Research
Q&A
By
Chuck Lowry, Director
of Client Relations
Q.
I was preparing some financial trending studies for our
Executive Committee, and I used the Am Law 100 posters
from the old magazines. When I compared my data with materials
from the ALM
Research on-line database, I found that some of the
rankings—not the raw data, but the rankings—changed
by a few positions. What’s up?
A.
To answer this question, let’s
begin with the database methodology. All financial rankings
are taken from the most comprehensive list in the database,
the Am Law 200. Under that condition, the explanation
for this phenomenon is simple: while the absolute numbers
(e.g. profits per partner, revenues per lawyer, net operating
income) do not change, the ranking, i.e. the position
of those numbers compared to a defined universe, can change
when the universe is expanded.
For
example, a firm on the Am Law 100 may have had profits
per equity partner (PPP) of $715,000 for a given year
and ranked 78th on the Am Law 100 for that metric. But
firm 106 on the Am Law 200, published a month later, may
have a profit per equity partner of $719,000. When all
Am Law 200 firms are then combined and ranked by PPP,
firm 106 will be ranked higher than firm 78.
Some
firms do not have enough in gross revenue to be on the
Am Law 100, but may well exceed the larger firms in measures
such as revenue per lawyer or profits per equity partner.
Therefore it is possible for a firm to have a lower relative
gross revenue figure, and a higher relative profits per
partner figure resulting in different rankings from one
list to another. Gross revenue is the default ranking,
so that ranking will not change; all the other rankings
in the Am Law 100 are susceptible to change when the second
hundred firms are added. The key, as is so often the case,
is found in the methodology!
Email
your questions to Chuck Lowry at clowry@alm.com
