Part 3 of Our Series on the 2020 AmLaw 200: Envy and its Discontents

Thomson Reuters’ Legal Executive Institute  was kind enough to ask us to undertake some analysis of the recently released AmLaw 200 for 2020.

This is our third and final installment in that series, which we publish with their generous permission.  (Their lightly edited version went online a few days ago; what follows is our original copy, which retains our stylistic signature of judiciously bending the rules of Proper Grammar.)

Part 2 of this three-part series analyzing the recently released AmLaw 200 for 2020 asked if the AmLaw 200 is even a useful way to categorize law firms for purposes of strategy or even simple benchmarking, and we concluded it was not.  The key empirical pillar we rested that conclusion on was the dramatic dispersion within the five quintiles of firms in the AmLaw First 100 between the ratios of their (a) gross revenue to (b) lawyer headcount to (c) net operating income.

In a nutshell, the data showed that the top 20 firms—the first quintile—were in the enviable position of achieving a greater share of net operating income than they had of revenue, and a greater share of revenue than of lawyers.  In other words, firms in this fortunate cohort (on average) were remarkably effective—more so by far than the other 80 firms—at converting lawyers into revenue and revenue into profits.  With apologies to the Gershwin’s, nice work if you can get it.

At the end of that essay we promised to take a ten-year look back at the AmLaw 100 (the years 2011 through 2020 inclusive) and see if that pattern held.

We have done that analysis and the answer is “not exactly.”

To be specific, the positions of the five quintiles in terms of their relative shares of these three key data series has migrated noticeably over the past decade. The 2020 pattern may be the logical evolution of what has gone before (we believe it is), but it has indisputably been an “evolution” and not a steady state of affairs.

First, the numerical and graphical views into the numbers, and then, our thoughts on what might be going on underneath the covers.

Numerically[1]

• Market share of revenue vs. # lawyers
  • Pretty stable: The 5^th  (-1.2% to -0.9%) and the 3^rd (+0.4% to +0.9%)
  • Solid start before sliding into decline: The 2^nd (from +2.6% in 2011 to +2.9% in 2015 to +1.7% in 2020) and the 4^th (-1.3%/2011 to -1.1%/2015 to -4.0%/2020)
  • And a passable start before taking off: Our old friend the 1^st, which started in negative territory at -0.5% in 2011 and stayed negative for four of the first five years, before turning positive in 2016 at +0.7% and maxing out over the time period at +2.4% in 2020
• Market share of NOI vs. revenue
  • All very stable: The 2^nd, 3^rd, and 5^th quintiles
    • 2^nd varies from low of 0.0% to high of 0.8%
    • 3^rd from low of -1.2% to high of +0.7%
    • 5^th from low of -1.7% to high of -0.6%
  • Bringing up the rear on a reasonably steady course south: the 4^th (from -1.2%/2011 to -1.2%/2015 to -2.6%/2020)
    • And on a straight and steady rise: Who else but the 1^st, from +0.6%/2011  to +1.75%/2015 to +4.0%/2020
  • Market share of NOI vs # lawyers
    • All quite stable, as in the last series: The 2^nd, 3^rd, and 5^th quintiles
      • 2^nd from low of 1.7% to high of 3.7%
        • Fairly steady 2011—2016, then steady decline to 2020
      • 3^rd from low of -0.6% to high of 1.2%–no “pattern”
        • 5^th also displays very little pattern: some ups and downs but no meaningful trend
      • The 4^th, predictably by now, declining steadily after 2014
        • 2014 @ -1.2% to 2020 @ -6.6%
      • And the fortunate 1^st on a steady trajectory up from 2014 onwards:  2014 @ +0.1% to 2020 @ 6.4%

Congratulations; you’ve now come through a somewhat extended exercise in narrative numeracy.  Let’s look at some pictures.