"There are two key questions every firm that we've worked with has wanted to answer... The first, "What work have we accomplished in a set time period?" And the second, "Are we getting paid for that work in a timely way?”- Kate Eberle, Director of Consulting
To drive growth and profitability, companies need to know their numbers. But which numbers? Regardless of industry, every company needs a firm grip on core metrics such as Profit and Loss (P&L), Accounts Receivable (AR), and Days Sales Outstanding (DSO). But for specific industries, choosing the metrics that advance your model can be the difference between top and mediocre performance.
For example, manufacturing companies measure Overall Equipment Effectiveness (OEE) and Cost of Goods Sold (COGS), while healthcare companies track Patient Wait Time and Provider Utilization. By being selective about which metrics to track, leaders can motivate behavioral change and focus their team’s energy on the activities most critical to advancing the value creation plan. (Change management expert Dain Johnson discusses this topic in depth in an Expert Insight Series interview.)
KPIs for the Legal Industry
In our work with some of the nation’s largest law firms, we've found a core group of metrics that drive organizational accountability and productivity. They include:
- Work in Progress (WIP) - What work is complete and unbilled/unpaid?
- Ratio of Paralegals to Associates and Partners - Are we applying our resources efficiently?
- Productivity (Activity by Associate) - Is the team managing cases in a timely manner? What will bonus payouts be?
- Matter Management - Can we analyze performance by office, practice group, and client over specific time periods?
- Diversity, Equity and Inclusion (DEI) - Are we proactively managing and creating an inclusive culture that advances the firm's mission?
- Case Mix and Pro Bono Work - How can we optimize and promote our case mix to improve our ranking and attract new clients and attorneys?
For further listening/reading:
- The Dashboard Effect Podcast
- How to Succeed with BI: Aligning on Metrics
- Change Management and the Power of Data for Distributed Decision Making
Brick Thompson: 0:03
Welcome to the Dashboard Effect Podcast. I'm Brick Thompson. And today I have Kate Eberle back with me, our director of our consulting group. Good to have you back, Kate.
Kate Eberle: 0:14
Nice to be here, Brick.
Brick Thompson: 0:15
So what are we talking about today?
Kate Eberle: 0:18
Today, we're going to hit on really industry specific measures. So those measures that are not just what you're tracking in your P&L, but what metrics might the legal industry in particular want to look at, that's different than other companies?
Brick Thompson: 0:31
Yeah, okay, good. So most companies have a set of base metrics that are going to be the same, you know, around profit and loss and accounts receivable, and DSO and various things like that. But as you get into different industries, there do tend to be specific metrics that will be common to those industries, although different companies will have variations on a theme.
Kate Eberle: 0:56
Yeah, I think the the goal of these, really what's going to be a series of conversations, hopefully, is to really explore what are those commonalities? What, if you're in a manufacturing company, in a legal firm, what should you be considering as a starting point if you're just embarking on your your BI journey?
Brick Thompson: 1:12
Yeah. Why don't we start with what we mean, by the term metrics? What are we talking about when we say metrics?
Kate Eberle: 1:19
Yeah, so it's, I think there are a lot of different ways that you can say metrics, metrics, measures, .key performance indicators. Really what we're talking about is a quantifiable way to track progress toward some sort of higher level objective. That might be expanding your sales base, organically growing your markets, maybe in the legal industry, that's focusing on something like attorney performance. Really a quantifiable way to see if rather than just trusting your gut, you're on track towards accomplishing your goals. Unsurprisingly, around here, we're big fans of the book Measure What Matters. And really, it's that progression of okay, what are your high level strategic goals? What are your objectives underneath that? And how are you going to know if you're accomplishing your objectives? That's your metric.
Brick Thompson: 2:02
Yeah, the metric or the measure is the thing that tells you whether you're hitting that objective.
Kate Eberle: 2:07
Brick Thompson: 2:08
Great. Or the key result. Yeah. Okay. You know, I think one of the things that happens is that people can think of lots of different metrics for their company. And sometimes you can sort of lose the thread by having too many. Do you have an idea about sort of what the right number of measures to have on a single report might be?
Kate Eberle: 2:32
You know, when you're looking at dashboards, certainly summary level dashboards that you're trying to use at either an executive or management level, really, less is more. So certainly there, I think we've just experienced this, relooking in our dashboards. Twenty measures? That's too many data points. You wouldn't drive a car with twenty.
Brick Thompson: 2:50
Yeah, I mean, you might want to refer to some of the more obscure ones now and then, but it's not the thing that you're gonna be sort of managing day to day on, necessarily,
Kate Eberle: 2:59
Right. So using that car image, again, where "dashboard" comes from, probably that seven to eight key indicators or key metrics is probably what you're looking for on the typical dashboard.
Brick Thompson: 3:10
Yeah, I agree with that. Okay, good. So let's talk about measures in the legal industry. And let's, let's sort of skip the ones that are more common to any business, any for profit business, and just focus just on illegal industry. And just to sort of give a little context, we've done work for some of the country's biggest law firms. And even though they can be very different in how they approach business, there's a lot of commonality. And so we're going to talk about the common metrics and measures that we run into.
Kate Eberle: 3:45
Yeah, and I think to start off with, there are two key questions every firm that we've worked with has wanted to answer, if not right off the start, somewhere within the first three months of our engagements. The first, "What work have we accomplished in a set time period?" And the second, "Are we getting paid for that work in a timely way?"
Brick Thompson: 4:05
Yeah. And is this WIP? Are you talking about work in progress, like work that's been done, but we haven't billed for? Is that one of the key ones?
