Tag Archives: Am Law 100

Female Representation in Biglaw Partnerships — A Long Way to Go

Disproportionate attrition of female attorneys in Biglaw is hardly a new problem. As a 2019 ABA and ALM report on the issue noted, “entering associate classes have been comprised of approximately 45% women for several decades.” Indeed, at 5 of the top 20 Am Law firms (by gross revenue), female lawyers now constitute a majority of associates:

Firm% of Female Associates
Baker McKenzie53.4%
Norton Rose Fulbright53.0%
Morgan Lewis50.8%
Hogan Lovells50.1%
Jones Day50.1%

But when it comes to partnerships, representation of women is substantially lower. Among those top 20 Am Law firms, here are the four with the greatest proportion of female partners:

Firm% of Female Partners
Ropes & Gray31.8%
Morgan Lewis28.8%
Baker McKenzie27.9%
Jones Day27.3%

Ropes & Gray is the standout performer, as the only top 20 firm with greater than 30% female representation in its partnership. Interestingly, unlike the other firms in this table, Ropes & Gray does not rank especially highly for female associate representation: only 44.8% of the firm’s associates are women.

And here are the four with the lowest female representation in the partnership:

Firm% of Female Partners
Gibson Dunn20.9%
White & Case20.8%
Simpson Thacher20.2%
Davis Polk17.9%

Gibson Dunn is an interesting case in that the firm last year elected its first-ever female Chair, Barbara Becker. Gibson Dunn’s announcement of the appointment emphasized diversity and inclusion, noting that Ms. Becker created the firmwide Diversity Committee. It will be interesting to see if Ms. Becker succeeds in boosting the firm’s female partner representation above the current below-average level.

Any way you cut it, Biglaw certainly has a long way to go. Should that be cause for despair? Not necessarily. The good news is that firms are well aware of the problem and at least some of them are making a strong push to fix it, even if progress is slower than we would wish.

How to increase female representation — and retain female partners

There are a number of ways that law firms are pushing to increase female representation in their partnerships. Flexibility is a key theme. Many female Biglaw attorneys are working mothers with other schedules to meet outside of work. A one-size-fits-all approach to hours expectations (including office presence, billable hours, and business development targets) can disproportionately drive away women. We speak to many high-powered female attorneys who feel compelled to leave the law firm grind because they also want to raise a family, and they have concluded that it is impossible to succeed at both. When law firms incorporate more women- and family-friendly policies firmwide (not just for partners!) it paves the way for female associates to first rise to the equity partnership and then succeed there — both inside and outside the office.

Increasing female representation in partnerships is not enough. Law firms must also offer a solid support structure so as to not leave women high and dry once they attain equity status. Providing adequate and equitable associate and administrative support goes a long way in retaining female partners and promoting their longevity. In addition, establishing vibrant Women’s Initiatives with strong leadership and defined budgets is one way to support female partnership (and all female attorneys).  And don’t forget the men — they need to be involved!  Male participation in Women’s Initiatives is crucial in demonstrating that the entire firm stands behind a diverse partnership and supports female advancement.  

Pitfalls to keep in mind

Law firms should be careful not to simply promote women to non-equity partner status and assume that’s good enough. Not all partnership roles are created equal. These days, so many firms have deviated from the one-tier structure of partnership, such that non-equity partnership often amounts to what used to be called Counsel. When there are several tiers of partnership, it creates additional obstacles to attaining the ultimate goal of equity.

Law firm leadership should also be aware that non-billable requirements often disproportionately take women away from billable work as compared to their male counterparts. For example, for some reason female attorneys are especially likely to participate on committees. Women’s Initiatives and other firm programs are important, but they present a Catch-22 that must be acknowledged and monitored. Firms should be careful not to unfairly assign a disproportionate amount of non-billable tasks to female partners or just assume they will take on an extra load. This is something we often hear our female candidates complain about, and it is an easy fix once the problem has been identified. But firm leadership must first be cognizant of the pattern.

A Detailed Breakdown Of The 2022 Am Law 100 Rankings

So how did Biglaw do in 2021, coming off its shockingly strong performance in 2020? In short: better. A lot better. Based on the financial metrics reported this week in the latest edition of the Am Law 100, the recent round of Biglaw salary increases makes perfect sense. Sure, most firms achieved record gross revenue, revenue per lawyer, and profits per equity partner. But that’s true in a typical good year. What made 2021 such a blowout is that many firms dramatically accelerated their growth rates on those metrics as compared to 2020 — a year that was itself hailed as a stunning success. Any way you look at it, 2021 was truly a year to remember for the Biglaw elite.

