By Andrew Slade, Senior Manager of Growth and Analytics at Perkins Coie LLP.
Every spring, The American Lawyer publishes its annual survey of the 100 largest U.S. law firms. These results are highly anticipated for reasons ranging from benchmarking and comparison to reputation and prestige. The 2023 Am Law 100 survey was no exception, especially for LVN professionals navigating evolving market conditions. To aid law firm strategists, this article (1) summarizes the key survey results and (2) encourages strategists to incorporate leading indicators in their decisions.
2023 Am 100 Law Survey Results
Law firms rarely reveal detailed financial information, so the Am Law 100 survey offers strategists an unusual glimpse into competitors’ revenue, headcount, and profitability. Smarter minds than mine have already shared their winners, trends, and themes . For those with limited time or attention, my key takeaways are:
Industry performance regressed in 2022, after two recording-breaking years
Market conditions favored different firms and practices than in the past two years
On the first point, more firms faced greater hardship in 2022. After a rising tide lifted most boats during the pandemic, aggregate production per lawyer fell, while aggregate costs per lawyer increased.
Even more interestingly, these economic headwinds hit different firms and practice areas than in prior years. Over the past decade, the most profitable law firms have generally extended their lead over other Am Law 100 counterparts, often due to high-end transactional practices. In the latest survey, most firms with the largest annual revenue per lawyer drops had a corporate focus, a New York headquarters, and/or profits per equity partner over $3M. Conversely, most firms with the biggest annual revenue per lawyer gains had a significant litigation practice, a mid-market headquarters, and/or profits per equity partner under $3M.
These market shifts present varied challenges and opportunities for different firms. For illustration, the following matrix presents several potential responses to the 2022 decline in higher-end transactional work, depending on a firm’s market position.
Leading and Lagging Indicators
Of course, the desirability of the above actions depends on whether the underlying market conditions continue. The Am Law 100 survey results are a lagging indicator, reflecting historical performance for the 2022 financial year. They do not necessarily reflect the market conditions in June 2023 or beyond.
Ideally, law firm strategists will consider both leading and lagging indicators. Leading indicators help predict the future success of an operation. This makes them extremely valuable, but also harder to identify, analyze, and adjust.
Firms that proactively identify and act on leading indicators will have more and better strategy choices available to them. Once a strategy is obvious, many law firms will pursue it. Early understanders and adopters have greater space and opportunity to implement their ideas.
 Law firms’ investments in large and distinctive private equity practices provide an instructive case study. Early movers in the latest private equity boom had relatively easier paths to build and defend such practices . Other law firms that aspired to follow suit—after lagging indicators validated the strategy—faced significantly narrower pathways to success with lower returns on investment.
Incorporating leading indicators in key strategy decisions is not easy. Law firms are inherently risk-averse organizations. New decision models require new resources, which can be difficult to procure in this more-for-less era. Finding the time necessary for deep thinking and strategic planning is always challenging.
Even so, the rewards for forward-looking firms are enormous and expanding. Technological advances, and their associated economic opportunities, are only accelerating. The law firms that quickly identify and decisively act on these market shifts will be tomorrow’s market leaders.
 See, e.g., Gina Passarella Cipriani, The Long View: A 10-Year Look at Key Financial Metrics; Patrick Smith, A Step Back, But Still Ahead? An Analysis of The 2023 Am Law 100; Jae Um, Power Ranking the Am Law 100: Who Won Out Through the Pandemic?.
 See Rita McGrath, Seeing Around Corners: How to Spot Inflection Points in Business Before They Happen (2019) (describing the inverse relationship between signal strength and degrees of freedom for strategic action).
 See, e.g., Fontanella-Khan, Indap, & Thompson, How A Private Equity Boom Fueled The World’s Biggest Law Firm.
LVN Insider's Greg Lambert recently caught up with Andrew to discuss the Am Law 100 results and break down the effects on firms' performance.