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Magic circle revenue growth falters in face of spiralling costs

The alleged improved transparency is helpful but once again shows strong inclinations to cling to metrics that have less value. When non performing partners (in billing terms) are removed (aka retired) PEP figures hold up. A better metric would be profit per lawyer. The business model for most of the larger firms does not seem to encourage new innovative ways of working. The leverage ratios of partner to lawyer get ever larger making the likelihood of partnership for many an illusion. Yet the staff solicitors are the 'engine room' where profit is generated. Staff solicitors generate fees at rates of 3.5 - 6 times their salary for a diminished opportunity of partnership while partners rely on profits generated by others. If standard business management models were followed surely partner numbers would fall and more structured career paths be developed. Why do law firms with a turnover in the hundreds of millions require hundreds of partners when a public company with similar T/O can cope with a board of 7-12 directors?

26-Feb-2013

2:52 am