My article on Matter Profitability published by ABA
My article on Matter Profitability was recently published in the American Bar Association's monthly e-zine for law practice matters. Here is the link: "Matter Profitability" in Law Practice Today.
A common metric for measuring financial success of a matter in large and
medium-size law firms is realization rate (the percentage of standard rate fees actually collected, after discounts and write-offs). My article explains why profitability of the matter is a far better metric, and describes how it is calculated.
The article also addresses in some detail the critical issue of expense allocation in calculating matter profitability - and how allocation issues can be managed to retain the credibility of the matter profitability metric within the firm.
The article concludes by exploring whether partner compensation should be linked to profitability instead of realization (aka origination credits) and realization rate.