Key Performance Indicators Revisited

I have been told, and if recent inquiries are any indication, there has been a resurgence in the interest in Key Performance Indicators ("KPIs") among solo practitioners and small law firms.

Any discussion of KPI should start with a word of caution - KPIs are simply tools - they are no substitute for the use of common sense and good judgment when it comes to the management of your law practice or firm.

Successful practices and firms constantly seek a balance between the business and people. By advocating the use of KPIs I am not suggesting that all that counts in a law practice or firm can be counted but rather what gets measured is what gets done.

Before exploring some simple but effective KPIs it is important to understand what is required to make a particular calculation or ratio a KPI.

The number being measured should meet the following three criteria to qualify as a KPI:

It must reflect the practitioner or firm's strategy and goals; It must be key to their success; and It has to be quantifiable. As a result, just because a colleague or their firm utilizes KPIs that you do not, doesn't mean that you are managing badly. The importance practices or firms place on specific KPIs will change over time as they move along their individual evolutionary track.

Context is critical to the effective use of KPIs. For many the only benchmark they have is their own past experience. Unfortunately, access to benchmarking data in the legal profession is limited. This is particularly true in Canada, especially for solo practitioners and small firms. As a result, in order to have some context they must overcome their reluctance to compare themselves to US practices and firms of similar size.

The KPIs identified in the remainder of this article have been grouped into the following three categories:

Business Development / Marketing Production Financial The following sample of KPIs are not meant to be all inclusive and is sensitive to the data readily available from accounting systems frequently used by practitioners and small firms.

Business Development / Marketing

Typically KPIs have focused predominately on the productivity and financial aspects of law firms. Practitioners and firms continue to explore business development / marketing KPIs to understand what will have the most meaning for them.

Client Growth Rate - the ratio of the number of clients that the practice or firm handled its first matter for in the past 12 months to the total number of active...