Ask Dr. Paola: Knowing What and How to Measure is Vital in Creating Incentives for Lawyers

Topics: Data Analytics, Efficiency, Law Firm Profitability, Law Firms, Leadership, Legal Innovation

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The Legal Executive Institute blog is honored to be working with Dr. Paola Cecchi-Dimeglio, a behavioral economist and senior research fellow for Harvard Law School’s Center on the Legal Profession and the Harvard Kennedy School, on a monthly column. Each month, Dr. Cecchi-Dimeglio will be answering questions about how law firms and legal service firms can navigate a dramatically changing legal environment using data analytics and behavioral science. (You can follow her on twitter at @HLSPaola.)

On to this month’s question…

Ask Dr. Paola: What’s the most important ingredient in creating incentives for my lawyers?

Dr. Cecchi-Dimeglio: We get this type of question a lot, and it mostly centers on how you frame what you want to achieve. Many legal leaders will say they want to “make their lawyers more efficient” — but that’s much too broad a scope.

You have to ask yourself, by what are you measuring success? What is the definition you have about performance? What are the levels in which you will assess performance to determine if it’s above and beyond what you are expecting?

But to begin with, the variable and the measurement is everything — it is absolutely everything. So, when someone tells me, “We want to increase performance.” I’m like, “Hold on a moment. What do you mean by performance? What is your idea of performance?”

Because you will be surprised that the notion of performance across different law firms are very different. Some of them may measure performance in the notion of billing. Others may measure it in the notion of team efficiency. Still others may measure it in terms of people not leaving the organization, or it can be a mix of the above. So, there is a lot that goes into what is considered “performance” for an organization.

Dr. Paola Cecchi-Dimeglio

When you want to implement a “nudge” or incentive as we’ve described it, to move people toward a positive direction, you always are making an assessment and it comes from a deep understanding of what the firm says it wants and how willing it is to move itself in that direction — all of that has to be informed by the data.

And there is also another element that you need to consider when you design a nudge: the type of population that you’re designing the nudge for. You may not have the same incentive or nudge that applies to everybody, and you know that there are some people who are more likely to respond to it than others.

For example, one type of nudge which is often very successful are those that relate to the health of individual employees. This one was related to the complaint of newer employees that they had less time overall to do things they cared about, including working out.

Now, that may not seem like a large issue, but if you look at it as to how it relates to new employees feeling that they’re losing themselves because they are working at your firm, you can see the importance of it. In this case, there was this job tension; and so we created a series of incentives, including one where the employer offered some sort of health club membership or in-house workout space that would benefit the individual and eventually benefit the team.

These are what the nudges, properly designed and implemented, can do once the firm — working with experts — determines what it means by “improving performance” and also determines what can be measured and in what way. Overall, it’s about impacting your employees’ behavior and about changing their engagement, changing how they perform, changing the way they perceive you as an employer, and changing the likelihood of them remaining with you.

Also, and I think we have to repeat this many times: Nudging and changing an organization cannot be done simply with people who are internal with your organization. You need to bring in specialist to properly do this.

There is no silver bullet — let’s be clear on that. But there is one thing that is constant about the work myself and others are doing, and that is the methodology we are applying. We know exactly when we are at risk of triggering a false measure, and that’s the danger when people decide to do that on their own.