Key Performance Indicators - An Introductory Guide

Introduction

Law firms of all sizes should calculate and track indicators of their performance and health. The most successful firms use these indicators to assist in making important business like decisions, in motivating and aligning behavior, and in adjusting to the new realities.

The challenge is to identify those specific indicators that are critical to the short, medium and long term success of your individual firm and then focus on them. Throughout this guide we will refer to this subset of critical indicators as key performance indicators ("KPI").

A couple of important contextual points:

It is unlikely that any firm will use all of the KPI identified in this guide; and The importance firms place on specific KPI will change over time as they move along their individual evolutionary track. The list of KPI identified in the remaining pages is not intended to be exhaustive but rather as collection of common and not so common KPI that firms are and will be using over time. The KPI identified in this guide are broken down into the following three categories:

Marketing Productivity Financial A word of caution - KPI is simply a tool - they are no substitute for the use of common sense and good judgment when it comes to the management of your law firm.

What Makes an Indicator a KPI?

Indicators should meet the following three criteria to qualify as a KPI for your firm:

1. It must reflect the firm's strategy and goals;

2. It must be key to the firm's success; and

3. It has to be quantifiable

Your firm's strategic focus will impact its selection of KPI. For example:

Transaction-focused firms will undoubtedly have different KPI than relationship-focused firms; Billable hour driven firms have different KPI than tariff driven firms; and Firms at a growth stage in their lifecycle will have different KPI than firms at a succession or regrowth stage. In this guide we have included KPI that apply to a range of "strategic focuses".

The fact that in a tariff focused firm the billable hours per lawyer would not be as relevant as the number of matters per lawyer demonstrates the importance of the first two criteria in defining which indicators are KPI to it.

The author is not suggesting that all that counts in a law firm can be counted but rather what gets measured is what gets done. Therefore, if an indicator is not quantifiable, it is not likely that it will be incorporated into your firm's decision making process which may in fact cause issues to go...