The Problem With PEP

Bruce MacEwan has an interesting post on the problems with PEP (profits per equity partner) as a measure of firm success. He argues that in a perverse way, focusing on PEP ignores two important constituencies : clients and everyone who is not an equity partner.

From a career perspective, looking too closely at PEP can blind you to bigger issues (Do you like your colleagues? Do you like coming to work every day? Do you like the work you are doing? PEP may be high but is the firm building a secure future?) It also leaves out the whole analysis of your likelihood of remaining an equity partner (to wit, the recent news that Mayer Brown has voted to de-equitize 45 partners.)

PEP that is stagnating, can be a sign that a firm is stagnating. My colleague Pete Smith warned about this here. But focusing too much on PEP in evaluating a firm’s success is like focusing solely on who is paying the largest salary (as I warned about here.)

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