Law Practice Management
Dentons takes a stand, won’t report ‘meaningless’ profits per equity partner
Posted Jun 11, 2014 8:38 AM CDT
By Debra Cassens Weiss
Updated: Dentons has decided it will no longer report average profits per equity partner, and it hopes other law firms will do the same.
Dentons says the PEP figure is “meaningless” and has the potential to damage client relations, Legal Week (sub. req.) reports. Law firm leaders wrote a letter to American Lawyer explaining their position; Legal Week viewed the document.
In the letter, global CEO Elliott Portnoy and global chair Joe Andrew argue that "a focus on profit undermines the differences between the practice of law being a profession rather than solely a business."
"It is easy to anticipate the assertion that we choose not to report aggregate annual average profit numbers because they are not as high as some other firms," they wrote. "But that assertion simply assumes that the way things have been done in the past is the way they should be done in the future."
Portnoy and Andrew argue that the PEP figures say "nothing about the success of a firm” and may lead to client dissatisfaction. Andrew elaborated on the latter point in an interview with Legal Week. “From a client perspective,” he said, “they see our profitability as services that aren't invested into further support for them.”
Andrew also pointed to Citibank studies suggesting that law firms often inflate PEP figures. “So you are taking a public relations hit, for exaggerating the figures in the first place, and then taking a second hit from clients when they see the exaggerated data," he said.
In response to the letter, American Lawyer (sub. req.) editor-in chief Kim Kleman wrote that profits per equity partner is an important metric that her publication is going to continue to track.
"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," Kleman wrote, noting that the firm did send out a press release earlier this year with the news that U.S. PPP was up 4.8 percent.
Updated at 5:20 p.m. to include coverage from the American Lawyer.