Listen to this post:
Everything seemingly is on track at your law firm. Everyone is busy. There is cash in the bank, and it looks like a good year in the making. Then, your best associate stops by to tell you she has found a better opportunity with another firm and is leaving. As you process that news, you notice an email from a good client indicating that they are very unhappy with the firm’s responsiveness and have decided to reassign some cases to another firm. If that isn’t enough, the firm accountant sends an apology that there was a mistake in the checking account balance, and you need to draw on the credit line to make payroll.
Your perfect day just turned into a nightmare. While most law firm managing partners don’t receive this triple dose of bad news in one day, problems in one area usually indicate issues in others. Having systems in place to detect the problems in time to address them is what every managing partner needs, but few have.
It is much easier for someone to help you build a system if you provide an example of the expected finished product. But what if you don’t know what you need well enough to make a model?
In this instance, here is an excellent start for a minimum viable product (MVP) managing partner’s dashboard.
Nothing derails a law firm faster than running out of cash. Most of the time, it is avoidable. Managing these metrics will help make sure you always have money.
Cash and Cash Flows
- Cash report
- Outstanding Checks
- Large disbursements pending
- 13-week cash forecast
- Working capital needs
AR-WIP (Accounts receivable and work in progress)
- Invoices due and not due yet
- Aged Accounts Receivable and expected payment dates
- Work in progress by age and expected bill dates
- Cash advances for client expenses
PRODUCTION AND PROFITABILITY
Understanding the drivers of profitability helps ensure the long-term success of the firm. These metrics will help identify potential trouble spots in the future. The nature of these KPIs includes trendlines and forecasts.
- Hours, dollars, billings, collections
- Projected production and billings
- Timekeeper profitability
- Income and expenses
- Case count
In addition to the cash flow metrics, a contingent fee firm may benefit from metrics similar to these:
- New clients by referral source
- Total active clients
- Demands made week/month
- Suits filed
- Settlements client and lawyer
- Cases going to trial
- Average fees per case
- Income and Expenses
CLIENT SERVICE METRICS
In most law firms, client service is the sole responsibility of the originating lawyers or lawyers managing clients or cases. Taking an enterprise view of client service is necessary to ensure consistency and to reduce blind spots. Here are some key metrics:
- Average case cycle time
- Case evaluation vs. outcome
- Client satisfaction
- Average FTE count and staffing mix by client/ matter
- Deadline adherence
- Client reporting frequency
How are the people doing?
Most firms struggle mightily in this area. When considering the short- and long-term turnover costs, we suggest tracking the following metrics designed to ensure that you don’t ignore critical aspects of the employee experience.
- Anniversary dates and raise history
- Last practice plan meeting
- Last formal feedback meeting
- Evaluation status
- Career path progress
Managing the firm’s marketing effort is beyond what individual attorneys do to get and keep business. Most law firms do not centralize marketing efforts, and the following indicators can help you stay on top of your firm’s business pipeline.
- Prospects and prospect conversion rate
- New clients vs. lost clients
- Client acquisition and retention cost
- Digital marketing analytics (website, search, social media, advertising)
- Client source breakdown
- Marketing hours by attorney
In all likelihood, your firm will not have all of the necessary data organized in a way that you can mine it. When building out your dashboard, start with a couple of key metrics from each area and build as your systems improve. If your initial project is too ambitious, it will likely stall, and you will end up frustrated. Remember that a continuous improvement process and progress will come in increments.
PerformLaw provides law firms with the help they need to build a great law firm. For nearly two decades, Perform Law has guided law firm leaders and managers in their efforts to create great systems, processes, and tools. If you would benefit from experienced and knowledgeable performance management support, here is a link to schedule a no-obligation call with us.
Brian Kennel, PerformLaw email@example.com 504-858-7424
Jan Sander, PerformLaw firstname.lastname@example.org 919-455-3905