With the kind permission of Thomson Reuters, I republish the following article which appears in the most recent edition of their Forum magazine.

What are we to make of the recently released 2016 AmLaw 100 numbers?  “Rather impressive,” as AmLaw put it in their May cover story: gross revenue up 4.3% and PPP up 3.0%. At face value, not bad.


I don’t know about you, but at least among people I’ve talked to the reaction has been one of incredulity: “Not possible,” “I just don’t see it,” “How can that be?” and so on. When the industry’s scorecard of record seems off, my instinct is to look more closely; shall we?

Self-flattery and Kentucky windage[1]

As privately held organizations, law firms obviously have no obligation to disclose financial results and are free from the shadow of having what they do choose to disclose subject to audit. This includes what information they do or don’t share with The American Lawyer. When the second prong of “trust, but verify” is off the table, we are left with “trust.”  Many disinterested observers choose to do just that, but it will come as a shock to no one to acknowledge that suspicion is widespread about flattering adjustments, roundings-up and roundings-down, and 12-month fiscal years that end “as late as January 45th,” as one droll skeptic put it.

This presents analysts with a choice:  Take the numbers at face value or try to apply a little Kentucky windage to correct for puffery?  I choose to take the numbers as reported.  For one thing, I’m clueless where one could even begin if asked to guesstimate a “self-flattery correction factor,” but more importantly, I prefer to focus on trends over time. Since there’s no plausible reason to assume firms have systemically become more honest, or more dishonest, over time, I’m willing to stipulate for purposes of proceeding that while the numbers may be imperfect, they’re probably apples-to-apples from year to year.

Modest data hygiene

One of the first questions an inquiring mind ought ask about financial performance over time is whether the figures shown are in “nominal” dollars (not accounting for inflation) or in “real,” constant dollars adjusted for inflation.  For the AmLaw 100, the BLS tells us that the CPI increased 2.08% from 2015 to 2016[2] and from AmLaw itself we know that lawyer headcount in the “100” rose 2.72%. Adjusting for both these figures:

Metric 2017 2016 Raw Difference Raw % Real $$ Real %
Gross Revenue $86,704,757,009 $83,148,500,000 $3,556,257,009 4.3%  $(438,349,238) -0.5%
Am Law 100 Net Income $34,511,864,305 $32,799,940,000 $1,711,924,305 5.2%  $136,155,106 0.4%
Total Attorneys  95,515  92,982  2,533 2.7% n.m. 2.7%
Equity Partners  20,768  20,344  424 2.1% n.m. 2.1%
Nonequity Partners  15,342  14,539  803 5.5% n.m. 5.5%
Am Law 100 RPL $907,765 $894,242.97 $13,522 1.5%  $(5,078) -0.6%
Am Law 100 PPP $1,661,772 $1,613,439 $48,333 3.0%  $14,773 0.9%


Illuminating in a number of dimensions, but the headline has to be that real total revenue swung from +4.3% to –­(0.5%) and RPL (adjusted for CPI but obviously taking headcount growth into account) from +1.5% to –(0.6%).

There’s more.

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