Using KPIs Effectively: Is Your Firm Measuring What Matters? (Part 2)

Topics: Billing & Pricing, Client Relations, Corporate Legal, Data Analytics, Key Author, KPIs, Law Firm Profitability, Law Firms, Midsize Law Firms Blog Posts

revenue recovery

The Thomson Reuters’ 2016 State of U.S. Small Law Firms Report released earlier this year showed that small law firms consider client service ratings to be important along with both matter and bottom-line profits. However, in my first blog on the effective use of key performance indicators (KPIs), we discussed the results of a small firm KPI survey where less than 5% of respondents measured client satisfaction.

I believe that happy clients that refer other clients ultimately generate more revenue in any industry; so, in this second blog, we focus on client metrics that will in turn increase your firm’s profits.

A law firm’s clients’ experience should be regarded and measured like any other customer and provider exchange. Not only are law firms of all sizes businesses, but KPIs apply globally, meaning that measurements translate in all countries. In the U.S., law firms tend to focus on inputs or what the firm’s lawyers can do for clients, rather than asking the clients for feedback. Anecdotally, lawyers fear that clients may rate them based on the outcome of their case rather than on the service or experience.


Clients desire polite, timely communication and efficiencies through technology. No one wants a surprise either in terms of outcome or billing.


However, in our daily lives we are often asked to give feedback on our experience when we purchase hotel rooms, flights, shoes and so on. Sometimes, it’s as simple as indicating if you were happy or unhappy with the product or service; but at other times, you’re asked to rate the experience using a numeric scale. At a recent small law conference, I asked an audience of more than 100 attorneys how many had been surveyed for feedback and close to 100% responded positively. I recommend using the client experience metric Net Promoter Score (NPS) because your clients are familiar with this approach.

A NPS survey asks existing or former clients how likely they are to recommend your firm to their friends and family or colleagues, depending on your client base. The answer to that question is a rating on a scale of 1 to 10 with a 10 being extremely likely to recommend. A 9 or 10 is a promoter; a 7 or 8 is neutral, which is ignored in the NPS calculation; and 6 and lower is a detractor.

The survey can be done at the close of an engagement but it not limited to that timing and must not be done anonymously to allow for follow-up. Survey Monkey or Google documents can be used to email the survey, and follow-up can be done by administrative staff. An Excel spreadsheet can track the firms’ results.

In the example below from my book, Small Law Firm KPIs: How to Measure Your Way to Greater Profits, in one month we had 22 responses and the results were 9 promoters, 8 neutrals, and 5 detractors. The calculation is simple math as outlined in the chart below, taking the percentage of promoter responses and subtract the percentage of detractor responses.

KPIs

The NPS in the chart above is 18%, but note that the NPS could be a negative number if you had more detractors than promoters. What does the 18% mean? Some may wish to know how that stacks up against competitors’ results. In research done by survey firm Inavero, the average NPS for the legal industry in 2016 is 23. It’s interesting to note that many think of success as being above 50% or a NPS target of 75% or above. Remembering that you are working with a possible result from negative-100% to positive-100% helps to put the 23 in perspective. However, the number alone may not be enough. Instead, consider asking the client “Why or why not?” along with the NPS survey question.

Collaborating and working well with a client requires soft skills like communication and project management. Clients desire polite, timely communication and efficiencies through technology. No one wants a surprise either in terms of outcome or billing. The NPS survey with the “Why or why not?” follow-up question gives a law firm the opportunity to check how it’s doing and make needed changes based on the feedback. Another complementary measure to NPS is to track the source of your new business by measuring new clients that come from referrals as a percentage of total new clients. It’s easier to either sell additional services to existing clients or potential customers who are referred.

Finally, measuring client experience applies equally to big law, and today several large law firms are gearing up to measure NPS. As mentioned in my first post, these newer KPIs around client experience and client acquisition costs do not require sophisticated technology solutions. My next blog will address KPIs for collections that can improve your firm’s bottom line.