Law Firms Trim Their Ranks to Boost Profits

In boom times, law firms bill tons of hours advising companies on mergers and acquisitions. When things go bust, they rake in fees presented by bankruptcies, reorganizations, and shareholder lawsuits. Yet the billable-hours set was hit especially hard by the crash of 2008 and is only now recovering. Profits per partner (PPP, the industry's generally accepted bottom-line metric) jumped 8.4 percent last year, according to 's 2011 Am Law 100 report, which tracks law firms' financial performance. That came after a flat 2009 and a 4.3 percent drop in 2008.

Law firms' fortunes rose last year in part because of the economic recovery, which allowed firms to bill more hours and discount fees less. What's most notable in the data is the extent to which firms drove profitability by cutting head count—even expensive, but historically untouchable, partners.