Editor's letter

How the mighty have stumbled...a little. True, the majority of people hurt by this recession might find it hard to sympathise with those whose annual pay packets have tumbled from a cool million to less than £750,000, but it is still a rather big deal (if you’ll pardon the pun).

Clifford Chance (CC) lifting the lid on its preliminary financial results in July − including a 37 per cent fall in year-on-year profits per equity partner (PEP) − was the surest sign yet of the extent to which even the largest law firms have been at the mercy of the difficult markets in this financial crisis.

Even more symbolic than a slump from the magic £1m profit milestone, however, is a seemingly less dramatic figure: the five per cent drop in revenue − from £1.33bn to £1.26bn. Quite simply, this means that CC is no longer the largest law firm in the world in terms of revenue, relinquishing that title to Skadden, Arps, Slate, Meagher & Flom.

CC’s global managing partner David Childs was succinct: “Last year was very challenging for our clients and therefore for us.” In addition to the profit fall, he acknowledged his management had taken a number of “difficult but necessary” decisions, including redundancies and a review of the firm’s overall partnership structure that is still ongoing.

Of course, even with the likes of rivals Freshfields Bruckhaus Deringer and Linklaters overtaking CC in the numbers game, tremors such as this in the legal world are more of a reality check than a revolution. Strategies may need to be reviewed in some quarters, but it is hard to imagine the recent crisis heralding anything as dramatic as the dissolution of the vaunted ‘magic circle’.

What’s more, CC’s statement also cites the recruitment of some key lateral talent as a highlight of its year − and the firm hasn’t been alone in finding it has had the time and means to pinch some profitable new partners to work with in these uniquely troubled times. Indeed, the legal giant itself recently lost a not inconsiderable portion of US litigation partners, including a trio led by the former global head of the practice Mark Kirsch, who joined the New York office of Gibson, Dunn & Crutcher LLP in June.

In fact, according to the consultants Kerma Partners, just as in the depressed housing market, now may well prove to be “the perfect time to buy” laterals. A report by Melissa Holyoak, former associate at O’Melveny & Myers, suggests partners concerned their current firms or practices face serious difficulties may well be persuaded to revise their expectations.

“Moving to a law firm with lower profits per partner may signify decreased potential for compensation growth,” she writes. “In a world of imploding firms, however, partners may trade that potential growth for financial stability.”

In other words, lateral talent could well be tempted by a law firm with a lower PEP − something Holyoak has certainly found to be true in the US. Her recent comparison of moves in the AmLaw 200 found laterals looking in the first quarter of 2009 plumped for firms where PEP was an average 1.8 per cent lower than their previous firm. In the same period in 2008 that figure was 12 per cent higher!

Recession or otherwise, however, none of this takes into account the significance of having the right cultural fit when identifying future partners − and this brings me to Lewis Silkin managing partner Ian Jeffery, who I am now delighted to welcome to the Managing Partner editorial board for the coming year. Ian was the first MP I interviewed for this magazine almost three years ago, and he recently celebrated his firm’s first entry in the annual Sunday Times ‘100 Best Companies to work for’ competition, debuting at an impressive number 19. In this issue he now reflects on that journey, the changes made and lessons learned when it comes to building a better workplace culture.

Richard Brent, Editor