I have been tracking partner to associate ratios at Birmingham law firms for five years now. This morning I thought it would be interesting to look at the trend over that time, focusing in on the four largest Birmingham-based firms.
Birmingham leverage ratios
These firms in total today have 451 partners and 170 associates in their Birmingham offices.
Here’s what I found: the overall partner to associate ratio has increased significantly from 1.61 to 1 in 2012 to 2.6 to 1 in 2017. Note that nationally, the partner to associate ratio is closer to .5 to 1 and Birmingham is considered a poorly leveraged market.
What does Birmingham’s increase in partners relative to associates mean? Is it a good thing?
Traditionally, law firms have sought to have a low partner to associate ratio as associates were arguably profit generators and partners were profit takers. Thus, the more associate workhorses a firm had, the greater the revenue shared by the partners. However, as the business of law has evolved, clients have begun to demand that law firms outsource the more time-consuming, less intellectually-demanding work such as document review and discovery to lower-cost contract lawyers or legal tech providers rather than have that work performed in house by associates. As a result, the demand for associates has waned.
Two sides of the coin
This does not mean that simply having a higher partner to associate ratio is indicative of a law firm responding to this client demand. For instance, in some firms, it may mean that partners are doing work formerly done by associates in order to optimize partner utilization. This is not a feasible long-term approach as clients are not going to pay partner rates for associate-level work. If this is indeed the case, essentially, the partners are just bailing water off a sinking ship.
On the other hand, if this higher partner to associate ratio is reflective of a law firm’s realization that it must find the most cost-effective approach to solving its clients’ problems — by improving processes, outsourcing task-based work and utilizing technology to improve efficiency, it reflects a tremendous advantage.
To the extent that any of the four largest Birmingham firms have come to this realization, the already-high partner to associate ratios and the fact that they did not start with a relative glut of associates works to their advantage.
Bringing it back to real estate, what does this mean to the law firm office?
If you had asked the managing partners at any of these four firms in 2012 if they thought their partner to associate ratio would increase as dramatically as it has, my guess is that they would have said no. Because this is indicative of the completely unpredictable trajectory of the legal industry presently, it seems the best approach to office space is one that provides the utmost flexibility to adapt to unforeseen changes. Abandoning the partner versus associate size office model in favor of one-size-fits-all offices will ensure that a firm can accommodate partners, associates, project managers, pricing officers, client service directors, etc. as those roles evolve in tomorrow’s law firms.
