Law Firm Leverage Varied with Firm Size and Location in 2006 — National Figures Fluctuate Over Time
01-18-2007

On a nationwide basis, major law firms employ one associate for every partner, and the overall ratio of lawyers to partners is just over 2.0 (2.19). This is according to recent analyses of the 2006-2007 NALP Directory of Legal Employers, the annual compendium of legal employer information published by NALP. The 2006-2007 Directory represents over 132,000 lawyers in more than 1,500 law offices nationwide, primarily, though not exclusively, in firms of more than 100 lawyers. The analyses reveal that, whether measured as the ratio of all lawyers to partners, as the ratio of associates to partners, or as the ratio of other lawyers, e.g., of counsel, senior and staff attorneys, to partners, law firms vary widely in their mix of lawyers.

What is more, on a national basis, these figures in the two most recent years have returned to levels of the mid 1990s, after experiencing an increase in the late 1990s and peaking in 2000. (See Table 1.) While the fluctuation in these figures is obvious, the reasons for the fluctuation are less so.

Not surprisingly, regardless of the measure used, on average, larger law firms leverage their partners with associates and other lawyers to a greater degree than do smaller firms. For example, the ratio of associates to partners in firms of 100 or fewer lawyers is about 0.7. Leverage figures rise rapidly for firms of 251 or more lawyers. In firms of more than 700 lawyers, the figure is about double, at 1.38. A measure based on all lawyers shows a similar progression, from 1.86 to 2.60. (See Table 2.)

City averages for leverage vary from city to city. Among the cities with the greatest representation in the Directory, lawyer/partner ratios ranged from a low of about 1.6 in Grand Rapids and Milwaukee, to a high of 3.16 in New York City. A number of cities, including Detroit, New Orleans, Minneapolis, Portland, OR, Seattle, and Tampa/St. Petersburg, are similar to Grand Rapids and Milwaukee, with leverage in the 1.68 to 1.75 range. On the high end, however, only San Jose comes close to matching the leverage levels of New York City firms. Most of the other cities are not too far from the national average of 2.19.

Likewise, only in New York City does the ratio of associates to partners begin to approach 2.0 (1.86). San Jose is second at 1.64. The list bottoms out at less than 0.5 in Detroit and Grand Rapids. This measure of leverage is less than 1.0 in a number of cities.

States, or portions of states outside of the cities listed, also vary. Thus leverage is highest in Nevada and lowest in areas of New York state outside of New York City.

Since leverage is generally higher in larger firms, differences between cities reflect to some extent differences in size composition. However, similarities with respect to firm size don’t necessarily translate into similar leverage figures. For example, when you look at cities with a similar percentage of offices from firms with more than 250 lawyers, such as Dallas, New York, Kansas City, Los Angeles, Orange County, Pittsburgh, and Raleigh/Durham, leverage levels are very different, ranging from just under 2.0 in Pittsburgh, to 3.16 in New York. Thus, while this information is among the most comprehensive available, it does not readily provide insight into other factors that likely play a role in determining the leverage decisions of an individual firm, nor the reasons for the averages in a given area. However, these figures do provide a useful description of the current application of leverage within the nation’s major law firms, and how it has varied in the past decade.

The 2006-2007 NALP Directory of Legal Employers, which provides the individual firm listings on which the 2006 aggregate analyses are based, is available online at www.nalpdirectory.com.

 

Table 1. Law Firm Leverage Nationwide — 1995-2006

 

  Ratio of Lawyers to Partners Ratio of Associates to Partners # of Offices
1995 2.15 0.99 993
1996 2.18 1.01 921
1997 2.18 1.01 1,053
1998 2.23 1.04 1,154
1999 2.32 1.12 1,258
2000 2.47 1.11 1,319
2001 2.37 1.15 1,322
2002 2.38 1.16 1,346
2003 2.33 1.12 1,391
2004 2.29 1.07 1,392
2005 2.24 1.02 1,452
2006 2.19 0.99 1,523

Note: These analyses are based on the NALP Directory of Legal Employers from 1995-2006. During this time, the number of offices included in the Directory has increased, as shown in the last column. The number of lawyers represented has likewise increased, from about 77,000 to 132,000.

