More large New Jersey law offices are growing revenue than are growing attorney population, the Law Journal's annual Top 40 survey has found.

Year over year, half of the 40 firms (ordered by fiscal 2017 gross earnings derived from their New Jersey offices) increased revenue, while 16 were down, and four were essentially flat.

Meanwhile, only 13 firms increased attorney head count in New Jersey last fiscal year. Most firms (15) were flat—meaning they had a year-over-year attorney population change of one or none. The remaining 12 firms had a net loss of two or more attorneys in New Jersey, according to the data.

Financially, it's a somewhat less rosy picture than last year's survey, which found that more firms (27) had year-over-year revenue increases in New Jersey.

In fiscal 2017, some firms increased New Jersey revenue by building their lawyer ranks, but as usual, earnings on an individual basis often tell the tale. Simply put, there's a reason why many who work with and observe law firm financial metrics consider revenue per lawyer (RPL) to be a key indicator of firm performance.

There are a few good examples in New Jersey.

Brach Eichler's gross revenue jump in fiscal 2017 came with no real change in the lawyer population. The firm improved its RPL by 4.8 percent—to $566,000 from $540,000.

Managing partner John Fanburg credited a better billing realization rate for the gain, as well as several practices he said have performed well: litigation, personal injury, corporate tax, health care and real estate.

Duane Morris' New Jersey offices fared similarly well. The firm's lawyer population in the state (36) was unchanged in fiscal 2017, though RPL improved 4.3 percent, to $722,000 from $697,000. That led to a 6 percent spike in the Philadelphia-based firm's New Jersey revenue, to $26.5 million.

McCarter & English had a net decrease of four lawyers in New Jersey, to 164, but grew its RPL 8.8 percent, to $702,000, helping yield a 6.5 percent year-over-year bump in New Jersey revenue, to $115.3 million.

Even with the population decrease, McCarter maintains the second-highest population of lawyers in New Jersey, behind McElroy, Deutsch, Mulvaney & Carpenter, which has 170 lawyers in the state.

A few other firms owe their gross revenue bumps to a combination of population growth and holding steady or improving incrementally on RPL.

At Connell Foley, for example, a net gain of two attorneys in New Jersey and a healthy-if-not-huge increase in RPL (by 2.3 percent, to $442,000) meant a 4 percent increase in New Jersey gross, to $51.7 million.

Lowenstein Sandler was something of a unique case. Though it had significantly fewer New Jersey lawyers in fiscal 2017, the firm improved its RPL markedly, and crossed the $1 million mark in the process. Its $1.01 million RPL figure is an 8.2 percent increase over the prior year's $934,000.

Scarinci Hollenbeck had a net gain of five lawyers in New Jersey, to 62, though the Lyndhurst-based firm's RPL decreased 2.3 percent, to $432,000. The net effect is a 6.3 percent increase in New Jersey gross revenue, to $26.8 million.

Managing partner Donald Scarinci said he's not satisfied with the firm's financial performance but credited the environmental, land use, commercial development and intellectual property practices for gains made.

He added that the firm's attorney population growth has been largely organic, with little lateral addition.

“The cost of providing legal services keeps rising, but the fees for those services do[] not,” Scarinci said in an email. “The market continues to be more and more price competitive. … Law firms must think outside of the box in every area, spend time on pricing legal services properly, and focus on quality of life to attract talent.”

Census

Fifteen of the 40 firms (37.5 percent) had a New Jersey population in fiscal 2017 that was actually or essentially flat, though there were some notable population swings among the group.

Some offices grew. Hoagland, Longo, Moran, Dunst & Doukas had a net gain of 16 lawyers in New Jersey, increasing to 104 total. Porzio, Bromberg & Newman gained nine lawyers, increasing to 70 total. And Schenck, Price, Smith & King gained seven lawyers, increasing to 83 total.

Other offices became smaller. Lowenstein Sandler had a net decrease of 16 lawyers in New Jersey, to 139 total. Three firms had a net decrease of seven lawyers: Riker Danzig Scherer Hyland & Perretti (to 134 total), Budd Larner (to 64) and Norris McLaughlin (to 63).

Fanburg said Brach Eichler tries to “hold the line” on attorney population, but is even more careful about staff.

“You can justify hiring a lawyer because you're going to make more money,” he said.

But, “not only do you work to bring in more work, but you've got to manage overhead,” he added. “I've seen law firms really forget about the overhead factor and bring in too many people who don't generate income.”

As for legal work profit margins, firms may be increasingly sensitive to them, but, “no one in this economy is going to turn work away,” Fanburg said.