My favorite professional sport is Major League Baseball (MLB). Besides watching a pitching duel between two all-star hurlers, the cat-and-mouse antics of base stealing and towering home runs, the most enjoyable aspect of the game is sabermetrics, the empirical analysis of baseball statistics.
Every aspect of a player's in-game performance is continuously measured in the MLB. Collecting and analyzing relevant data from those activities enables coaches and players to predict with certainty the likelihood of specific actions occurring in certain situations. These situations can be particular: they can predict the probability that a left-handed pitcher will throw a curve ball to a right-handed batter with a full count in the ninth inning of a close game with 1 out and a runner on second base.
Every major league team has an analytics department whose job is crunching numbers. The teams that do it well win more than they lose. Sabermetrics has proven so helpful that other sports leagues are now adopting it.
Law firms aren't going to measure an attorney's ability to hit a fastball or turn a 6-4-3 double play, but there are a host of metrics they can use to evaluate progress toward achieving their goals. By tracking and analyzing key performance indicators (KPIs), managing attorneys can gain insight into how the firm is functioning and identify operational strengths and weaknesses.
Hundreds of KPIs contribute to a firm's success, and not all of them have to do with the actual practice of law. When you begin tracking KPIs, accept that you can't follow each one, so focus on KPIs crucial to keeping the doors open and the lights on. Then, once you're comfortable monitoring and analyzing, you can add more KPIs later.
Because different firms have different goals, KPIs will vary. When selecting your firm's KPIs, make sure they meet the following three criteria:
- The KPI is essential to a firm success
- The KPI directly supports firm goals
- The KPI is easily quantifiable
Once you've settled on which KPIs to track and analyze, make certain every member of the firm understands why you are doing it and how their performance as an employee influences KPI trajectories.
Tracking your Law Firm KPIs can be tedious, but Filevine has built-in automation to make Legal Analytics a breeze to create and read smoothly.
Tracking and analyzing KPIs will provide an overall picture of your firm's performance and enable you to make needed course corrections in a timely manner. If success is your goal—and it should be—here are 9 KPIs that your firm needs to be tracking:
1. Client satisfaction
Satisfied clients mean more business and more referrals. The simplest way to measure client feedback is with brief surveys shortly after their particular matter is resolved. The surveys can be online or on the phone and made up of simple questions such as: Rate your level of satisfaction with the firm's service between 1 and 5, and the likelihood of recommending the firm to others.
You should follow up with a phone call to any client that rates your service on the low satisfaction scale. During the call, ask what you could have done better. Clients know what they like from their attorneys. Listening to client suggestions can help you improve operations and increase profitability.
In this new digital age, clients have moved to text as their main form of communication. Text-to-case-file is how many Filevines users gain the feedback of their clients and report a higher satisfaction rate than many other users.
2. Cost per matter
Some clients and legal matters are always going to be more profitable than others. Criminal cases will typically be one-and-done, whereas a corporate client can result in a long-term relationship. Tracking the time spent on each case and the fees generated will help you determine practice areas that need improvement and which areas bring you the best returns financially.
3. Firm profitability
You won't stay in business long if you're not making more than you spend. Therefore, profitability should be tracked over a set time period, typically quarterly and annually. However, I recommend doing it monthly so you can make timely adjustments as needed.
To determine your firm's profits, add up operating expenses for each expertise area of the firm and then subtract that amount from your gross receipts. Expenses will include payroll, utilities, rent or mortgage, travel, entertainment, and any other regular financial outlays such as IT-services or expert witnesses.
Careful tracking of expenses will show you your largest expenses and give you an opportunity to make some money saving adjustments. For example, if travel expenses are too high, hold Zoom meetings when possible.
4. Revenue flow
Measure the time between billing a client for your great service and receiving their check. One unpleasant fact of practicing law is that sometimes clients need to be reminded to make payment—it's more common than not. Tracking the time between invoice and payment enables you to implement procedures that streamline the billing process making it more efficient and timelier.
Ensure clients are aware of billing and payment terms by highlighting them in your retention agreement and include any penalties for late payments.
This is more than advertising on radio, in print and online. Therefore, it's essential to track the total number of marketing actions and the medium in which they occur and compare the cost of each effort against the number of clients signed on.
Websites are especially important in marketing. Site design must make for seamless browsing. Visitors won't stay long on a confusing site. Ensure you're tracking an accurate count of visits to your site, how long they stayed on specific pages, the number of requests for someone to contact them, and the number of clients who sign up for your services with lead tracking and intake by Filevine.
Tracking the work production of every member of the firm is crucial to controlling costs and overall profitability. For attorneys this will include the number of matters managed and resolved successfully, the number of billable hours, the ratio of billable hours compared to non-billable hours worked and additional repeat business from existing clients.
Doing so will enable you to identify the most productive members of the firm and reward them for their performance. You can also determine which team members may need extra training or assistance with Audit Log Activites.
Audit Log Activities help manage your practice with all the data at your fingertips, with in-depth reports. Each activity taken within Filevine is recorded with a date, time, and location. This information is stored for you and helps admins make smarter financial, legal, and staff management decisions.
7. New clients
Having long-term clients is excellent, but the financial lifeblood of thriving practices has always been new clients. This requires interacting with a lot of potential clients. Tracking and analyzing the time and cost of client recruitment along with the type of potential clients that sign up will provide insight on the type of services in which you should specialize.
This also applies to new business from existing clients. If your firm engages in high-value injury litigation, tracking and analyzing clients may indicate a need for estate planning services as well.
8. Active cases
Being busy doesn't always equate with being profitable. Too many open cases can mean a bottleneck somewhere. Tracking and analyzing the type and number of open cases and how long they've been open will help you take steps to streamline case flow. For example, your billing procedures may be lagging, or certain attorneys may need more guidance from above.
9. Employee satisfaction
Successful firms have low employee turnover rates. Attorneys and staff stay because they enjoy their work, appreciate their fellow employees, and feel valued by management.
Solicit employee feedback regularly through brief surveys asking questions about how they enjoy their jobs, particular aspects of the firm culture they appreciate or don't appreciate, anything they would like to see changed, and if they would recommend friends to join the firm. To obtain honest feedback, take care to ensure that all responses are anonymous. If surveys indicate a change is needed in the office, do it quickly.
Another effective way to gauge employee satisfaction is with Stay Interviews. This is where managing attorneys sit down with each member of their practice area to learn what their people like most and least about their jobs and to ask if there are other practice areas they would like to experience. Stay interviews are a great way to develop stay-plans to help retain top performers. These go-getters may enjoy occasional rewards like working from home a couple of days a week or more family-oriented firm events.
Make it easier with case management software.
Case management software can seamlessly track many of the KPIs that build long-term success for law firms. Rather than adding in the additional work of data entry and spreadsheet design and maintenance, you can automatically pull information from your case files to keep your KPIs fresh and accurate.
KPIs will help your firm hit legal home runs. They are a proven method for providing managing attorneys with accurate data and knowledge in a timely manner and can assist each member of the firm in understanding and appreciating their roles and contributions to the firm's long-term success.