As a lawyer, you’re an expert on the practice of law, but are you taking the time to track what’s important when it comes to guiding the success of your firm?
Monitoring the performance of pivotal aspects of your firm can make a major impact on your firm’s revenues, growth, and overall success—but to succeed in our changing legal landscape, you must evolve what and how you measure.
This is where Key Performance Indicators (KPIs) can help.
By planning, selecting, measuring, and analyzing law firm KPIs specific to your business, you’ll be better able to make data-driven decisions and informed changes to improve your practice.
In the following guide, we’ll explore how using law firm KPIs impacts your firm’s success and how to pick the right KPIs for your practice’s unique situation. We’ve also assembled a vast list of potential law firm KPIs to manage, so you’ll have plenty of ideas to bring back to your firm.
Why are KPIs valuable for law firms?
Nowadays, you hear every entrepreneur and investor saying “KPI.” So much so that you might think of it as a mere buzzword. But what exactly are KPIs, and why are they important?
KPIs are business metrics that evaluate an organization’s performance and success. KPIs give you the data and knowledge to answer critical questions, and they should be measurable, specific, and targeted to the unique goals of a business.
By learning to pinpoint, measure, and leverage specific performance indicators, law firm KPIs provide:
- Measurable performance. There’s a big difference between simply collecting data and analyzing data. If you want to use data to determine if you’ve performed well or not, you need to first identify what you’re trying to achieve. By identifying and tracking goals for performance indicators (for example, the KPI of monthly revenue), you can better assess how your firm is performing.
- Accountability. If you haven’t identified what KPIs to track, it’s difficult to determine who or what is responsible for wins or losses at your firm—which in turn makes it difficult to replicate or avoid certain results. Selecting and monitoring specific performance indicators creates a clean line of accountability at your firm.
- Predictability. Without setting and tracking KPIs, you’re often left to speculate over why things are going wrong (or right) within your firm. With KPIs, you can track specifics over time, making it easier to predict results for what will work in the future.
- Easier tracking. Once you’ve established a system for monitoring your law firm KPIs, upkeep is relatively simple. It can be as easy as assigning a staff member to input the numbers for each predetermined KPI once a month. Then, you can set aside a block of time for yourself to analyze the results, identify patterns (good and bad), and find opportunities for adjustment.
When using a practice management software like Clio to track all of your cases, contacts, and billing in one place, one of the advantages is that it’s easy to run reports to get the information you need to track your most important KPIs.
How to choose the best KPIs for your firm
It’s all well and good to know that you want to measure performance to assess your firm’s strengths, but—with seemingly endless areas to assess—how do you decide which specific KPIs are most valuable for your law firm?
Remember that not all KPIs are useful for your firm. Trying to measure every performance indicator available is overwhelming, needlessly time-consuming, and counterproductive. With this in mind, before you look at which firm-specific KPIs you want to measure, you should first think about your practice’s unique overall goals and how your firm measures success.
Here are a few questions to consider before looking at specific KPIs:
1. What do you need to measure?
When it comes to metrics you can measure, the possibilities are endless. Start by deciding what type of information provides valuable insight into your business’s performance and what data is needed to give you that information.
2. What data do you already have?
You can’t measure what you don’t track. The first step in establishing your KPIs is looking at the data you already have available in your firm’s practice management system.
- Make an inventory of the data being collected
- Determine if there are any gaps between what you have and what you need
- Check if your firm is using systems that are integrated with each other so that pulling figures is streamlined
- You will most likely have to create a spreadsheet for all your metrics
3. What are your targets?
Are you doing criminal defense work where you hope that the client is only with you once? Or are you doing intellectual property work that can be repeated over the years? What is the lifetime value of every client?
Every firm must set its own targets before choosing KPIs to measure because they are unique to your practice. For example, your target for the cost of client acquisition depends on the type of law and the return on investment per client.
Conclusion
Integrating KPIs into your business planning allows you to create a customized dashboard for monitoring and evolving the success of your law firm. By setting specific targets and then tracking and measuring key performance indicators, you can empower yourself to make more effective decisions on behalf of your law firm, clients, and staff.
For a comprehensive list of KPIs law firms should measure, check out “62 law firm KPIs to Measure” on the Clio Blog.
About the Author
Teresa Matich is an experienced legal tech writer and editor. She is the editor of the Clio Blog, the co-producer of Clio’s Matters podcast, and has written for publications such as Legal Technology Today and Above the Law. She’s also interviewed dozens of practicing lawyers and leading legal industry thinkers, including Preet Bharara and Bryan Stevenson.
Clio’s industry-leading cloud-based legal practice management, client intake and legal CRM software simplifies law firm operations, improves productivity, and increases revenues. Clio’s product suite is trusted by 150,000 legal professionals and approved by over 66 bar associations and law societies, globally. Learn more at www.clio.com.