In Defence of the Merger?

I wrote recently about the problem of mergers in the legal market. My post seemed to resonate with a lot of people - it has been one of the most read articles on my blog with over 300 hits since it was published.

I have received a few comments about it too - most have been supportive, but a few have been critical - saying that I had underestimated the success of mergers and that I didn't quite understand the motivation behind firms merging.  In particular, it was suggested that I didn't understand the financial pressure to merge faced by smaller firms with no access to loan capital. So I have been reading around the subject today to see if I have been missing something.

I read a very interesting article from Syscap (see the article here), who are a 'provider of smart, cost-effective finance solutions' according to their web site. The article from Philip White, their CEO, suggests that since access to finance has become so difficult for smaller law firms, their only solution is a merger.

Even firms that can get offers of conventional bank loans are finding that those loans are too expensive. Bank of England data shows that lending margins for small businesses loans across all sectors are still on the rise.  Small businesses, such as sole practitioner law firms, are now paying the highest interest margins in three years on loans of less than £1 million. 

The law firms that Syscap speaks to about funding for tax payments, IT investment etc, leave us in little doubt that they are finding it almost impossible to get sensibly priced funding elsewhere in the market. 

Further evidence of how tough things are can be seen in the 17% jump, since the start of the year, in the number of funding requests that we have received from law firms to help pay their big semi-annual tax payments to HMRC.

The above quote form the article does demonstrate the difficulty of financing a firm - but I'm still not convinced that merging is the solution. Two smaller firms who can't finance a capital programme merge - and become a larger firm with the same problem.

Partnerships have always had some difficulty to get bank loans - there is almost no collateral for banks to lend against. The traditional answer to that problem has been the equity call - or rather the practice of retaining sufficient profit each year to fund capital projects, rather than returning as much as possible to the partners in order to boost that favourite measurement of Profit per Equity Partner (PEP). Recently, however the drive to show more profits being given to partners has meant that a smaller and smaller percentage has been retained within the firm.

I appreciate that the profits in small law firms are proportionately small - however their access to affordable finance is unlikely to improve in the near future (and I don't plan to get into the argument about non-partner equity here) and so partners will need to look at improving the profitability of the work that they do. Not so that they can take more out of the firm - but rather so that the partners can use the cash in the firm to fund efficiency projects and some real growth.

So - before you consider a merger consider this: look at the way that your firm works and the cases and matters it takes on. Increase the profitability of the work - don't just look for turnover. Talk with the partners about the large/capital projects required - whether that is investment in technology or a marketing push. Look to invest internally. Look to flatten out the peaks and troughs that normally categorise partner drawings by developing a long-term financing strategy based on internal investment and a longer equity return model.

It's not likely to be a particularly popular strategy (particularly with those senior partners about to retire and withdrawn their equity) - but it will provide some stability to the firm and a platform for growth.

Gaming the Stats

This is exactly the sort of headline I usually cringe at - a very consultant/business school mealy-mouthed statement. I'm using it, however, to make a point (honestly) - that statistics can be important but that (a) you have to be sure that you are collecting and analysing the important numbers (not just the good ones) and (b) that you then talk about those important numbers. It's also important to remember that statistics can easily be used to fool people...

My somewhat odd train of thought was pushed into motion because of a headline on the "FindLaw" blog (here). Apparently the number of partners in law firms in England and Wales has reduced for the first time since 2008. The post says:

The survey revealed that the number of partner roles available to lawyers in the UK fell in the year to 30 June 2012 to 33,662, a fall of 153.
The fall is more remarkable because the number had grown by 689 last year and by 1,466 in 2009/10.
It is thought the fall in jobs reflects a wider uncertainty with the current economic outlook but may also be due to uncertainty created in the legal sector by the advent of Alternative Business Structures introduced by the Legal Services Act, or 'Tesco Law'.

I'm not sure that this is the whole picture.

Most law firms are obsessed by one particular statistic - PEP. Profit per Equity Partner (PEP) is one of the few numbers that most law partners can remember and want to talk about. Firms publish their PEP figures in the industry press and there is much discussion about the subject.

If you have read this blog before, you will know that I think that PEP is one of the most foolish statistics every used. I won't go on about it again - but there is no definition of how profit is measured, and no agreed definition of a partner (A Equity, B Equity, Fixed Equity...).

