Business of Law

Small Associate Classes Partly Account for Smaller Growth in Partner Profits at Second Hundred Firms

The nation’s “second hundred” law firms weren’t as successful as their top 100 counterparts at translating revenue growth into partner profits last year.

Second hundred law firms had a 5.3 percent growth in revenue per lawyer, compared to just 1.9 percent for top 100 firms, according to the American Lawyer and a press release. But profits per partner in the second hundred rose only 2.2 percent, compared to 3 percent for top 100 firms.

The second hundred is lagging in growth in partner profits, the story says, because of “steep expenses and a sharp drop in leverage.” The publication defines leverage as the number of lawyers other than equity partners divided by number of equity partners. Leverage at the largest firms increased to 3.49, while it fell at second hundred firms to 2.04.

Head count increased in the top 100 firms last year, with the growth in nonequity partners outpacing the increase in equity partners. At second hundred firms, on the other hand, head count dropped, and much of the decrease occurred in nonpartner ranks.

The story quotes Mark Hinderks, managing partner of Stinson Morrison Hecker. “Firms in the second hundred have not been aggressive in hiring associates; they’ve been restrained in terms of recruiting,” he says.

Managing partners at other second hundred firms told the publication that leverage is dropping because clients are requesting that senior lawyers handle their work.

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