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Matter Profitability: When Metrics Mislead

By Steven Campbell
November 29, 2005

Law firms often mislead themselves when they draw conclusions about profitability based on individual metrics without adequately considering how the metrics interrelate. In particular, isolated improvement of one or more measures may impair rather than improve the net contribution of a matter and therefore partner and firm profitability.

Profitability Factors

The well-known DuPont formula to determine return on equity was adapted by David Maister for professional services firms in his 1993 book Managing the Professional Service Firm. In Maister's formula:

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