The first quarter brings us rapturous reports of revenues, rankings and profits per partner from the U.S. legal press. American Lawyer Top 100 rankings are announced. Headlines like “30% Profit Increase at Firm Despite Pandemic” appear. And “rumored expensive deals” for lateral partners get favorable attention for the acquiring firm. This drumbeat from the legal press about “top firms” is supposedly a proxy for excellence in law firms, law practices and excellent individual talent. But are these the best measures to help a client or a job-hunting professional decide to choose a “top” firm?
How did we get here?
The U.S. legal business is unlike that in any other nation because it voluntarily offers up its financial numbers to The American Lawyer and other data aggregators who will publish (for profit) comparison tables that are principally focused on revenues, lawyer numbers and profits. There is no S.E.C., no regulatory body and no external shareholders asking for these data. You can’t get these numbers on law firms in Canada, Brazil or France. But it has become a “given” to discuss U.S. firm rankings as a proxy for excellence.
Some Alternative Measurements to Consider
The Client Perspective
It is true that some clients will choose a high revenue large firm because of its perceived excellence or AmLaw ranking. But that is often because the corporate counsel answers to a Board or executive that wants “the best” external legal talent. This provides a buffer if the legal strategy goes south. But why would a client choose the most profitable firm? That seems like a proxy for over-paying your lawyers, not necessarily excellence. Clients do value personal connections to lawyers who have demonstrated their talents and provide both value and excellent service. For that reason, it is often assumed that an excellent lateral partner hire will bring their clients with them. There is no ranking for “How many loyal clients-per-partner do you have?”
The Associate, Partner or Professional Hiring Candidate Perspective
It is doubtful that prospective hires make their decisions based on external rankings. True, a top student or mid-level associate might use rankings to create a pool of potential firms. However, they will put greater weight on their future co-workers, career advancement, training and business development opportunities when making a final choice.
Internal Talent Ranking Numbers
Most of these internal numbers are not available, because they are not shared or consistently reported. Yet, if a firm wanted to persuade clients and prospective hires of their excellence, value and a “best fit” for a lasting relationship, these are some numbers they might promote:
- Associate retention rates at years 2, 5 and 8
- Associate retention per practice group
- Professional position promotion opportunities per year
- Acceptance rates from the ten law schools where the firm most often competes for talent
- Percentage of budget spent on talent, CLE, training and mentoring (of administrative budget) and year-over-year changes over 5 to 10 years
- Average and high/low of partner hours per year recorded for training and mentoring
- Lateral hires incoming (partners and associates) per year, last 5 years
- Departures of laterals who were with the firm less than 5 years (compared to laterals who “stick” longer than 5 years)
- Diversity hire increases/decreases over 5 years
External rankings turn on surveys and perceptions of employees. When taken annually or every two years, these can show that a firm is on a rise or a downslope where employee satisfaction is concerned. Two measures that get a lot of attention from those who work in recruiting and professional development are:
- The AmLaw Mid-Levels rankings
- Fortune 100 Best Places to Work (annual, covers all companies).
These rankings are more likely to be seen by clients, since firms will promote the rankings in their websites and newsletters. The 2020 rankings will reveal satisfaction with early handling of the pandemic. In the AmLaw Mid-Levels survey for 2020, O’Melveny & Myers was the top ranked. When compared to all companies and professional services firms, it is tougher to place in the Fortune 100. Yet Alston Bird, the first law firm to break into those rankings, is a perennial top 100 choice of employees. Perkins Coie was the highest ranked law firm in 2020 and 2021. Only 3 or 4 law firms make the Fortune 100 every year. Orrick regularly ranks well in the Fortune 100 and appears in the top 75 of the AmLaw survey.
Whether you are a client looking for excellent lawyers or a jobseeker looking for a great place to work, the much-touted rankings for revenues and profits may be the wrong proxy for excellence. Excellence may be better measured by how much investment a law firm makes in its people, how long they remain at the firm, and how the employees, from first hire to longer career paths, rank the firm. A law firm that is not ranked highly in revenues and profits might turn instead to showing how they excel on internal measures of career development and external rankings by employees. There’s a unique competitive advantage if your measurements make your firm a talent magnet.