Orrick Herrington & Sutcliffe has never been a shrinking violet when it comes to publicity and this past week has proven no different. First was the news that its proposed merger with UK firm SJ Berwin had, like so many of Orrick’s previous dalliances, failed. Then was the bold announcement that Orrick would no longer report its average profits per equity partner (PPP) figure to the press.

Partner profits figures have long been a divisive issue amongst law firms. On the one side are the Anglo-Saxons, with their more transparent approach to finances, especially in the UK LLP era when all such data is publicly available. On the other are European law firms which have, on the whole, been reluctant to reveal their bottom line profits.

From the first perspective, the decision of a top US firm to close ranks does make some sense. Orrick’s charismatic chairman, Ralph Baxter (pictured), said the move was made because PPP no longer reflected the right way to evaluate the business. Apparently it does not encourage the correct approach for the firm and the priority instead should be grabbing a bigger market share and deepening client relationships.

“The legal profession is at a transformative moment, and now is the time to reconsider all of the metrics we have traditionally used to measure success,” said Baxter. “Our partnership is engaging in a serious dialogue to identify more appropriate metrics to evaluate our firm, to strengthen our client relationships, and to make our lawyers’ careers even more meaningful. Moving away from the profit per equity partner metric is a step toward greater accuracy and transparency about law firm economics, and it will focus us even more on how we deliver value and efficiency to our clients.”

Outside of the legal market the emphasis on – and indeed benchmarking of – average PPP (or profits per director) would seem rather strange. Most other large service professions do not rely so heavily on the system. The idea of judging success on the average profits executives make even seems a little outdated. Would Deloitte be judged better than KPMG if average PPP was €10,000 more per year?

The revolution in the legal services sector over the past decade has also played its part. The traditional all-equity lockstep model is pretty much a thing of the past. Those old structures, when partnerships were smaller and more defined, gave a better indication of profit levels.

Nowadays law firms have hundreds and hundreds of partners. Many firms have two or three levels of partnership, ranging from salaried to fixed-equity to full equity. Firms in the UK have even introduced the concept of part-time equity partners. The geographical spread of big law firms is also a factor.

Of course PPP can give a broad indication of profit levels in an international firm. But Orrick has asked the question; is that really fair when other businesses do not get judged on average levels of profitability from across the globe?

On the flip side, European law firms have also deployed multi-tiered partnerships increasingly in recent years but have not exposed their inner-working so fully. Others have also expanded globally. Historically few haved dished out profit figures because of the discrepancy between what top partners earn and what junior partners do. Even so, a move away from PPP figures would not have that much of an impact.

“Clients and others have made it clear that the metric

actually creates the impression that firms manage to the metric to make themselves look good, rather than managing for their clients, their people, and a sound long-term strategy,” Baxter concluded.

Whether Orrick’s proclamation ends up posturing or a genuine U-turn is still unclear. It does, however, underline the growing commercial approach of the legal profession. The drive for greater transparency has left profit figures as the over-riding benchmark for a law firm’s success. In a global business, this probably is not the most reflective criterion to judge performance. By not letting the cat out of the bag in the first place, European practices must be relieved that profits are not the ultimate yardstick in which they are judged.