January 17, 2018
The Value of C-Suite Professionals
A recent study by Colliers International’s Anita Turner, The Impact of C-Suite Growth in the AmLaw 200, assesses the value of non-lawyer professionals in managing the business of law. The study looked at the existence of certain C-Suite professionals in AmLaw 100 and 200 firms, and compared the average profits per equity partner (PPEP) of those with the professional to those without. The study evaluated firms with and without: Chief Financial Officers (CFO), Chief Marketing Officers, Chief Human Resource/Recruiting Officers (CHRO), Chief Information/Technology Officers (CIO) and Chief Knowledge Officers.
The study found strong correlations between firms with CFO, CHRO and CIO professionals and firms with high PPEP. The average PPEP of firms with CFOs was $1,245,659 versus $894,324 for firms without CFOs. The study notes, “Those firms [with CFOs] expend significant effort to understand financial data and to use that data to determine what it is going to take in the new legal market to maintain profitability. One prominent firm’s Executive Director added that the CFO often adds discipline and structure to daily decision making.”
The average PPEP of firms with CHROs was $1,300,000 compared to $943,660 for firms without CHROs. The study suggests, “[C]ontinuously profitable firms are more careful and considered when bringing on laterals and as a result, their hires are more successful. When a Chief HR officer is tasked with managing the lateral hiring process and strategically addressing the need for change in staffing models, it would logically follow that PPEP would increase as a result.”
Finally, the study found the average PPEP of firms with CIOs was $1,191,313 versus $982,291 for firms without CIOs. The study notes, “COOs interviewed for this study cite the fact that CIOs and CTOs are usually tasked with making lawyers more productive and efficient as the likely reason for the associated higher PPEP.”
The study concludes, “The most successful AmLaw 200 law firms have evolved from being partner-run to being run by a group of highly-skilled professionals reporting to the shareholders of the firm. The data collected from our survey indicates that this model is generally conducive to increased profitability for the firms that adapt it. Firms can be reluctant to add these positions due to the additional overhead burden, but our research shows a strong positive correlation between profits per partner and firms with a more extensive network of business executives (i.e. non-practicing lawyers) in leadership positions.”
A Record Year For Law Firm Mergers
The year just ended saw the highest number of mergers and acquisitions in the past ten years, according to an Altman Weil MergerLine report. The report lists 102 mergers and acquisitions for 2017 versus 85 for 2016, and higher than the 91 combinations completed in 2015, which was the previous high from 2007 to 2016. Most of the acquisition targets, around 80 percent, were firms with less than twenty lawyers. While 13 percent involved firms between 21 and 100 lawyers, and 7 percent involved firms with over 100 lawyers. Nearly thirty of the acquiring firms were AmLaw firms with an average firm size of 982 lawyers.
“Not only is there a broad-based, ongoing interest in acquiring small, high-quality firms to buy market share, but there is also a newly intensifying appetite for larger combinations as more law firms feel the pinch of flattening demand and look for new ways to differentiate themselves from competitors,” noted Altman Weil principal Tom Clay.
Best & Worst Law Schools By Salary & Debt
If you’re wondering where to send your child to law school, SoFi, the online lender, recently released a study of the best and worst law schools by measuring graduate salary and student loan debt. The company analyzed over 60,000 student loan refinancing applications submitted between January 2014 and December 2016. As one might expect, the study found that the top twenty performers in graduate salaries were all, but one, in the top 25 of US News & World Report’s Best Law School rankings. The total average salary for the top twenty was $166,155, with Cornell University tops at $183,377 and University of Texas ranked twenty with $147,444. Fordham University (rank 37 by US News) was 15th with $160,590.
The top performers on a “Salary-to-Debt” basis was Brigham Young University with 1.7x ($108,916 average salary to $64,873 average debt) and second was the University of Texas with 1.4x ($147,444 average salary to $105,254 average debt). The worst performer was Florida Coastal School of Law at 0.5x ($84,664 in average salary to $158,427 in average debt). Also, among the ten worst was Texas A&M University with 0.6x ($90,665 in average salary to $149,042 in average debt). (Clearly, if you live in Texas, you should send your child to UT. Hook ‘em!).
Funny or Not, Here It Comes
I was hauled before the judge for driving with expired license plates. The judge listened attentively while I gave him a long, plausible explanation.
Then, he said with great courtesy, "My dear sir, we are not blaming you—we’re just fining you."