Collectively, here’s what the Am Law 100 achieved in 2021 (as noted by Patrick Smith in his summary of the data):

  • Total revenue: $127.4 billion, up by 14.8%. 
  • Average revenue per lawyer: $1.18 million, up by 12.5%.
  • Profits per equity partner: $2.66 million, up by 19.4%.

To appreciate just how good those growth rates are, let’s compare them to the strong growth of 2020 and the more typical rates in 2019:

Part of the impressive profit growth can be explained by attorneys working harder. Based on data from the 61 firms that submitted billing figures to the American Lawyer, hours billed rose 5.7% relative to 2020. Meanwhile, headcount in the Am Law 100 was up just 2.1%. As we at Lateral Link can attest, firms were eager to add talent in 2021, but growing the ranks was a challenge in the face of intense competition.

Let’s now take a closer look at the three key metrics — gross revenue, revenue per lawyer, and profits per partner — and the top 10 firms in each category.

Gross Revenue

Here are the top 10 firms in the 2022 Am Law 100 rankings, ranked by their gross revenue in 2021. You can access the full list here.

Kirkland & Ellis and Latham & Watkins once again led the pack, not only maintaining their #1 and #2 slots but also increasing revenue at faster rates than the other top 10 firms. The composition of the top group was fairly stable, with Ropes & Gray riding a 22% growth rate into the top 10 and Jones Day falling out of it, despite increasing revenue by 10%.

Revenue growth was strong across the board, with every Am Law 100 firm enjoying an increase (as compared to 26 firms that suffered revenue declines in 2020). Remarkably, 63 firms increased revenue by at least 10% and 18 were up by at least 20%.

Revenue Per Lawyer

Here are the top 10 firms in the 2022 Am Law 100 rankings based on revenue per lawyer. You can access the full list here.

Seven of the top ten firms increased revenue per lawyer by double digits (as compared to four in 2020). Once again, Wachtell and Sullivan & Cromwell took the top two spots. Davis Polk cooled somewhat after its market-leading 22% RPL growth in 2020. Cravath impressed with its rise from from #10 to #3 (mirroring the jump that Davis Polk achieved in 2020). Quinn Emanuel and Paul, Weiss ascended into the top 10, displacing Cahill Gordon and Debevoise.

Profits Per Equity Partner

And finally, everyone’s favorite ranking: the top 10 firms by profits per equity partner. You can access the full list here.

As always, Wachtell tops the list, this year exceeding $8 million in PPEP for the first time. Kirkland and Davis Polk each cracked the $7 million mark. Sullivan & Cromwell leapfrogged Paul, Weiss and Simpson Thacher to claim the #4 slot. Broadly speaking, the top 10 was fairly stable: the only firm to drop out was Debevoise, which grew PPEP by 10% but was no match for Latham’s 26% growth.

Overall, 14 firms now have profits per equity partner above $5 million (compared to six in 2020). Consistent with the long-running “rich get richer” theme in Biglaw, PPEP growth was strongest at the top of the Am Law 100. Whereas the top quartile increased PPEP by 22.7%, the bottom quartile of the Am Law 100 managed only a 7.7% increase. Still, no matter where their firm stood in the rankings, most Am Law 100 partners would be hard pressed to complain about 2021.

Why Leave Biglaw To Form A Boutique?

If law practice were a normal business, this would make little sense. In theory, larger firms should be more profitable per partner than smaller firms because a large firm can spread its fixed costs of operation over a larger pool of lawyers, lowering per-lawyer cost. The move to form boutiques seems to violate the basic principle of economies of scale.

But law is not a normal business. As we have previously explored, the legal profession is remarkably fragmented relative to other professional services fields. It is clear that standard economies of scale logic does not explain law firm industry structure.

We see four central factors driving the boutique boom: founder autonomy to chart strategy, avoidance of client conflicts, the opportunity to limit overhead investment, and freedom from ongoing obligations to retired partners.

Strategic autonomy

Boutique founders value the ability to chart their own strategy and run the show. A rainmaker in a typical Biglaw firm can be expected to have a more influential voice than the average partner, but the fact remains that major decisions require some degree of consensus, and the status quo tends to prevail.

Take alternative fee arrangements, for example. Boutiques generally have embraced flat-fee or other alternative structures much more readily than their Biglaw peers. That shift is a lot easier to execute when a firm is controlled by a small group of partners who work in the same practice area and are operating on a relatively long time horizon.