Importantly, too, there are too ways to improve PEP. The first is to improve the firm's profitability. This is very hard for most partners to think about. Other than firing people, few lawyers have the time to consider cost saving exercises and tend to view marketing as taking people out for meals and drinks.

The second way to improve PEP is to reduce the number of Equity Partners That's much easier - partly since it can involve effectively firing people...

The maths are simple (and apologies if you have seen this before - but I think it bears repeating):

In year 1, the firm's profit is £10million and they have 50 Equity Partners - so PEP is £200,000.
In year 2, the firm's profits have fallen to £9million (oh no!)  - but they have reduced Equity Partners by 6 (through retirements and 'nudging' aside a couple of partners that no-one liked too much) to 44 - and so PEP is now £204,545. Yippee!

My point is that there is a huge motivation to, at the very least, maintain partner numbers. In the example above, if profits remain the same, each additional partner reduces PEP by nearly £4,000.

It shouldn't be a surprise that partner numbers are falling - I'm surprised they haven't fallen further.

Tough Times for Equity Partners

Perhaps the title should read "A tough time to try to become an equity partner" which, although more accurate is less snappy.

It would appear from the statistics and results being released that there are fewer equity partners in law firms that in previous years. Firms (or rather existing equity partners) have protected their own earnings and the PEP figures (which they seem so fond of) by the simple expedient of either not increasing their partner numbers or by actively reducing them. Five years ago, perhaps, an equity partner would be 'carried' to an extent by his colleagues - for a while at least. Not now. The principle now seems to be 'perform or out'.

Only one major firm (as reported in "The Lawyer") has increased its ratio of equity partners over the last five years - although that figure is skewed by the partner activity over the last 12 - 18 months. Field Fisher Waterhouse, for example, have reduced their equity partners (that is, full. "A" level partners) from 41 to 27, according to "The Lawyer".

So what? Should we care? Only to the extent that it is another demonstration of the ruthlessness of the industry. In a way it is nice to see that this ruthlessness is applied to fellow equity partners as well as to employees. No-one would appear to be safe.

More seriously, however, this could be (some firms will, of course, have given the matter more thought than others) a further example of short-term thinking. Presumably those partners who no longer have equity in a firm will fell a little miffed. I suspect that it is, therefore, unlikely that they will continue for any length of time in that firm. Of course, this might not be a problem, if the partner really wasn't performing. I doubt, however, that this can be the case with all of them (surely?).

The other serious issue is that of motivating about-to-become-equity-partner level staff. Most lawyers only have one promotion path in mind - that of making partner. This progression has suddenly become more difficult and so firms will need to become ingenious in motivating the people before whom they used to dangle an equity partnership.

It will be interesting to see movement in this market over the next few months - and the clever ways in which firms work with their good senior associates or fixed share partners in order to keep them.

Responsibility and Leadership

As regular readers will know, I have issues about the way that many law firms are managed - specifically that firms are, in general, run by "enthusiastic amateurs" who have an instinctive suspicion of those professional managers who do not have a law degree (merely having advanced degrees in management, for example).

I was reading the story of Halliwells over the weekend (see here for the least impartial view) and was struck at the difference in the outcomes for partners, junior legal staff and support staff. It would appear that many of the partners have simply walked into new roles at other firms while most of the others are currently - or will soon be - out of work. I am sure that most of them will secure new employment soon, but it is striking that it is the owners and managers of the business - those who presumably made the decisions that got the firm into its current mess - who are least affected by its failure.

It occurred to me, however, that I might have been thinking about this in the wrong way. I have been constantly comparing law firms with more commercial organisations when, perhaps, they are not business at all. Most are simply collections of solicitors who have no consideration of the firm as an entity and who seem to have no motivation to look after anyone but themselves.

Does this sound too cruel? Perhaps. I'm sure that I am describing one end of the continuum. I am, however, sure that many partners seem to have a poor understanding that the firm is larger than just them, their team or the legal staff. My recent analysis of 186 of the top 200 firms (as measured by "The Lawyer") showed that, on average, 45% of staff in those firms were non fee-earners (with the maximum being 64% and the minimum being 12.5%). That is a large number of people to look after. The partners in law firms have a responsibility for these people, even if many of them seem to think that this responsibility can be discharged by email...

