Bank Report Shows Partner Productivity Lagging in Pa.

, The Legal Intelligencer

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"While firms continue to cull the non-timekeeper categories, total attorneys in Pennsylvania are up 2.9 percent and were flat nationally," she said.

Senior partners, both in Pennsylvania and nationally, still log an average of 1,500 billable hours a year, compared to the 1,700-to-1,800-hour range seen prior to 2009, Ashenbrenner said, noting current productivity levels are "very concerning." It's that lack of productivity that is suppressing firms' profitability, she said.

"It's as simple as this: Firms with busy partners are the ones enjoying the most success," Ashenbrenner said.

Productivity and inventory are up for Pennsylvania firms, and they rose at rates higher than the national average, but the hours per attorney have fallen, according to the Wells Fargo survey results.

The total hours logged by firms rose 1.6 percent in Pennsylvania while they dropped 1.1 percent nationally. Inventory rose 4.7 percent for Pennsylvania firms and 3.6 percent for firms nationally. But the drop in individual attorney hours logged shows a productivity problem that will eventually catch up with firms if they don't better manage expenses, including headcount, Ashenbrenner said.

"Firms that have kept a keen eye on expense management and productivity are pulling away from the pack," Ashenbrenner said. "Those firms that didn't take precise action and pivot quickly are really falling behind."

But Ashenbrenner noted that stratification among firms is less severe in the Pennsylvania region than it is nationally.

A number of large-scale law firm mergers have been seen in recent months and Ashenbrenner said merger discussions are certainly on the rise. The firms that are falling behind will be more eager to merge in the coming year, but she again noted that stratification isn't as apparent in Pennsylvania, which may make mergers less of a factor in the market.

In 2012, expense gains were also outpacing revenue gains by the end of the third quarter, but the fourth quarter brought a boon in transactional work that helped overcome that deficit. Ashenbrenner said there is nothing expected in the fourth quarter of 2013 that will help ease the pressure on profitability.

Wilmouth said the focus needs to be on increasing revenue as much as possible. While Citi is seeing the gap close between revenue and expenses, he said firms still have that hurdle to jump in terms of making up for the revenue they saw in the fourth quarter of 2012. The good news, he said, is that firms seem to have built up inventory as they headed into the fourth quarter of 2013. Wilmouth said Pennsylvania firms had the second-largest increase in inventory of all the markets Citi surveyed.

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