 

Table 2. Law Firm Leverage — 2006

  # of Lawyers Ratio of Lawyers to Partners Ratio of Associates to Partners Ratio of Other Lawyers to Partners # of Offices % of Offices in Firms of 251+
Total 132,413 2.19 0.99 0.20 1,523
By Size of Firm:
50 or fewer lawyers 4,602 1.86 0.71 0.16 155
51-100 lawyers 10,899 1.86 0.69 0.17 173
101-250 lawyers 31,271 1.91 0.73 0.18 316
251-500 lawyers 29,634 2.12 0.89 0.23 372
501-700 lawyers 15,648 2.56 1.31 0.25 131
701+ lawyers 40,359 2.60 1.38 0.21 376
Offices in:
Atlanta 3,831 2.18 1.02 0.17 43 53.5
Austin 919 1.99 0.79 0.20 21 76.2
Baltimore 993 1.79 0.64 0.15 11 54.5
Birmingham 1,024 1.70 0.58 0.12 11 18.2
Boston area 4,542 2.30 1.13 0.16 36 61.1
Charlotte 1,194 2.06 0.91 0.16 19 57.9
Chicago 8,329 1.95 0.83 0.12 60 56.7
Cincinnati 1,071 1.89 0.74 0.15 12 58.3
Cleveland 1,504 2.13 0.91 0.23 14 42.9
Columbus 1,172 1.99 0.77 0.22 14 50.0
Dallas 3,665 2.20 1.01 0.19 41 68.3
Denver 1,434 1.92 0.74 0.19 26 57.7
Detroit area 1,794 1.71 0.49 0.22 16 31.3
Ft. Lauderdale/W. Palm Beach 557 1.83 0.67 0.15 14 57.1
Grand Rapids 550 1.59 0.38 0.20 8 25.0
Hartford 969 2.16 0.87 0.29 15 20.0
Houston 3,093 2.17 0.94 0.23 39 71.8
Indianapolis 1,365 1.94 0.66 0.28 11 18.2
Kansas City area 1,577 2.04 0.68 0.36 12 66.7
Los Angeles area 6,785 2.41 1.21 0.20 90 67.8
Miami 1,341 1.92 0.82 0.10 22 59.1
Milwaukee 1,209 1.64 0.55 0.08 9 33.3
Minneapolis/St. Paul 2,352 1.73 0.59 0.13 23 21.7
Nashville 691 1.79 0.69 0.10 9 44.4
New Orleans 611 1.67 0.54 0.14 9 44.4
New York City 22,971 3.16 1.86 0.29 144 69.4
Northern NJ/Newark area 2,665 2.48 1.22 0.27 27 29.6
Northern Virginia 918 2.10 0.94 0.16 23 82.6
Orange Co., CA 1,179 2.35 1.20 0.15 29 69.0
Philadelphia 3,091 2.36 1.11 0.25 21 61.9
Phoenix 1,332 1.85 0.72 0.13 17 47.1
Pittsburgh 1,318 1.96 0.78 0.17 12 66.7
Portland, OR area 1,048 1.75 0.61 0.14 20 20.0
Raleigh/Durham 495 2.09 0.73 0.35 13 69.2
Richmond 902 1.95 0.78 0.17 8 50.0
Salt Lake City 396 1.91 0.81 0.10 10 50.0
San Diego 1,323 2.45 1.20 0.25 22 77.3
San Francisco 4,143 2.31 1.11 0.20 58 74.1
San Jose area 2,398 2.83 1.64 0.20 43 86.0
Seattle area 1,867 1.75 0.63 0.12 34 32.4
St. Louis 1,590 2.02 0.80 0.22 11 54.5
Tampa/St. Petersburg 716 1.73 0.63 0.10 14 42.9
Washington, DC 13,631 2.36 1.08 0.28 137 78.8
Wilmington 668 2.20 1.06 0.14 12 41.7
States:
Other areas in California 900 2.13 0.89 0.24 22 36.4
Other areas in Florida 1,076 1.84 0.61 0.23 18 66.7
Kentucky 994 1.88 0.60 0.28 7 28.6
Nevada 429 2.21 1.09 0.12 16 12.5
Other areas in New York State 1,609 1.82 0.61 0.20 16 12.5
Other areas in Texas 551 1.89 0.68 0.20 14 71.4

Source: The 2006-2007 NALP Directory of Legal Employers. For law firms that repeated firm-wide information for each office listing, information was retained for just one office to avoid double counting. Some city information includes one or more offices in adjacent suburbs. Orange County includes offices in Costa Mesa, Irvine, and Newport Beach. The San Jose area includes offices in Cupertino, Menlo Park, Mountain View, Palo Alto and E. Palo Alto, Redwood Shores/Redwood City, San Jose, and Sunnyvale. The Northern New Jersey/Newark area includes offices in Newark, Livingston, Rochelle Park, Roseland, West Orange, Florham Park, Hackensack, Morristown, Parsippany, Short Hills, Westfield, Bridgewater, Somerset, and Woodbridge. Northern Virginia includes offices in Falls Church, McLean, Reston, Vienna, and Alexandria. State figures exclude cities reported separately.

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