So - the learning is this. Your firm is more than just you. It is a collection of real people who (in general) work hard to provide you with additional profits and who, in return, hope for consideration and respect - and a long term future. As a partner, you are asked to be a leader for the whole firm in return for which you are given wealth, status and security. It is not sensible to assume that you can have one without the other. Lead your firm, please.

What's the problem with PEP?

I had an interesting conversation yesterday. I was talking with a lawyer friend of mine (who will remain nameless) and was continuing on my recent theme of measurement within law firms and, specifically, the problems with PEP (profit per equity partner). I won't repeat my issues with PEP here - just have a look at my last post if you'd like to see what I think.

My lawyer friend is not a partner (yet). He suggested that, since he was going to be a partner, and since PEP was published for almost every firm, this measurement gave him a fine way to compare firms. Our conversation went something like:

"PEP is great - I can see which firm is best", he said.

"No - you can see which firm might give you the most money when you are an equity partner. PEP isn't a measurement of which is best"

"Well it's the same thing, really..."

I countered with a story about a mutual friend who is a corporate finance manager in a large company. He had recently moved firms and during the process had gone through the books of prospective firms in great detail, examining profit flows, balance sheet health, forward strategies and client surveys. Yes of course he was concerned about the amount he would be paid - but he was as concerned that the company he was about to join was healthy.

PEP gives no idea about the health of the firm. Look at the results from Shoosmiths (as published by Roll on Friday). They have published an increase in PEP of 70% despite a decrease in revenues of 9% - and have issued a statement that this has been possible because of "...developing existing clients and ...winning new ones". Just to repeat - they have managed to take more money out of the firm, even though less came in. Not only that - but they justify this by saying that they have "developed clients". What does this tell us about the health of the firm. On the face of it, nothing at all. In fact, however, it suggests that Shoosmiths either have no idea about forward planning and building reserves, and so are content to pump money out of the firm at the very time that it needs it - or that they are content to paint a rosy picture to prospective employees and partners. Neither is very good at all. I am not suggesting that Shoosmiths are any worse than any other law firm. The majority of the larger firms (by revenue) have posted similar increases in PEP and decreases in revenues - while suggesting that this is good.

I suggest that prospective partners look well beyond revenue and PEP before moving from one firm to another. At the very least I suggest that they:

• Look at five years worth of balance sheets to see
• the ration of liabilities to assets
• the amount of band debt written off
• reserves
• Look at the strategy of the firm and whether it has actually been implemented
• Look at the marketing strategy of the firm to see if it actively supports the firm strategy and whether pervious measures of success have been achieved
• Look at staff and partner satisfaction surveys
• Look at client satisfaction surveys
• See evidence of business training for partners - after all, you will probably be asked to take some sort of role in the management of the firm.

If a firm is unable to supply any of the above - if, for example, they have no firm measurements of success for marketing or do not take satisfaction surveys - I'd be a little worried. It might not be a deal-breaker, but it's a large red flag that suggests that the firm you are looking at may not be amongst the "best" after all - no matter how much money they might give you.

Understanding the Numbers

Revenue down - bad. PEP up - good! That seems to be the message from the industry as published by The Lawyer (see here). The top 30 firms (as always, measured by revenue) have shown a drop in revenues of nearly £0.5 billion. "Don't worry", would appear to be the message, "PEP has risen".

I know that this has been a theme of mine recently, but let's just see what this means.

Revenues down
This means that clients are spending less. There is a smaller amount of money in the industry. It's not a small sum of money, either. The industry has contracted significantly and so almost the same number of firms (sorry Halliwells) will be chasing a smaller pool of work.

In any other industry this would see prices fall as market power moves to the client and would see businesses doing everything that was required to get their organisation through the difficult times - cost control, improvements in efficiency, increasing or using reserves as required (this is the rainy day that every firm should have been saving for).

Firms have been talking about cost controls - but for most law firms this means firing people. Care needs to be taken, however, since there are significant costs associated with both firing and with hiring staff - redundancy payments, legal fees, lost work time for meetings, poor use of executive time, recruitment charges, "ramp up" costs (as new staff find their feet in a new environment) etc etc. The last time I did a calculation for a law firm, it was cheaper to retain an associate if they were likely to be fired and then someone hired 17 months later. Let me repeat that - it was cheaper for the firm to pay an associate to sit at their desk doing nothing than for the firm to fire them and buy someone else in 17 months later. Never mind the fact that there would be some useful work for them to do - or the PR/HR benefits in being seen to retain staff wherever possible.

