Key Performance Indicators

Understanding How to Keep Your Eye on the Dashboard

Certain performance indicators can provide law firm management with the information necessary to make informed decisions and adjust direction as needed.

But no one number tells the story—instead, the data must be viewed collectively so that you can measure progress toward the firm’s goals. Context is critical.

Stephen Mabey Author

Karen MacKay
Karen MacKay, MBA, CHIC
President, Phoenix-Legal Inc.*

There’s a wide variation among firms in the type and amount of financial information that firm management receives on a monthly basis.

Moving from one extreme to the other, we know of one firm’s management committee receiving so much monthly information it came in a banker’s box and another firm where the managing partner was getting all the information he felt he needed on one page.

Of course, with the advent of computerized accounting and billing systems, most law firms now have far more financial data available to them than ever before.The struggle for most is figuring out which elements of that data firm management should absolutely pay attention to and why.

The answer is to focus on your firm’s key performance indicators, or KPIs.

12 Key Performance Indicators

What is a KPI? It is any measurement or statistic that a law firm tracks that meets all three of the following characteristics:

  • It reflects the firm’s goals.
  • It is seen as key to the firm’s success.
  • It is quantifiable.

The following highlights 12 KPIs that, when viewed collectively, can provide law firm management with the information necessary to make informed decisions about the firm’s financial performance and what adjustments can be made to improve that performance.

First, though, it’s important to note that law firms are as unique as the lawyers who work in them, and different firms will look at different KPIs depending on their current situations and the goals they have set. These 12, however, will be useful starting points at most firms:

  1. Associates-to-Partners is the ratio of associates to partners for the most recent 12 months. It measures leverage, one of the important drivers of firm profitability.


The rest of this article is available in Stephen Mabey's new Book

Book Cover - Leading and Managing a Sustainable Law Firm - Tactics & Strategies for a Rapidly Changing Profession by Stephen Mabey

Available for purchase on BookBaby.

 

 

 

As valuable as they are, KPIs are simply measurable inputs—they are no substitute for considering all information with common sense and good judgment when it comes to the management and leadership of your law firm.

Comments or Questions?

*Co-Author - Karen MacKay was President of Phoenix Legal and worked with law firms in consulting, career counseling and outplacement.

Previously published in Law Pratice April 2010. Copyright © Applied Strategies Inc. & Phoenix-Legal Inc.

Legal Strategy Consultant