In a new white paper entitled, “Using KPIs Effectively: Is Your Firm Measuring What Matters?” by Mary Juetten, founder and CEO of Traklight and co-founder of EvolveLaw, the author makes her strong case that running a law firm, at its core, is a business and therefore, measurement is critical for success. And key performance indicators (KPIs) are universal and apply to the legal profession regardless of firm size.
Breaking from traditional KPIs that focus on the lawyers’ input or time metrics, the author argues that “measurement should start with the client and also zero in on collections” rather than only hours. The main reason for business failure is a lack of cash, she explains, which is caused by a shortage of clients, poor billing and collections results, or a combination of both.
As Juetten points out, some of these concepts surrounding KPIs and metric measurements are new to the legal industry, but not to in-house counsel or consumers, who see KPIs used in their business and everyday lives.
Satisfied clients increase revenue but many firms still fail because they do not pay attention to
the business of timekeeping and billings. Recording hours, billings, collections, and cash flow are all critical to business and therefore, to a firm’s survival. Now, I would like to focus on KPIs around collections that could increase your firm’s profitability.
Small law firms consider both matter and bottom-line profits to be important… [and] the majority of firms surveyed on KPIs rely on bank balances or take-home dollars at the end of the month to measure profitability. Based on this information, I infer that a majority of firms are looking backwards when it comes to results.