How the Recession Hit the Global 100

In a September 30 American Lawyer article, Richard Lloyd looks at the effects and trends that the recession has had on the world’s top law firms over the past 5 years.

Lloyd began by looking back at this past year, with the year-to-year change from 2011 to 2012. A number of different trends are apparent. For the sector as a whole, total revenues grew to $85 billion in 2012, an increase of 3.79% or $3.1 billion. However, this represented a slowdown in growth relative to the 6.8% increase in revenues for 2011. Total lawyers also grew to 108,378, an increase of 3.8% or approximately 4,000 lawyers. Productivity stalled, as average revenue per lawyer (a measure of the legal industry’s overall health) stayed flat at $784,297 for 2012 versus $784,419 for 2011. DLA Piper replaced Baker & McKenzie as the world’s highest-grossing firm with an increase of 8.6% to $2.44 billion in revenues.

Looking at this year relative to the recession as a whole, 4 British firms made the top 10 list this year as highest-grossing, including Clifford Chance, Freshfields, Linklaters, and Allen & Overy. However, each firm lost significant ground to its US and Australian counterparts, a theme for many British firms which by the numbers were hardest hit by the recession. On the other hand, American and Aussie firms seem to be faring better. Lloyd attributes the success (since 2008) of a “core group” of US firms like Quinn Emanuel, Kirkland Ellis, and Gibson Dunn to the depth of the American litigation market as well as the improving US economy. Similarly, Australia has benefited during the recession from its proximity and relation to the growing Asian market. In the same vein, Lloyd also pointed towards what he anticipates to be significant growth of Chinese firms over the next 5 years.

The longer the recession has lasted, many firms have sought one or multiple international expansions. This has particularly been the case with British firms such as Norton Rose, Hogan Lovells, Clyde & Co., Allen & Overy, and others. While this may be somewhat counterintuitive given how hard the recession hit the UK, it also makes sense in that firm leadership has sought to balance ill effects of the recession with opportunities for strategic growth. Lloyd interviewed Norton Rose’s CEO Peter Martyr, who phrased the reasoning behind such thinking well: “The more recessions you go through, the more you realize that you need to focus on two things—survival and taking advantage of opportunities as they emerge.”

The question is—how effective have international growth strategies been? On the surface, UK firms have benefited in terms of gross revenues (i.e. Norton Rose has seen an increase from $582.5 million in 2008 to $1.33 billion in 2012). However, in most cases, and as many US firms are quick to point out, this growth has not translated into increased profitability due to a significantly weaker British pound, among other factors.

Other ways UK firms and others have dealt with the recession has been with a concerted effort to clearly define and focus on their strengths. Clyde & Co. is a great example, as it has become a world leader in insurance, and similarly Bird & Bird has done the same in technology, media, and telecom.

No matter the case, Lloyd says it is clear that “no managing partner can sit idly by and let his or her firm’s PPP lag far behind its rivals. Change may be happening at an unprecedented level among the world’s largest firms, as strategic opportunities emerge and clients demand more return on their legal budgets, but partners still expect some payoff from their investments—wherever they are in the world.”

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Midlevel Associate Survey Shows Gender Differences, Fewer Hours

The American Lawyer recently released results from their annual survey of AmLaw 200 third, fourth, and fifth year associates. In the survey, respondents were asked various questions related to their overall satisfaction along with three open-ended questions: Tell the managing partner one thing. What would you change about your firm? What most surprised you about working at your current firm? Among the nearly 6,000 AmLaw 200 midlevels surveyed, three main themes appeared.

First, the survey suggests that associates are generally more satisfied than they were a year ago. Scores were higher in each of the categories ranked by the survey, including interest in the work, compensation, training, partner/associate relations, billable hours, etc.

Second, as a corresponding Vivia Chen article suggests, the survey shows substantial differences between male and female associates in their outlooks on their firms and careers:

  • Male associates are generally more satisfied, have a stronger desire to make partner, rate firms higher on diversity and family friendliness, are generally more concerned about pay, and indicate higher satisfaction with level of responsibility, client contact, and the firm’s retention efforts.
  • Female associates are more concerned about work-life balance and time outside of the office, are more willing to take a pay cut for decreased amount of hours, are skeptical about whether they will be promoted, and are hesitant that there is an unspoken penalty for motherhood.
  • Few male or female associates see themselves as equity partners in 5 years, though more men do than women; more men also believe they will make partner (income or equity) than do women.
  • Most associates are married – 88% of female associates, and 84% of male associates.
  • More male associates have children – 40% of male associates, and 26% of female associates.

Finally, as Robin Sparkman highlights in a follow-up article, both male and female associates express increasing worry over a continuing decline in billable hours. There seems to be a general level of concern over the amount of work being generated, within practice areas and firms as a whole. As put by Robin Sparkman in a September 25 article for the American Lawyer, “For recession-scarred young people, it’s understandable that they are concerned about having too much downtime. Not only is there the short-term risk of a lower bonus, there’s also the more existential questions about whether their practice area will get busier soon, whether the lack of work will derail them from a partner track, and whether the slowdown they are seeing reflects more macroeconomic concerns about the firm’s financial health.”

Overall, the message from midlevel associates is mixed. While the survey reflects what Sparkman calls the “perennial complaints” of associates (lack of transparency about financials, compensation, and path to partnership), it also appears that job satisfaction is generally improving across the board. Notwithstanding this general improvement in associate outlook, however, there now appear to be concerning differences between male and female outlooks on the future as well as an evident unease over a lack of work, both of which firms may well need to address.