I'm not seeing many efficiency improvements. Many firms seem unaware that they have processes never mind looking to see how these could be made more efficient. As for reserves - most law firms seem to think that these are not necessary. I'm am amazed that there is no appetite to smooth out the highs and lows in PEP. Reducing pay outs in the good years would enable a smaller reduction in the bad. May daughter understood this piggy-back mentality when she was ten...

PEP Up
At first glance this seems to be good news - Profit per Equity Partner has gone up. Surely if profit has improved that is a good thing? Yes - except that PEP does not simply measure net profit. PEP is a measure of the net profit that has left the firm. This is the amount of money that the Equity Partners removed from the firm to their own accounts.

Why would firms boast about this? I will never understand why the most favoured measurement of a firm says "look how much we've stripped from the firm!". I don't know of any other industry that makes such a noise about partner or executive payments.

What would be more impressive for the good of the firm would be a measurement of retained profit or a statement of reserves. Why have law firms not been building up reserves to see them through this sort of market? Yes, there are tax advantages in the way things are done now - but this is a very short term view of business.

What is unfortunate is that PEP makes lawyers as a whole and partners in particular look greedy.

Neither revenue nor PEP should be the numbers the industry discusses. Let's look at simple net profit or retained profits or profit per fee earner over five years - or the trend in profit per fee earner or partner over five and ten years. These are useful measurements which focus on the firm rather than on the industry or the personal interests of the partners.

Belt Tightening or Investment

There have been a number of news items over the last week concerning firms withholding profit sharing - see this summary from the blogger "Solicitr" (I'd like to point out that the news was covered in the more mainstream legal press - I just enjoy Solicitr's take).

The point of the story was that a number of firms - including Pinsent Masons,  DLA Piper, and CMS Cameron McKenna - are apparently holding back or reducing profit distributions. This seems to be causing a little shock amongst partners, but I'm a little surprised why. In any other industry this might be considered investment. After all, as partners seem to repeatedly point out, they are the owners of the business. Times are difficult and profit is down and this requires investment in the business - for lawyers just as for any other firm.

The fact that this appears to be a shock is, in my opinion, indicative of the short term nature of most thought in this industry. Bumper years lead to bumper payouts and tough times immediately lead to pay cuts - for the staff as well as the partners (Shoosmiths have apparently convinced 90% of staff paid over £25,000 to take a 2.5% pay cut). Never mind the planning difficulties of this way of working - it is basically unfair. While £25,000 is a good salary in any other industry, it is a very poor salary in a law firm. Withholding profits from the partners is an investment - the partners will receive larger payouts some time in the future. The staff, however, seem to be asked to reduce their salary - it is not being invested in the firm and there will, apparently, be no return of this 2.5% of salary.

Here's an idea. Move to a longer term cash planning cycle. Retain more profit in the firm (yes, I know there are tax issues - but the firm and the partners can afford it) in good times and use it to invest in the future. Bring a culture of investment to the firm. If pay cuts are necessary (and I'm not convinced that they will be) then invest that money on behalf of the staff and return it when the good times return.

Above all, ensure that the partners understand that they have a responsibility to the firm. As the owners, they must ensure that sufficient investment is made in the firm and if this requires retaining profit for a few quarters then so be it. The partners should realise the sense of this action and be proud of their contribution.

Questions for new Partners

Congratulations. You've been offered a Partnership in your firm - or in another firm - and you're about to sign on the dotted line. You will, of course, have given the matter a great deal of thought and will have considered carefully the business you will bring in, and will be doing, as a Partner. You know your points level and your bonus requirements (if any).

There are some other questions that you might like to ask in your role as a new Partner - questions related to the way that the firm operates, rather than with the legal work you do in it. I'd like to suggest the following:

• What risk management systems are in place in the Firm. You will know your Risk Partner (surely!), but does your Firm have an up to date risk register? Are there contingency plans in place? Are these plans tested?
• What insurance cover does the Firm hold? Is it good enough? Will you be content that "someone else deals with that"? I don't think I would be.
• Is the Firm up to date with its requirements for the SRA?
• Do you know exactly how the Firm is governed? Have you met, or are you due to meet, Heads of Department - both legal and support? Will you be taking part in any part of the running of the firm - what committees are there that you might be able to contribute to?
• What's your business development plan for the Firm? I assume that you will have discussed your own development plans before moving on, and will possibly have discussed a plan for your department. What, however, about the business development work you will be doing for the Firm as a whole?
• What Partner meetings are held regularly? It is your duty as a Partner to get involved in the Firm and to take part in Partner-wide meetings. Sadly most such meetings tend to be attended by only a core of the Partnership. These are meetings that are worth attending - take the time!
• Finally - how is financial and operational planning done? Who decides about cost-cutting measures? Who makes decisions about budgets? Are the qualified to do so (ok - this is a tricky question for a new Partner - but you will have had to ask more difficult questions in the past and will, I'm sure, find a delicate way to ask it)? What is the involvement of experts in these decisions?