Boutiques can also more easily limit themselves to competing only for higher-margin work. When you make no pretense of being a full-service firm, and you have no legacy low-margin practices encumbering you, there is little reason to bring on equity partners whose revenue contribution would reduce the average.

Conflict avoidance

In their public statements, boutique founders tend to highlight the appeal of escaping the conflicts entanglements of Biglaw. It sounds more noble than “I’m expecting to make way more money.” But in all seriousness, freedom from conflicts can be important. It is a frustrating experience to be in line to represent a client in a significant matter, only to find out that your firm has a conflict that seems entirely tangential but nevertheless requires you to decline the work.

No bloated overhead

If law firms were managed to maximize profits, overhead considerations would counsel against forming a boutique. All law firms must incur some level of fixed cost in order to operate. Consider IT costs. Properly managed, the amount spent on IT per lawyer should be materially smaller at a 1000-lawyer Biglaw firm than at a 10-lawyer boutique. Similar economies of scale should exist for real estate expenses.

And yet, boutique founders routinely cite reduced overhead as an advantage of the boutique model. This is an indictment of large firms’ spending decisions. Historically, there has been a cultural assumption among the Biglaw elite that fancy offices on the highest floors of the most prestigious towers are a necessary expense, both as a status symbol for clients and as a recruiting tool for attorney talent. Boutiques have illustrated that there is reason to doubt this assumption. Even before the pandemic made every law firm question its real estate needs, boutique founders realized that they could operate successfully with a considerably smaller office footprint.

Here we again see the value of the autonomy discussed above. It is easier for a small group of founding partners to agree to dispense with some of the traditional trappings of Biglaw office space than to drive consensus among a large partnership to make substantial cost cuts.

No retirement payments

The final factor is likely the least intuitive, especially for lawyers who are not yet partners: the burden of payments to a firm’s retired partnership. Biglaw firms vary in the generosity of annuities offered to retirees, but it is common for a retired partner to be paid in perpetuity something like one-third of the partner’s average compensation in the final five years of service.

As life expectancy has increased, these generous payouts have become an ever-growing drag on Biglaw profits. Imagine you are a relatively young and successful partner. You could spend the next two decades dutifully contributing to the pockets of your retired forebears and hoping that you will receive a similar deal in your old age. Or you could leave now, found your own boutique, and keep that portion of your billings for yourself. In a world in which even partners who stay in Biglaw are likely to make multiple lateral moves over the course of their careers, it is increasingly difficult to convince current partners that bearing the costs of retirement payments is a worthy investment.

Conclusion: Biglaw must reform its cost structure

Unless Biglaw firms take seriously the signals that the boutique boom is sending, they can expect escalating losses of their most productive partner talent. There is of course a limit to the reforms that Biglaw firms can undertake: the autonomy and conflicts factors are particularly hard to counter. But on cost control, the ball is in Biglaw’s court. And in the wake of the pandemic, the largest firms have a golden opportunity to reimagine their business models in fundamental ways.

Biglaw firms need to take a hard look at all elements of their cost structure, with real estate and retired partner compensation at the top of the list. To that end, now would be a great time to shift to more professional administration by trained management professionals, rather than untrained lawyers engaging in administration as a part-time, supplemental duty.

Biglaw firms have advantages that boutiques cannot easily match, including strong brands and the ability to cross-sell work among multiple practices. But without significant reform on the cost side, Biglaw will continue to lose ground to boutiques.

A Deep Dive Into The 2021 Am Law 100 Rankings

Last year was a difficult year for so many industries but a shockingly good one for Biglaw, at least in terms of metrics like gross revenue, revenue per lawyer, and profits per partner.

“Lawyers are terrible businesspeople.” You’ve surely heard this before. But is it true?

If lawyers are so bad at business, then why did the Am Law 100, the nation’s 100 largest law firms ranked by revenue, have such a banner year in 2020? In the midst of a global pandemic and economic downturn — one that hammered so many industries, from airlines to hospitality to commercial real estate– Biglaw firms flourished.

Last week, the American Lawyer issued its eagerly anticipated Am Law 100 rankings for 2021. As a group, here’s how the Am Law 100 fared in 2020 (as noted by Dan Packel in his excellent analysis of the data):

  • Total revenue: $111 billion, up by 6.6 percent.
  • Average revenue per lawyer: $1.05 million, up by 5 percent.
  • Profits per equity partner: $2.23 million, up by 13.4 percent.

Who are you calling a terrible businessperson now? These growth rates exceeded those posted by the Am Law 100 in the far more normal year of 2019 (which were 5 percent, 3 percent, and 5 percent, respectively, for total revenue, RPL, and PPEP).

