According to data published by Citi Private Bank covering the vast majority of large US-based firms, the compound annual growth rate of yearly revenues between 2001-07 was 10.6 per cent and that of profit per equity partner (PEP) was 9.3 per cent.
Put differently, the average firm’s revenue more than doubled in that period, up 102 per cent, and PEP was not far behind, up by 87 per cent, even after allowing for a 22 per cent increase in equity partner ranks. Results for the UK-based firms were comparable.
These are stunning figures by any account, and alas also unsustainable. As the great US economist Herbert Stein succinctly remarked: “Trends
that can’t continue, won’t.”
We have now violently crossed from ‘can’t’ to ‘won’t’, and the Wall Street wisdom never to confuse a bull market with brains has kicked in. What, everyone wants to know, will this mean? Some of the theories being loudly or softly bruited about are: lower revenue; lower headcount; lower associate/partner leverage; drastically reduced non-equity partner ranks. Note how these all add up to smaller firms – do you detect an emerging consensus?
There’s more: a clean sheet of paper and rethink of the associate career path – compensation, advancement, and professional development included; alternatives to the invincible billable hour finally, really and truly, gaining traction with clients in the marketplace; a diversification of practice areas away from the profoundly compromised financial services sector; searching questions posed about the supposed inevitability and pace of globalisation.
If you’re looking for my thoughts on which of these may kick in sooner, later, strongly or mildly, stop reading now. Because I believe another issue overrides all of these speculative future paths for our industry.
That issue is leadership – your firm’s leaders will be tested as never before. None of us has lived through anything remotely like now and the quality of leadership will distinguish winners from losers, those firms that seize opportunity in the face of peril from those that freeze in uncertainty.
Never has visibility been so low. Never has the cacophony of competing demands been so deafening. And never has their been more need for great and visionary leaders to step forward.
So if I could ask you only a single question in pursuit of seeing your firm emerge on the other side more capable and competitive externally and more united and vigorous internally, it would be: Do you have the right people at the top?
How, you ask in return, can you tell? By these criteria – bold and even inspiring vision for the firm combined with personal modesty and humility; a collaborative and open mind and a propensity for agility over resolves; energy and clear-eyed optimism combined with unyielding rejection of the wishful and the superficial.
Tomorrow will not resemble yesterday. Do you have the right horse for the new course?
Bruce MacEwen, Adam Smith Esq