Remember - as a new Partner, you are now an owner of the Firm and, as such, responsible for the way that it works. Don't just undertake extensive, in-depth, reviews for your clients. Ask the difficult questions in your own Firm. You can then be assured of sleeping better - and possibly help your Firm to become more efficient.

Partners from a wider Pool

Well, well - Pictons has joined the (very) small band of UK law firms to have a non-lawyer partner (see here for the story).

It is sad that this is news - I have been an advocate for some time of widening the pool of partners beyond legal staff. It can only be a good thing - a different perspective, and different background leading to, hopefully, a better decision-making process.

As a former general manager, I am, however, a little saddened that it is often HR Directors who make the leap. I can understand it - and in no way suggest that Yvonne Hardiman did not deserve her promotion. HR Directors are, of course, intimately involved in the selection of lawyers at all levels, but in particular in the identification, selection and promotion of partners, and so are well known to the existing pool. I'm sure, too, that experienced HR Directors have strategic decision making experience, skills and knowledge.

Wouldn't it be wonderful, however, that a real generalist was promoted? Someone with strategic experience of running an organisation rather than a part of an organisation. Someone who has been specifically trained for the role of running a firm. Dare I say it - someone who has worked in a different industry and has leadership experience.

Perhaps that would be a step too far and that we reformers should be happy with the move away from all-lawyer partnerships. We should celebrate Yvonne's achievement and encourage other firms to take a similar step.

I will, of course, also point out that the elevation to partner status is more to do with the ownership of the firm rather than the management of the firm (see here for a longer discussion of the need for separation of ownership and management). I am sure, however, that there can only be a positive impact on the strategic understanding of the firm.

Well done to Pictons!

Is the Big Law firm really a big law firm?

Following James' recommendation on Twitter, I read Patrick Lamb's blog entry about Big Law firms dealing with the downturn in a series of "slash and burn" exercises. He rightly raises the question - why were average profits reported being down by almost 20% (I assume he is referring to US law firms) while profit figures are actually down 3-5%? Last month I blogged myself about UK law firms where there was an average rise in revenue for the top 50 firms but an average drop in PEP for the same group. The understanding that I took away was that law firms were poor at accurately assessing the downturn.

Patrick goes on to say that the "slash and burn" exercise - i.e. slashing costs by, generally, reducing head count and finding savings in expenditure (often by pressurising suppliers or reducing benefits) - which has been demonstrated to be unsuccessful, is simply repeated. He expresses surprise that Big Law firms seem unable to move to a different model.

I can't speak for US firms, although I had understood that they worked to a more corporate model that their UK counterparts. The the UK, however, I firmly believe that the Partnership model is the problem. Debra Weiss talks about this in her posting "Most law firm reform ideas are insipid and inadequate", and points readers in the direction of Larry Ribstein, a law professor at the University of Illinois, who suggests external ownership of law firms.

The issue in the UK is that, no matter how large the organisation seems - thousands of staff, and millions of pounds worth of revenue - law firms are small businesses. By that I mean that the governance model which is used in almost every firm I have analysed is the same - a board of lawyers headed by a senior lawyer who may receive advice from functional specialists employed as directors. These lawyers, in order to have reached the stage where they have achieved partnership and been considered for the board, will have put in a tremendous and impressive amount of work in order to build up a client base and an income for the firm. This will have required years of training and hours of practice - in preference, often, of many other parts of their lives. Eighty hour weeks are still considered normal for aspiring lawyers.

