Lower Partner Profits in 2008 Driven by BigLaw’s Big Hiring

Partners at the nation’s top 100 law firms began feeling the pinch last year, earning lower profits, on average, even as their law firms saw increased revenues.

The American Lawyer is placing part of the blame for the drop in profits on BigLaw’s big hiring. Overall, gross revenue at the firms was up by 4.1 percent, the story says. But an increase in lawyer headcount and a drop in demand for high-end work spurred the lower per-lawyer revenues.

Average profits per partner fell to $1.26 million, a drop of 4.3 percent, according to the story. Revenue per lawyer also fell, to $818,000, a drop of 1.2 percent.

“At 71 firms last year, the percentage change in lawyer head count was greater than the percentage change in profits per partner,” the story says. “To put that more bluntly, the failure of two-thirds of the firms to restrain their lawyer hiring cost their partners money.”

Most affected by the downtown were law firms that were classified as national or international enterprises or New York-based. Firms in those categories had drops in both profit and revenue per lawyer. Firms headquartered in Texas and Washington, D.C., on the other hand, had revenue and profit gains.

The article puts the figures in perspective, saying the top law firms have seen 17 years of sometimes spectacular growth. But it warns that more problems may be in the offing. “The firms now sit delicately on a large and lush plateau, from which there is a long way to fall,” the story says.