"Profitability data" refers to information or statistics that show how profitable a business or company is. It helps analyze how well a company is performing financially, including factors such as revenue, expenses, and overall profit.
Full definition
Part 3 describes cautions to be considered in taking action based
on profitability data and sharing this sensitive data more widely within the firm.
Having the capability to generate quality
client profitability data and the ability to use these data to support meaningful change in an organization are two entirely different processes.
This Part 3 describes cautions to be considered in taking action based
on profitability data and sharing this sensitive data more widely within the firm.
Concerns that partners at large may not consider these issues could lead a law firm leader to err on the side of
maintaining profitability data within a small circle of senior management, or exposing it only in the context of a formal presentation that includes the relevant explanations.
What I am recommending is that
client profitability data, rates, staffing mix, costs per hour and overhead structure be used to expand the options a firm has for improving profits.By thoughtfully considering all of the elements of profitability, law firms have a better chance at operating in step with the market.
Most importantly,
profitability data should be used in compensation setting only after everyone has had a chance to learn it and manage to it... not on day 1.
Profitability data is a tool that requires a management time commitment to utilize effectively.
Most important is that a method be selected that is rational and will be accepted by the lawyers who view
the profitability data (to the extent the data will be shared with others besides the firm's chairman).
Part 3 will describe cautions to be considered in taking action based on
profitability data and sharing this sensitive data more widely within the firm.
Client
profitability data are used in several ways including:
Gather and present data for business analysis such as sales, demographic, and
profitability data.