Profitability Opportunities for Large Firms

A new survey by Cap Gemini Ernst & Young looked into the correlation between growth and profitability among large law firms in the US and UK. The most important finding is that “no single firm has yet achieved a combination of global scale and high-end profitability.” Of the ten firms with the highest profit per equity partner (PEP), only one is in the UK and the remaining nine are in the US.

From my perspective, of the four performance “levers” they identify for triggering increased improvement, one in particular stands out:

  • Opportunities include adapting appropriate incentive and reward models; rolling out best practice initiatives to consider managing client relationships more efficiently; adopting new technology and support services and improving sales and marketing. [emphasis mine]

The report’s author, Bob Scott, concludes:

“There are significant opportunities for legal firms to capitalise on size, reputation and reach to improve efficiencies and returns on investment in people, processes, IT and infrastructure. Sustainable, profitable growth can only be achieved by balancing M&A, cost reduction, price optimisation and the cultural changes necessary. Those firms that get this combination right will be the ultimate winners.”

The abstract of the report is here in PDF format.

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