio.
But how is leverage a reliable gauge of firm profitability?
“I think it’s really measuring whether the firm has a proper balance of age and experience in the firm structure,” says Michael Rodburg, managing partner at Lowenstein Sandler, where the lawyer-to-partner ratio has fallen to 2.71 from 3.39 in 2005. “I’m not sure there’s a right number or a wrong number.”
Beginning in 2000, the Roseland firm had higher leverage because of retirements of founding and senior partners and the hiring of larger classes of new associates, which Rodburg says have been smaller in the past couple of years.
Archer & Greiner’s Gary Lesneski says there should be the right mix of junior and senior staff on cases, one that makes efficient use of labor while meeting the client’s staffing preferences. “You don’t want to pay someone $400 an hour to sit in a room sifting through boxes,” he says. “Whatever you call somebody, leverage is not as important if you’re controlling compensation.”
Some consultants say that while methods of tracking leverage change over time, the underlying principle stays valid. “Leverage is still a key driver of law firm profitability. It’s still important to push work down” to the lowest-paid person competent enough to perform the task, says Michael Short, a vice president at Hildebrandt International in Somerset.
Another consultant, Ward Bower of Altman Weil in Newtown Square, Pa., says a clearer picture of a law firm’s structure would emerge from computing a ratio of profit contributors – defined as paralegals, associates, of counsel or counsel and nonequity partners – to profit sharers, i.e., equity partners.
Nationwide, leverage has been falling since 2000, according to NALP, whose figures are drawn from its annual Directory of Legal Employers, more than 1,500 firms of 100-plus lawyers.
In the NALP survey, leverage correlates with size: Firms with more than 700 lawyers have a 2.61 ratio, compared with 1.88 in firms of 50 or fewer lawyers.
Among the New Jersey firms surveyed, leverage varies significantly. DeCotiis, FitzPatrick, Cole & Wisler of Teaneck, with 21 partners among its 82 lawyers, had the highest ratio, 3.9. Haddonfield’s 140-lawyer Archer & Greiner, with 77 partners, and 100-lawyer Stark & Stark of Princeton, with 55 partners, had ratios of 1.8, the lowest.