Kate Eberle: 4:12
Yeah, so work in progress. That's exactly it. When we're looking at legal firms, what that typically means is okay, what matters has a timekeeper logged their time to so that they can charge those billable hours. The other key piece is accounts receivable. So here we're getting ready to move into Q4. A lot of times for firms that's the end of your wrap-up. The billing and collections team, the billing of responsible timekeepers, it's a very busy time of year as they're trying to get together and really collect on everything that's been billed throughout the course of the previous three quarters.
Brick Thompson: 4:43
Yeah, okay. Makes sense. So what work have we done that we haven't charged for been paid for? Applies to a lot industries but definitely in legal this comes up. This is a big one. What's the next one?
Kate Eberle: 4:56
So really, it's what else, it's actually what more. So when you're looking at WIP, traditionally, legal ERP systems require a lot of very manual extraction processes to get to that data. So imagine your typical lawyer, their associate level lawyer. They're not going to spend too much of their highly valuable time in the day going and engaging with legal ERP systems to figure out how they're doing in the course of the year. And their management probably isn't doing that either.
Brick Thompson: 5:26
Yeah, although, I mean, I know in the legal world, a lot of times pay and bonuses will be tied to, you know, how much of your year was billable, and so on. So it's really important to get to. Someone is digging through and figuring that out.
Kate Eberle: 5:41
Yeah, and so the faster, the easier, you can make it for associates, attorneys who are actually doing the work, so the working timekeepers to get to their data, the faster it can be for them to get back to actually doing the work, proactively working on matters and really driving their performance to align with firm level goals.
Brick Thompson: 5:58
Yeah, and, you know, obviously, this data is available in the legal ERP system, the system they're using to track matters and clients and WIP and all that stuff. But exposing that to individual attorneys and to you know, the more senior partners can be really helpful too for people to know where they stand and what they need to do, that type of thing.
Kate Eberle: 6:22
Yeah, and I think foundationally if a firm has a legal ERP system to start... So we've encountered Aderant, 3E or Elite, and a number of circumstances, that's a great foundation. The data is organized pretty well, but it's not optimized for reporting and getting to quickly. We have worked with a couple of firms that have had more homegrown solutions, but really the the same foundations are in place. You want to make it as fast and as seamless for attorneys to get access to their performance data as possible.
Brick Thompson: 6:51
What are some of the other areas that you're going to want to track KPIs and metrics in?
Kate Eberle: 6:57
Yeah, so I think if a firm has a good foundation as it relates to what's been worked, are you getting paid in a timely manner for that work? Then I think you can start to expand the lens a little bit to really looking at metrics around bonuses, which are very motivating, obviously, are partners and working timekeepers receiving those bonuses aligned with what they think they should be based on their productivity. Are you managing your matters effectively? So staying within budget, are you actually spreading the rates in a really effective way with the right blend of paralegals to associates to more senior associates and partners? And then subsequently, what are you getting from a detailed perspective? Are you able to look at data by different offices or practice groups, even over different timeframes? That's a lot of the nuance that, once you have the foundation of, How are we doing today," you can really start to dig in and get really rich data around.
Brick Thompson: 7:51
Yeah, and I'm sure the same thing applies to digging into individual clients. I mean, some of the clients are huge. There are tens of matters going on at any given time. So being able to slice and dice that how you want to can be helpful, I'm sure, in that management.
Kate Eberle: 8:07
Yeah, I think more and more clients are seeking that sort of proactive data and proactive reporting from firms. So generally, your client satisfaction is going to improve if they see active results on on what's been worked on for them over a certain period.
Brick Thompson: 8:23
Yeah. Okay. What else?
Kate Eberle: 8:25
I think expanding the view even more. So those things that really if you've got good reporting for the working timekeeper, responsible billing, your paralegals, you have a good handle on bonuses with good ways to slice and dice. Next, I mean, I think a lot of the firms we've worked with, diversity, equity and inclusion reporting is really important. So finding that focus so you can proactively manage and make sure that you're creating an inclusive culture that's really advancing what you're trying to accomplish as a firm. That's something that we're starting to see a lot of as another area for metrics, and also being able to promote the pro bono work that a firm is doing, that case mix that it's taking on. I think that's the next horizon as it relates to legal metrics.
Brick Thompson: 9:08
Yeah, those are good. I'm sure those impact firm rankings and your ability to recruit new attorneys and get new clients, that type of thing. So yeah, interesting. Okay, what else do we want to discuss here?
Kate Eberle: 9:21
You know, I think that really covers it for today. We know there's a pretty big movement within legal IT to really move into the 21st century. There's just a huge opportunity with just a couple core reporting areas and metrics to advance your firm pretty rapidly.
Brick Thompson: 9:39
Yeah, I think what I know of some of our legal customers that's been really sort of impactful and made huge change for them, is just being able to put this data at the fingertips of all of the timekeepers and people managing timekeepers. Some of them haven't had that. It's been hard. They get sort of static reports, Excel sheets, you know, outputs, that they can't really interact with and slice and dice. I think another big one is also just the management of the data in terms of governance. So you know, Row Level Security so you're only seeing data on your matters or on your clients, those types of things. Those are the types of things that really supercharge this.
Kate Eberle: 10:25
Oh, absolutely. I think Row Level Security and following those hierarchies is really important in legal so you have one responsible timekeeper overseeing a group of associates and paralegals. Making sure that those associates only see their data is actually very pivotal in this field.
Brick Thompson: 10:42
Yeah. Okay. Well, good discussion. I know we wanted to just kind of cover this at a high level. I think we've done that. Seems like we could come back and do a longer podcast on this at some point. But what I've enjoyed the education here and look forward to talking to you again soon.
Kate Eberle: 10:59
Thanks, Brick. Same
Brick Thompson: 11:00
Alright, see ya.