This is all well and good - but it does leave little time for the hot-shot lawyer to learn anything at all about running a multi-million pound business. Many firms will point to their internal training programmes (although almost as many will have been cut or cancelled altogether in the first "slash and burn" round) which they use to identify future partnership material. Some firms will even go to the lengths of sending senior associates or partners away on a week long course to a major business school to learn the skills to manage the firm. I have a number of issues with this approach. As a professional manager, I find it somewhat insulting that anyone should think that they can learn my job at a week-long course. I would have more regard for the idea if, having been on this accelerated learning programme, returnees were allowed to get involved in actually running the firm. Often this is not the case. Holders of certificates from Harvard may well be invited onto a committee but the chances of being in a position to see the business being run and to have a hand in it are very slim before achieving board level. They may well pick up some staff-management experience as they rise to Head of Department, but it is unlikely that they will engage in any strategic staff management or long term planning (I am often told by law partners that, since it is so difficult to forecast the requirements of the firm in the future, there was no point in trying).

This means that the first time they are expected to make a strategic business decision will be at their first board meeting. In most cases they are not ready for that moment and are not sufficiently trained for the task they undertake. That is why "slash and burn" exercises are undertaken so often - they are easy to start, easy to understand and a way of being obviously seen to be doing something. Setting up new governance systems with long term measurements and targets is difficult - and so often avoided. This is a small business mentality - and, in fact, some small business owners I know would be insulted at the comparison.

I agree with Professor Ribstein - external Board membership and external ownership is the probably the way forward. Law firms need to take the step to become large businesses and incorporate the expertise in running a business into their firm. Managing a business is a skill in itself and should be left to those trained to do it and with experience of dealing with upturns and downturns. By introducing an external view, firms will be forced to become more corporate and will benefit from a more diverse opinion, knowledge and skill set.

Moving towards being a large firm will be difficult. The first step, as so often, is to recognise the skills already available to the firm - i.e. in the current Board - and to equally recognise what skills are missing and so will be necessary. A full programme of training will be necessary for both this generation of "managing lawyers" and the next. Understanding of business must be introduced as early as possible. Trainees should have one "seat" with the firm's management and spend a rotation understanding how the firm actually works.

I believe it is possible to produce this new type of law firm - and that the firms which move away from the traditional model will be the ones to recover most quickly.

Use of PEP in an industry with fewer Equity Partners

Interesting article today in Legal Week about the falling numbers of Equity Partners in the face of increasing numbers of Partners in law firms.

This seems to suggest that most of the top 25 firms (this research was confined to the UK top 25 firms) are keen to spread the pain amongst a smaller number - presumably in the hope of spreading the upside equally amongst fewer Partners. Given this decision, it is hardly surprising that PEP figures are falling dramatically. This action does seem to be a deliberate policy - deliberate if not written.

It would seem that Partners' believe that the pain now is worth it and see no need to share later gain any wider than possible. The Magic Circle firms are bucking this trend - perhaps professional measurement is advising these firms to spread their equity base...

Turnover and PEP in UK Law Firms - More Thoughts

I blogged earlier this months about statistics and the need for a longer term view (see here). Today "Legal Week" has written about firms' turnover and PEP figures - and the need for longer term measures.

A small amount of analysis shows some interesting information. The top 50 UK firms' data from 2001 to 2009 is very interesting. Using the "Legal Week" data, I looked to see what would have happened to a firm which in 2001 had a turnover of £70 million and PEP of £250,000. By 2009, the data suggests it would have had a turnover of just under £135 million and PEP of just under £350,000 - rises of 92.8% and 38.7% respectively. Not too shabby at all.

As expected, the firms at the top of the list for year-on-year growth tend not to be those showing the highest for turnover and PEP in 2009. In fact only one firm in the top 10 for PEP made it in the top 10 for turnover growth (DLA Piper with Average PEP of £645k and turnover growth from 2008 of 16.3%). There was also only one firm in the top 10 of revenue per lawyer (RPL) in 2009 which made the top 10 for profit growth from the previous year (Freshfields with RPL of £400.4k and profit growth of 0.6%).

More interestingly 6 firms made both the top 10 for turnover growth and the top 10 for profit growth (Kennedys, Berrymans, HFW, Ince, WFW and Clyde).

All this just adds weight to the need for longer term measures rather than focussing on year-on-year PEP. I propose a move to publishing different measures as a matter of course:

• Five year average PEP
• Five year PEP growth
• Five year average Revenue per Lawyer
• Five year RPL growth
• Five year average profit
• Five year profit growth

Each of these should be easily available - and the five years' data should be published in graphic form to make it even easier to see the trends.