Agreement on a common set of financial metrics - Top 20 law firm – 5 July 2007
Q1: “We hope that MPF members would agree that any financial data taken selectively can be misleading and that no one data point is likely to be truly indicative of the full health of a professional practice given the murky make up of most firms’ partner bases.
In an ideal world, firms would publish audited financial accounts that are transparent and consistent. In the absence of such a world, should the professions continue to publish selective, unaudited and unverifiable vanity numbers as a PR exercise, or should we try to agree on a common set of metrics that are audited and then released to clients, employees and the media as a single table on the same date?”
RESPONSES
5 July 2007 – MP, Top 100 law firm
“I agree that we seem to have got ourselves on a treadmill of rather pointless 'vanity' disclosure with the media asking for more every year with little benefit to the profession as a result. Pulling something together as described which the top 20 or 100 firms could all sign up to is unlikely to be easy but a common approach on how much we're willing to disclose might be possible. We'd certainly look seriously at it.
With the growth in LLP status filed and audited accounts accounts are now publicly available for many firms. They don't meet the media's need for immediacy and full PEP details but I'd be happy if that's all they got.”
5 July 2007 – Specialist management consultant
- More consistency (and truthfulness) in the disseminated performance information is much needed. What might be helpful in considering the process for achieving that is an independent body/institute that is set up voluntarily and which becomes the de-facto standard of the profession (equivalent of Standard & Poor).
- The currently available information relates to past year performance and is P+L focused. What is missing is the equivalent of the balance sheet of the firm. I am not talking about the accounting BS (pardon the pun) that the firms get to date, but an assessment of their intellectual assets and whether they have grown, improved or are increasingly at risk – compared to before. It is in the analysis of assets that you discover successful firms – increases in profits are the result of that and can come much later.
6 July 2007 – CEO, Top 150 law firm
“Being able to compare detailed data with other firms, especially those of a similar size, etc, for benchmarking purposes would be and is invaluable. However, producing a common set of metrics would only produce a 'genuine' table for vanity purposes. Such data would always be capable of being manipulated by firms wishing to push themselves up the league ladder.”
6 July 2007 – MP, Top 150 law firm
“I think this question is hugely loaded. Personally I have no knowledge that would lead me to suppose that one firm or group of firms is better or worse than others in publishing misleading or inaccurate data and would tend to suppose, because of the reputation risk of being caught out in a blatant lie, that none are. We tend, I would guess, to puff up good numbers and to let poor numbers die quietly. Who doesn't? Why wouldn't we? We are competitors, I guess.
For those firms who have adopted some form of corporate model the statutory accounts do provide a "standard" return basis. I would not understand hugely why we would need another public format for our results unless it were designed to supersede the work done by the legal press to extract and report upon results by partner income and supplant it by a model derived from the statutory format.”
9 July 2007 – Director, Magic Circle law firm
“Interesting idea in theory (and I agree with the sentiments being expressed) but not sure my Finance Director would be happy!
Also, you then lose one of the upsides with being a private partnership in having control over this sort of thing. The shareholders are the ones who need to be happy and how the PR is handled is secondary to managing the internal stakeholders. MPs need the flexibility to deal with that audience as and when appropriate rather than dictated by an exercise like this.
Finally, LLP conversion means there is likely to be more transparency down the line.”
9 July 2007 – Marketing Director, Top 20 US law firm
I would welcome a scheme which would allow us to publish audited figures on a set date but fear that in the absence of enforceable methods of policing such a scheme, it will be impossible to implement.
I can add that the publisher of a very well known US trade publication has been lobbying for many years for more transparency and standards for reporting financial results as the magazine's value, in particular with regard to published rankings, relies on the professional honesty of the legal community in what they report.
As mentioned above, this will only work if the industry self-monitors and agrees to generally accepted standards. At the moment the US haven't arrived at that stage either, but an increase in client pressure may also be a contributing factor.
9 July 2007 – HR Director, Leading actuarial practice
The exhibition industry conducts ABC audits around a number of key metrics including visitor attendance (A key measure for this industry) to fulfill the purpose described in this query. This originates from publishing of magazines. If this is of interest I can put someone in touch with an industry body to explore further.
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