Revenue Dips, PPP Rises as Blank Rome Cuts Partner Ranks
Blank Rome's gross revenue fell 2.6 percent to $320.5 million in 2013 while other key metrics rose as overall headcount fell and the equity partner tier was cut by 16.4 percent.
Last year marked the end of a program to "rightsize" the firm in an effort to deal with "excess capacity," firm Chairman Alan J. Hoffman said. Rightsizing has been a priority for the firm for the past five years, but Blank Rome has made a concerted effort to trim ranks during the past two to three years, Hoffman said.
"It was a difficult two years with respect to that but we are finished with that," Hoffman said of the rightsizing, which happened through de-equitizations, dismissals and natural attrition.
Blank Rome had $8.5 million less in its coffers at the end of 2013 than it did in 2012. Overall headcount was down as well, dropping 5.1 percent from 471 lawyers in 2012 to 447 lawyers in 2013.
Hoffman said the firm was able to stop revenue from dropping in line with the larger headcount decrease because the remaining attorneys in the firm increased their productivity, with hours increasing by 38 for each lawyer. Overall hours at the firm fell by 5 percent, Hoffman said, which is in line with the headcount decrease.
The firm's revenue per lawyer (RPL) rose 2.1 percent from $700,000 to $715,000. Hoffman noted another reason for the overall decline in gross revenue was that the firm's typical contingency fee revenue of between $9 million to $12 million a year was only $4.9 million in 2013 given when certain cases were resolved.
Hoffman said Blank Rome has been focusing on improving its profitability through adjusting its attorney complement and focusing more on alternative fee arrangements and project management. The firm's profits per equity partner (PPP) rose 9.3 percent from $750,000 to $820,000, but that was thanks in large part to a 16.4 percent decrease in equity partners. Blank Rome's equity tier fell from 140 in 2012 to 117 in 2013 and the nonequity tier grew 6.5 percent from 108 nonequity partners to 115 in 2013.
Pay to nonequity partners rose at a greater rate than did their ranks, increasing 18.1 percent from $36 million to $42.5 million. That increase contributed, in part, to the 8.6 percent decrease in net income for the firm. Blank Rome's net income dropped from $105 million in 2012 to $96 million in 2013. The firm's profit margin fell two percentage points to 30 percent. The firm's average income for all partners rose 4.4 percent from $570,000 to $595,000.
Blank Rome's equity partnership tier has generally been shrinking since the recession took hold. In 2006, the firm had 480 lawyers and 166 equity partners. Now there are 447 lawyers and 117 equity partners. In the two years since the firm was actively trimming those ranks, Hoffman said more than 30 partners were affected. Blank Rome has continued to promote "star performers" to equity partnership but, as with many firms, the criteria for making and keeping that partnership stake has become stricter, he said.