Come right in and take a look at the views, but make some room. The legal industry’s most exclusive club just got a little more crowded.
In a year so flush with financial success for law firms that extraordinary numbers began to seem merely ordinary, The American Lawyer’s annual Super Rich list swelled to include more members than ever.
The complete Super Rich list is at the bottom of this article.
A year after the thresholds to gain entry were elevated to account for the Am Law 100’s pandemic success story in 2020, the group of Super Rich firms has expanded from 31 to 40 in the wake of an even more profitable sequel. The 32% growth in the membership of this elite crowd would only be fitting for a year in which 32% growth was on the table at some firms.
To make the Super Rich list, firms must have revenue per lawyer of at least $1.1 million and profits per lawyer of at least $550,000—markers that indicate an organization is getting the most out of everyone it employs. Each of the 31 firms that made the cut last year returned to this year’s list, along with nine additional members: Alston & Bird; Cadwalader, Wickersham & Taft; Covington & Burling; Dechert; Kramer Levin Naftalis & Frankel; McDermott, Will & Emery; Sidley Austin; Vinson & Elkins; and Wilson Sonsini Goodrich & Rosati.
Demand over the past two years has been “insatiable,” McDermott chair Ira Coleman says, and that has been the biggest contributor to the newfound level of prosperity across the industry. A rising tide lifts all boats, as they say. McDermott, for instance, grew RPL nearly 15% to $1.4 million and PPL almost 21% to $561,000.
But firm leaders would be wise to recognize that demand is a fickle factor in their success. No matter how much top-to-bottom talent or structural integrity a firm has at its disposal, an unexpected dip in demand would threaten budgets across the Am Law 100. With that in mind, Coleman suggests a focus on factors within a firm’s control.
“We can all pat ourselves on the back and say how extraordinary we are at management to make these great strides,” Coleman says, “or we can take it with a grain of salt and say we’re blessed to have this level of demand in our industry and hope it continues.”
Or, as he puts it more succinctly, “don’t get too high on your own supply.”
The increase in Super Rich firms may indicate that some firms have learned pandemic-aided lessons about how to put their people in the best position to succeed, whether through hybrid work or more focused collaboration. But it may also be a result of long hours, blurred lines and an all-hands-on-deck approach to meeting client demand.
“Some firms have used this as an opportunity to learn to work differently and better by investing in technology and development and bringing people to a place where they can work more efficiently and effectively,” says Marcie Borgal Shunk, president and founder of the Tilt Institute. “Unfortunately, I also think there’s another considerable group that have simply asked people to work harder.”
For those firms, elevated levels of productivity and prosperity may be something of a canary in the coal mine. They may not feel the financial impact for a while, Shunk says, but “right now there are tremendously high levels of burnout and frustration” at many firms, posing a serious strategic threat that will only be amplified if and when demand dampens.
“We’re already seeing it in the movement that firms are experiencing,” she points out.
Super Separation
The 40 firms on this year’s Super Rich list distinguish themselves from the rest of the Am Law 100, primarily because of their size and the power it wields. Their average gross revenue is nearly $1.7 billion, two-thirds higher than the $994,000 average of the other 60 firms in the Am Law 100. And last year they grew that number by an average of 17.3%—a much bigger leap than the 10.3% step taken by everyone else, on average.
But what stands out most in an analysis of the haves and have-mores is the Super Rich firms’ efficiency in turning manpower into money. Their average revenue per lawyer (one of two metrics used to determine the list and therefore a natural point of separation) was over $1.65 million in 2021, compared with about $928,000 at the rest of the Am Law 100. The Super Rich grew that number by an average of 13%, compared with 9.9% at other firms.
And when profits take center stage, the discrepancy is even more apparent. The Super Rich average $4.4 million in profits per equity partner (and 19.7% year-over-year growth); everyone else averages $1.6 million (on 15.1% growth). The gap in profit margin (52% vs. 34%, on average) is similarly stark.
