One of the country’s most senior corporate lawyers has launched a stinging attack on law firms’ obsession with promoting what he claims are flawed performance statistics that risk tarnishing the profession’s reputation.

In an article published on his firm’s website this morning, Guy Beringer, senior partner at Allen & Overy, argues that profits per equity partner (PEP), the standard global measure of law firm success, is a “dangerous and undesirable metric”.

Mr Beringer’s principle objection is that PEP – calculated by dividing a firm’s total profits by its number of equity partners – “ignores the two audiences that determine the success or failure of a law firm: its clients and its people”.

He also claims that PEP statistics are typically based on unaudited figures and that firms adopt a variety of different methods to calculate them but rarely specify which they have used, making comparisons meaningless.

Tony Williams, founder of Jomati, a law firm consultancy, said he agreed with the thrust of Mr Beringer’s argument but warned against dismissing PEP statistics altogether.

“While it’s true that we do not have a single, all encompassing measure of law firm performance that does not mean to say that individual methods such as PEP or revenue per lawyer are redundant. They are far from perfect but they are still useful to give a sense of how firms are doing,” he said.

Mr Beringer also warns that the focus on PEP – encouraged by firms that leak their figures to their press – portrays law as “a profession which is preoccupied with its own narrow financial interests”.

He highlights Allen & Overy, which has recently converted to a limited liability partnership (LLP), as the “principal exception” to this trend. The firm now publishes full, audited accounts after the end of each financial year and Mr Beringer welcomes the prospect of other firms following suit.

The article calls for a “more balanced view in the future” and suggests that PEP be replaced with “measures which take account of sustainable profitability, client satisfaction and staff motivation”.

However, although he outlines a crude method for measuring these aspects of a firm’s performance, Mr Beringer concedes it is unlikely to be adopted “because it is too difficult to chart”.

Mr Williams supported Mr Beringer’s for firms to use performance metrics that take a longer-term view of profitability and include client satisfaction.

“Measures that take into account issues such as whether multinational clients are using the same firm in multiple jurisdictions and that track profit growth over a three to five year period rather than year on year are essential for the industry to keep track of the firms achieving sustainable growth.”

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