Data analysis increases profit but also increases productivity

Law firms want to harness data mostly to increase their profitability.  For example, they might want to spot clients that have lower margins (broadly thought of as fee revenue minus full costs of timekeepers) so that they can cull money-losing clients.  Law departments want to harness data mostly to manage (or reduce) their spending.  As an example of that, they might study total costs of budgeted matters compared to similar non-budgeted matters so that they can decide on the best strategy.  For both, money matters.

But a second goal for data analysis in both firms and departments should be to boost productivity.  If a firm handles matters for a department on a fixed fee, productivity increases profitability.  Moreover, you can think of a legal department as a fixed-fee resource (setting aside the variability of external spend), so even more so than in firms productivity gains increase the company’s profitability.  Achieving more with fewer resources (lawyer/paralegal hours or lower cost hours) may well lead to increased profits or decreased spend, but productivity goals are analytically distinguishable.

This realization came from a book review of James Cortada’s, All the Facts (Oxford 2016) in the Times Literary Supplement, Sept. 30, 2016 at 24.  If improved data and analysis enable lawyer and paralegals to accomplish more quickly what previously took longer, their productivity has increased – regardless of the monetary benefits.