It May Be More Than a Pond, After All

Sometimes it's not the worst thing to confess bafflement—OK, perhaps "bafflement," which implies total cluelessness, is too strong, but I will at least cop a plea to not being confident how to truly explain something.  That something is, as Legal Week reports, "the growing financial chasm between US and UK firms."

Occasion for this attention-getting generalization is their annual compilation of results for the top 50 firms in each market.  Here's the story:

One explanatory hypothesis for this is simply that the domestic US legal market is so much larger than the domestic UK market.  But that explanation would be, as they say, "obvious, simple, and wrong."  Baseline market size explains nothing about the remarkably different growth rates in revenue and PPP.  Moreover, a substantial portion of the revenue of both "top 50" groups comes from outside their domestic market.  As the chairman of Hogan & Hartson put it ("burying the lead," as it were, which is that US firms are outpacing UK firms where both are on foreign soil):

"US firms also are continuing to grow stronger in the European and Asian markets, which I expect will bode well for us in the future as we compete for the best work and the best people."

The annual 2005 Chambers Awards, at least impressionistically, confirm this.  For example, 5 of the top 9 Chambers firms in France are American but 0 are UK, and 4 of the top 9 in Germany are US but only 1 UK.  More tellingly, among "Top Western European Firms" by practice area, there is a fair degree of representation of US-based firms across the board, whereas among "Top USA Firms" by practice area, there are zero foreign-based firms.

Another possible hypothesis is that Americans are just plain more entrepreneurial, more competitive, more venturesome and superior risk-takers.  Aside from the (to me) obnoxious, self-congratulatory hokum at the core of this theory is that it's tautological and has, again, no explanatory power.  It amounts to:  "The better businesspeople are better businesspeople."  I wish I'd thought of that.

How about this instead:  When a firm with the clear American tilt towards eat-what-you-kill compensation goes up against a firm with the UK's tilt towards lockstep, it turns out that incentives do matter and the US partners battle longer and harder to win the business.  Now we might actually be getting somewhere.  Unfortunately, as I've written elsewhere, lockstep can have tremendous virtues and be "just what the doctor ordered" for firms powered by collaborative and collegial cultures.

Still, numbers don't lie.  Something real is going on here, it has been for awhile, and if anything it's only accelerating.  It's reader participation time:  Any ideas out there? 

Email me; we'll wrestle this to the ground together—because I'm not happy where we are.