Law firms accumulate and hold a tremendous amount of data, but the majority have limited access to this information. With the help of technology, firms are unlocking deep insights about their practices to improve client outcomes, maximize staff efficiency and financial performance, and grow and scale like never before.
By using technology to streamline your firm’s business processes, you can easily enable firm leaders to access the data needed to improve operations, business development, intake, performance and efficiencies, and client satisfaction.
Key Performance Indicators
As the old saying goes, you cannot manage what you do not measure. To understand your firm’s performance, it is essential to collect data on Key Performance Indicators (KPIs). Firm KPIs can be very specific, based on the characteristics of the type of practice, and should objectively measure what is important. There is no one-size-fits-all list of KPIs, rather, the most valuable KPIs are designed specifically for the individual firm so as to truly paint a picture of how the firm is performing.
Litify has considered the KPIs firms need most to offer an integrated data visualization application that makes your data work for you. Here, we offer four common types of KPIs law firms should track.
1. Firm Operations
Do you know the cost associated with acquiring a new client? Marketing, pitching work, intake processes, and consultations all involve monetary and time expenses and in legal, time is literally money. Developing a deep understanding of what matters are worth and what time and budgetary expenses are involved with bringing in work can result in significant gains for your firm.
Does your firm regularly bill? Do you end up haggling with clients over fees and end up reducing your fee regularly? What is your firm’s realization rate? Billing is among every lawyer’s least favorite tasks, but if it’s a particularly painful process for your firm, it’s important to understand why.
By identifying KPIs that focus on specific data points such as billable hours per timekeeper, billing rates, staffing ratios and leverage, cost recovery, percentage of hours by attorney role (e.g., partner or associate), you can gain a more accurate understanding of your firm’s operation performance and identify areas to improve. Without this key data, finding solutions to problems is nothing more than a guess-and-check process. The right data can help to pinpoint a problem, identify solutions, and track how changes might be improving outcomes.
2. Business Development and Intake
Efficiently and effectively bringing in new clients is essential for every firm. Developing KPIs that provide insight into what matters best fit your practice can help firms establish a strategy for pursuing new work and engaging the most valuable clients.
KPIs can track the cost of marketing and business development per client. Other KPIs can track client growth (top-end client growth year-to-year), cross-selling opportunities (practice area utilization within the firm), and active clients, year-to-year.
For some firms, developing a clear picture of who to engage can be critical. Using KPIs that track billing and outcomes (e.g., damages awards), a firm can develop a profile of a profitable matter and use this profile when deciding on which clients to take on during the intake process.
Leveraging a tool like Litify’s intake app, which captures data about your firm’s client intake pipeline, can provide key data related to the types of matters your firm is taking on. The app can integrate with lead generators to provide insight into the effectiveness of these services and help firms identify where their most valuable leads are coming from. Litify’s intake app also includes a case qualifying scale, which determines during the intake process if the matter meets the specific qualifying criteria, and it also uses data collected from past matters to help firms determine the quality of a specific matter and whether or not it isis worth taking on. This can save a significant amount of time and money for the firm in the future.
3. Performance and Efficiencies
Delivering effective legal services is not just important for the client, but also to the firm’s bottom line. Delivering quality services inefficiently hurts the firm, while delivering low-quality services quickly puts clients and the firm at risk. Measuring firm performance with the right set of KPIs can help firms deliver services better, faster, and cheaper.
For example, KPIs focused on matter outcomes can track the time it takes, on average, to resolve certain types of matters. Over time, tracking this data may reveal that some matters are not worth taking on as they require significant time and are not cost-effective for the firm’s business model. This same data may help firm leaders identify practitioners who take significantly longer than others to resolve certain types of matters, and can address issues that may be causing these delays.
All firms should also consider including KPIs focused on work product quality. Leaders can use this data to improve client outcomes, identify efficiency gains, better evaluate technology solutions, improve profit margins, and identify practitioner strengths and weaknesses, among many other purposes.
4. Client Satisfaction
Client satisfaction KPIs can provide a window into how your firm is perceived by your current and prospective clients. Maintaining quality relationships with clients is a priority for every firm, but developing data around what clients think about the client experience—things like your firm’s responsiveness, attentiveness to client issues, and whether or not you are meeting your clients’ expectations—can help identify areas where your firm can improve relationships and better serve clients. Learning about your clients’ needs and desires can open up opportunities to engage in new ways, allowing your firm to deepen your relationship with them by identifying or anticipating issues, and potentially obtaining additional work through cross-selling opportunities.
Identify KPIs specific to your firm
The suggestions for KPIs discussed here are not meant to be exhaustive, but rather to help generate ideas for what firms need to consider. Many of these data points are universally important for every law firm to track, but some of the most important KPIs are unique to each firm.
To get to this layer of firm-specific KPIs, firms should look at the data they presently collect and use these data points as an initial guide to what is important. From there, identify what else should be tracked.
For many firms, where the data is housed could be an initial barrier to implementing KPIs. Data scattered in many places, for example, inhibits a firm’s opportunity to leverage the information they have. As a fully customizable platform, Litify is designed to allow firms to focus on client work, while it collects data throughout the entire life-cycle of each case. Litify provides a single practice management platform, allowing lawyers to view all of their KPIs in one central location.
Any KPI development plan should include identification of benchmarking data. This can be internal data (e.g., the first month or quarter of data collected) or can come from external sources (e.g., the ABA, bar associations, and other legal associations). It is important to identify this benchmark data early on so that as new data from KPIs becomes available, reasoned comparisons can be made. Like other parts of the KPI development process, the benchmark data may not be perfect, especially at the outset of the project, but will improve over time as more KPI data is added to the dataset.
Dashboards and Visualization
Today, attorneys have access to tools that help them identify trends in merger deal terms, spot patterns in a specific judge’s rulings, and even evaluate the quality of a law firm’s court filings. But few tools offer a window into a firm’s own operations.
Humans are by nature visual beings and can more easily perceive differences in size than discern what data in a spreadsheet might indicate. For this reason, Litify has established a suite of visualization tools within each of its apps. The Insight app has customizable dashboards and powerful reporting functions designed to provide firms with the tools they need to understand their performance quickly and easily.
For firms, the hardest part of developing a data-driven business approach is determining what to measure in the first place. To start, consider the four types of KPIs listed above: firm operations, performance and efficiency, business development, and client satisfaction. But also, think about which KPIs paint the most accurate picture of your firm. It is important to remember that this initial set of KPIs does not need to be perfect. In fact, KPIs will evolve as firm managers develop a deeper understanding of how the firm is performing and action is taken to address areas of concern and grow areas of strength.
More critical than the KPIs themselves is what action is done once firm leaders have these insights in hand. Litify’s apps are ready to help your firm organize your practice and matter life-cycle from beginning to end, harnessing your data to efficiently make informed, data-driven decisions for your firm.
Talk with us today to learn more about how Litify is uniquely positioned to help you track and leverage your firm’s KPIs.