"What happened to the legal industry?
The problem, many lawyers say, is “P.P.P.” (Some firms call it P.E.P.) P.P.P. stands for profit per partner. (P.E.P. is shorthand for profit per equity partner.) It has become the ultimate metric for measuring success among law firms. When American Lawyer magazine began publishing a ranking based on profit per partner in the early 1980s, it revolutionized the industry, but it also arguably led to a dangerous race among firms that left clients as a secondary priority.
Indeed, says Mr. Harris of Axiom, about three decades ago “the interests of law firms went from serving the clients to serving themselves.”
As Michael H. Trotter, a partner at Taylor English Duma in Atlanta, says in his book “Declining Prospects” that there are only a few ways to increase profit per partner. One way is for firms to “charge their clients more for what they do”; another is for them to “do more work for their clients by working more hours or using more lawyers”; a third is to acquire more clients; and the last option is for firms to “reduce their overhead by paying less rent, restraining the compensation of their lawyer-employees and other personnel.”
None of those options appear to be in the client’s interest at all.
This is not a new lament.
A decade ago, Robert E. Hirshon, then president of the American Bar Association, declared that “the billable hour is fundamentally about quantity over quality, repetition over creativity.”
He explained that “because a lawyer’s time is not an elastic variable, increased billable-hour requirements are squeezing out other aspects of what it means to be a lawyer.”
The focus on profits per partner is one reason so many companies have increasingly tried to move legal work away from big firms and have hired internal lawyers. And that means, Mr. Trotter says, that “the leverage that law firms have utilized to generate profits will go down and they aren’t going to need as many associates.”