Sometimes it’s not the worst thing to confess bafflement—OK,
perhaps "bafflement," which implies total cluelessness,
is too strong, but I will at least cop a plea to not being
confident how to truly explain something. That something
is, as Legal Week reports,
"the growing financial chasm between
US and UK firms."
Occasion for this attention-getting generalization is their
annual compilation of results for the top 50 firms in each
market. Here’s the story:
|
US Top 50
|
UK Top 50
|
|
|
Total Revenue 2004
|
$32.9-billion
|
$15-billion (approx.)
|
|
Revenue Growth 2003-2004
|
+14.1%
|
+4.6%
|
|
Profits Per Partner 2004
|
$1.2-million
|
$738,000
|
| PPP Growth 2003-2004 | +10.2% | +6.0% |
One explanatory hypothesis for this is simply that the domestic
US legal market is so much larger than the domestic UK market. But
that explanation would be, as they say, "obvious, simple,
and wrong." Baseline market size explains nothing
about the remarkably different growth rates in revenue and
PPP. Moreover, a substantial portion of the revenue
of both "top 50" groups comes from outside their domestic
market. As the chairman of Hogan & Hartson put it ("burying
the lead," as it were, which is that US firms are outpacing
UK firms where both are on foreign soil):
“US firms also are continuing to grow stronger in the European and Asian markets, which I expect will bode well for us in the future as we compete for the best work and the best people.”
The annual 2005
Chambers Awards, at least impressionistically,
confirm this. For example, 5 of the top 9 Chambers
firms in France are American but 0 are UK, and 4 of
the top 9 in Germany are US but only 1 UK. More tellingly,
among "Top Western European Firms" by practice area, there
is a fair degree of representation of US-based firms across
the board, whereas among "Top USA Firms" by practice area,
there are zero foreign-based
firms.
Another possible hypothesis is that Americans
are just plain more entrepreneurial, more competitive,
more venturesome and superior risk-takers. Aside
from the (to me) obnoxious, self-congratulatory hokum at
the core of this theory is that it’s tautological and has,
again, no explanatory power. It
amounts to: "The better businesspeople are better businesspeople." I
wish I’d thought of that.
How about this instead: When a firm with the clear
American tilt towards eat-what-you-kill compensation goes
up against a firm with the UK’s tilt towards lockstep,
it turns out that incentives do matter and the US partners
battle longer and harder to win the business. Now
we might actually be getting somewhere. Unfortunately,
as I’ve written elsewhere,
lockstep can have tremendous virtues and be "just what
the doctor ordered" for firms powered by collaborative
and collegial cultures.
Still, numbers don’t lie. Something real is going
on here, it has been for awhile, and if anything it’s only
accelerating. It’s reader participation time: Any
ideas out there?
Email me; we’ll wrestle this to the ground together—because
I’m not happy where we are.
