With flat demand and revenue, how do we account for 2010?
Law firm profits and lawyer productivity were strong in 2010 compared to a poor showing in 2009. But it is too soon to celebrate, says this article on the AM Law Daily.
Since demand and revenue were essentially flat, the increase in profits came from somewhere else. Industry wide cost-cutting, including a 2.2 percent reduction in expenses and a 0.7 per cent drop in equity partner head count, account for much of the uptick.
In addition, there have been modest rate increases driven by a shift to more senior people doing the work. The reasons for these rate increases, according to the article, include the fact that clients demanded more senior people, partners may be hoarding work, and firms’ associate ranks have become "older," due to head count reductions, particularly among younger associates, deferrals of incoming classes, and reductions in size of incoming classes.
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