We keep hearing about groups of partners leaving; Twenty-one in the past month alone. And now this article comes to us from the Legal Times: “Akin Gump Restructuring to Increase Profits.” I’ve pulled a few quotes to make my point:
Akin Gump Strauss Hauer & Feld‘s chairman says that while some recent partner departures have been unexpected, the firm is committed to a restructuring plan aimed at increasing profits and giving its New York office more clout in deciding the firm’s direction.
The changes haven’t sat well with everyone. Over the past month at least 21 partners have departed or said they will leave.
The changes at Akin Gump are part of a drive to increase profitability. The firm was 29th on this year’s Am Law 100, reporting firmwide gross revenue of $752.5 million — a 3.5 percent increase from last year. But profits per partner fell, dropping nearly 7 percent to slightly more than $1.2 million. That puts it below many players in the key New York market, including players like Orrick, Herrington & Sutcliffe ($1.66 million) and White & Case ($1.67 million). Increasing that number would make it easier for the firm to attract laterals and keep talent there.
My comments below are to be taken generically as Akin Gump is not the first firm to adopt this strategy of transitioning power and profits to a New York-focused model. My points are:
- Does this strategy benefit the client? Or is it being driven solely by the need to increase revenue and PPEP?
- At what price are firms willing to pay for the benefits of implementing this type of strategy?
- How willing are these firms to lose long-term partners and clients for the sake of this strategy?
- While this strategy will “attract laterals and keep talent” in New York, what about the other offices? Can they sustain the hourly rates necessary to hit these numbers?
- Is this strategy sustainable over time?
- As a GC or CLO, how happy would your board be to read the headline: “(Insert name of your firm) Restructuring to Increase Profits.”
Look, we’re in business to make money, otherwise we’d all be working for a non-profit somewhere and traveling via public transportation (I’m in L.A.). My concern is that the “product” of our business is a service. Legal Services. I just find in this ever more addictive pursuit of the AmLaw 100 ranking of your choice, we are losing sight of the client and of the service.
After I posted The AmLaw 100 is Crack for Attorneys I received the following comment from an in-house counsel:
I’d like to see just one law firm merger justified on the basis of a reduction in costs to the clients — as opposed to increased hourly rates and hubris-induced rapture from climbing the Amlaw 100 ladder.
I’d also like to see the same for a law firm strategy.