What drove the dramatic increase in profitability? Yes, cost-cutting did play a role; firms used the pandemic as an opportunity to make themselves more efficient, eliminating or reducing various expenses that they were already planning to cut (e.g., certain administrative roles, real estate costs, etc.).

But, at least collectively, the Am Law 100 didn’t juice their profits by slashing lawyer or even equity-partner headcount. Total attorney headcount actually grew slightly, rising by 1.7 percent to 105,718, and the number of equity partners remained flat (down by just 12 partners, to a new total of 21,258).

Let’s now take a closer look at the three key metrics — gross revenue, revenue per lawyer, and profits per partner — and the top 10 firms in each category.

Gross Revenue

Here are the top 10 firms in the 2021 Am Law 100 rankings, ranked by their gross revenue in 2020. You can access the full list here.

Kudos to Kirkland & Ellis and Latham & Watkins, once again the two top-grossing firms, which both grew their total revenue by double digits. All of the other top-ten firms also increased their revenue, except for Baker McKenzie, which saw a slight dip (perhaps due to the global nature of the firm; the U.S. legal market generally performed better than overseas markets last year).

As you can see, there wasn’t much change in terms of the rank order of the firms. Everyone kept their 2020 spots except for White & Case and Hogan Lovells, who swapped places; now White & Case is #8 and Hogan Lovells is #9.

In 2020, 42 firms enjoyed gross revenue in excess of $1 billion, one more than the 41 firms in 2019. Almost three-quarters of the Am Law 100 — 74 firms, to be precise — grew their gross revenue. On the strength of its capital markets practice, Davis Polk had the biggest gain, a whopping 22.6 percent. (For more on how Davis Polk pulled off such a great financial performance, see this Bloomberg Law piece by Roy Strom.)

Revenue Per Lawyer

Here are the top 10 firms in the 2021 Am Law rankings based on revenue per lawyer. You can access the full list here.

As you can see, revenue per lawyer grew quite nicely among the top ten, with four firms posting double-digit growth. Once again, Wachtell Lipton and Sullivan & Cromwell took the top two spots — but Davis Polk zoomed up from #10 to #3. Two other firms known for strong capital markets practices, Cahill Gordon and Debevoise & Plimpton, also posted strong gains, breaking into the top 10.

Profits Per Equity Partner

And now, everyone’s favorite ranking: the top 10 firms by profits per equity partner. You can access the full list here.

As usual, Wachtell Lipton took the #1 spot, with an incredible $7.5 million in PPEP. But Kirkland & Ellis, in recent years the #2 firm, got bumped out of second place by Davis Polk, with $6.35 million. If 2021 turns out to be like 2020, it’s conceivable that Davis Polk could displace Wachtell as #1 in next year’s rankings (but based on the strong year that M&A is having so far, I wouldn’t necessarily count on that). As for the rest of the top ten, there wasn’t that much movement, except for the ascension of Cahill and Debevoise (which the revenue per lawyer rankings hinted at).

Taken collectively, the Am Law 100 performed well in terms of profitability. As the American Lawyer reports, average PPEP increased by 13 percent in 2020, and 56 firms enjoyed growth rates of at least 10 percent, compared to just 23 in last year’s rankings. So congratulations to Biglaw on its big success in 2020 — a year that was, to put it mildly, extremely challenging for so many of us.

Moving on from the rankings, I’d like to close with a personal announcement. As mentioned in passing in this New York Times piece by media columnist Ben Smith, I’m returning to full-time writing as of next week. I’ve enjoyed recruiting, but one thing I’ve learned about myself over this crazy past year, including my near-death experience with Covid-19, is that writing is what I truly love.

Back in December, I launched a new publication about legal affairs called Original Jurisdiction. I started off doing it for fun on the side, but I’ve realized after five months or so that I want to do it full-time and try to make a living out of it.

Original Jurisdiction comes out as both a newsletter and a blog; please feel free to sign up if interested. Right now it’s free, as it has been for the past five months. Next week, I will add paid subscriptions — which is how writers on the Substack platform earn a living — but there will always be lots of free content.

I have greatly enjoyed my two years at Lateral Link, in large part because of my amazing colleagues, and I wouldn’t have wanted to work at any other recruiting firm. I don’t think there’s another legal search firm out there that has such talented recruiters and does such an excellent job of encouraging and incentivizing them to work together as a team.

If you’re interested in working with Lateral Link as either a law firm or a candidate, please feel free to reach out to me. Although I’m finishing up my work here, I’d be happy to connect you with an appropriate colleague.  Thank you, and please do stay in touch!