Law360: CEO Carter Brown on PEP as an Indicator of Law Firm Prestige
Profits per equity partner, often referred to as PPP, has been used as a key measure of law firm success and prestige for years - and as recruiters, we pay close attention. But as Macrae CEO Carter Brown points out in the Law360 article, What Can PPP Tell Us? It's Complicated, PPP is just one factor lateral partner candidates sizing up law firms should consider.
Here, some key excerpts from the piece:
…PPP doesn't always provide an accurate portrait of how much money a given partner in a law firm earns, according to Carter Brown, CEO of legal recruiting firm Macrae.
PPP is calculated by dividing a law firm's profits by the number of equity partners in the firm, but profits are not split evenly in practice. And so at a firm with $3 million in profits per partner, for example, one partner could earn $500,000 and another could earn $6 million.
According to Brown, it would be illuminating to know both the average partner pay and the median partner pay to understand whether outliers are skewing the overall number.
"Tell me what the lowest-paid partner makes and what the highest-paid partner earns and between those, give me quartiles or deciles. That will tell you a lot more about what the characteristics of the law firm are," Brown said.
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According to Brown, financial performance is just a piece of the puzzle for lateral partners looking at a law firm and considering its prestige. Other factors may include the strength of the particular practice area they're joining, the firm's Chambers ranking, its reputation for pro bono activity, or other people-centered factors like the firm's culture or reputation for how it treats women and people of color in its midst.
"I can think of a number of other indices that offer a more holistic picture" of a law firm, Brown said.
However, he added, PPP really is the simplest financial measure, a shortcut of sorts that isn't entirely inaccurate in at least estimating the prestige of a firm, particularly when it's looked at over a period of several years.
Brown suggests that using multiple financial figures is the best way to go, but, "If I had to choose just one, [PPP is] probably the best to choose, and no measure is perfect," he said.
We encourage you to read the Law360 article in full, What Can PPP Tell Us? It's Complicated, as well as the complete Prestige Leaders 2023 series, which can be found here.