Not Dead Yet? How BigLaw’s Best Firms Are Finding Growth
Apr. 2, 2014 (Mimesis Law) — Kent Zimmermann, consultant to law firms for The Zeughauser Group, tells Lee Pacchia that despite years of negative press heralding the end of BigLaw’s best years, there are tangible signs of strength and improvement among the ranks of the largest law firms. According to Zimmermann, the average BigLaw firm saw gross revenue and profits per equity partner (PPEP) grow around 2% in 2013, with average profit margins at 36%. Such results “would be the envy of many industries,” he said. “There is a group of firms that’s really performing with great strength.”
The financial performance of large law firms looks even better, Zimmermann contends, when moves in a firm’s PPEP are considered within a five year time frame. Out of the top firms in the country, only three saw double digit declines in PPEP over the last five years, while over 50 saw double digit growth.
Challenges, however, still remain. Zimmermann points out that there are still too many lawyers and not enough work to go around. In addition, many large law firms are carrying practice areas that continue to see suppressed demand for work. Zimmermann sees many of these firms continuing to balance capacity with demand by employing a strategy of “quiet rightsizing” in which under-performing partners and practice areas are identified and addressed.
Compounding the difficulties of running a large law firm in today’s market is the necessity for building consensus within partnerships, a difficult and challenging task for large organizations with stakeholders spread out over the world. BigLaw partners are “smart, rich people who don’t necessarily want to be led,” Zimmermann says. “There is an art to getting input and building consensus.” Still, Zimmermann contends that for growing firms such as DLA Piper, Hogan Lovells, and Baker & MacKenzie, some BigLaw leaders are proving themselves up to the task at hand. “They are growing very successful, global brands…with consensus among their partners. It’s not easy to do.”
Main image via Erwin Soo