Spoiler alert: If you’re looking for a hard-hitting expose of everything that’s wrong with RPL, look elsewhere.

I’m on record as saying that RPL is the most telling metric we have, and I stand by that with permission to amend, or permission to put all the stress on the last phrase: “The most telling metric we have.

That one of its core virtues needs to even be mentioned is an embarrassment to our industry, but it’s that RPL is hard to play games with. Revenue is, with the rarest and typically most disastrous of consequences, a real hard number for calendar year fiscal, cash basis reporting firms: Cash receipts from midnight January 1 through midnight December 31. The exceptions are not worth dwelling on, save to share with you the remark of a partner fleeing a firm flagrantly cooking its books who, when asked when the firm closed the year out, replied, “January 45th.”

Similarly, the number of lawyers at your firm is, or ought to be, trivial to determine. If anyone wants to quibble about part-time, flex, contract, or otherwise, can we just all be adults and stipulate FTE’s?

As I said, an embarrassment to have to mention, but there you have it. Now to substance.

For simplicity, let’s diagram this:

Pros Cons
Roughly represents what clients are willing to pay for a year to rent one of your lawyers, or put more directly, how much they value what you provide Different practice areas have intrinsically different rate structures and hence RPL’s
Fairly directly corresponds to span of your firm’s rate structure (high, medium, low) and rates roughly reflect sophistication/degree of difficulty of work performed Firms with higher leverage, all else equal, will have lower RPL—but leverage ratios are randomly correlated with quality of work
If your firm’s RPL is higher as against your peer group, may reflect how clients assess relative quality Rates vary notoriously by geography, and firms’ geographic center of gravity has nothing to do with sophistication or quality

I wonder if you discern the same pattern here that I do: It strikes me that RPL is much more significant in the context of any given firm from year to year than it is in service of trying to make cross-firm comparisons.

Here are the general characteristics of firms with low RPL:

  • geographic center of gravity outside of the top global capital markets or leading metropolitan areas;
  • higher leverage; and/or
  • a preponderance of rate-sensitive practice areas.

Let’s visualize such a hypothetical firm. It’s based in the US South, Midwest, or Great Plains—pretty much anywhere except the Northeast Corridor, California, or major financial/commercial centers of gravity like Texas or Chicago—and it caters to price-sensitive clients, perhaps small and mid-sized privately held companies who tend not to have shockingly complex legal needs, and does so efficiently and effectively by deploying large numbers of associates per partner.

What, I ask you, is “wrong” with such a firm? It sounds like a very stable business, a sane place to work, and one providing valuable services to its clients which they personally appreciate. Yet I guarantee you its RPL is well below average.

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