Law Practice Improvement: The Importance of Tracking KPIs
Measuring Key Performance Indicators is essential to the growth of your law firm
Analytics are an important metric for the health of your business. The phrase Key Performance Indicator (KPI) is thrown around so often on business blogs and entrepreneurial articles that it begins to feel like another busy buzzword – a trendy idea that professionals expound upon with very little understanding of its actual meaning or worth. However, measuring the KPI of your law firm is essential for growth and profit.
Knowledge is power, and KPIs can help you understand where your business is experiencing the most return on investment, or which services or processes require more assets than they’re worth. Running a successful law firm involves more than just a simple understanding of billable hours, profit, and loss. Longevity requires you to analyze, measure, define and set goals around your KPIs.
The challenge lies in determining what to measure – the possibilities are endless and should ideally be tailored to your firm’s specific business goals.
To start, evaluate what information is indicative of the success of your law practice. KPI possibilities include:
- Number of new clients
- Collected revenue
- Billed revenue
- Monthly expenses
- Cost of client acquisition
- Client satisfaction
- Employee leverage
To determine if your KPIs are appropriate, check to make sure they have the following characteristics:
- Is it quantifiable?
- Does it reflect the goals of our firm?
- Is it a key to our overall success?
The most important component of effective measuring is information. Once you decide what your metrics are, you need a system for collecting and analyzing the associated data. Look at what data already exists in your firm’s management system and determine how you will manage that information, and then distinguish the gaps between what data you have available to you and what you need.
The most convenient and effective way to organize your Key Performance Indicators is with a spreadsheet or series of graphs. Easy access to a visual representation of the various elements and indicators can help you identify patterns and areas of improvement.
Many firm management applications include a component that offers dashboard reports, which can help streamline the set-up and review process. Getting well-acquainted with this module of your management software is a worthy investment.
To make effective changes, you have to have a true understanding of the meaning of each KPI and why it’s important to your overall success. Don’t rush to make changes through – data will need to be collected for a few months in order to be able to spot trends and measure impact.
Plan to run your KPI reports monthly and analyze the collected information promptly. Once you identify areas of improvement, take corrective action and re-evaluate during your next analysis.
Once you have a general idea of your current circumstances, create benchmarks and set goals for the future. Increasing customer satisfaction can improve your ability to gain new customers or reduce your cost of client acquisition when repeat customers are involved. Working more efficiently or better leveraging your staff can reduce monthly expenses or increase billed revenue. Think of your KPIs as individual cogs that work together to improve production. A minor tweak to one area can result in a ripple effect of changes.
Acting on evidence
Adaptability is essential for growth, and you can’t adapt productively if you don’t have verifiable evidence of where change is needed most. Knowledge is power, and KPIs enable you to make data-driven decisions that help you make informed improvements.
Although measuring KPIs initially feels like more work, eventually, the information collected will improve productivity and profitability which increases the satisfaction of employees and clients alike. Break your law practice down into the components that contribute to its overall success, become familiar with each, and make the necessary changes to help your law firm evolve into its optimal form.
At Boss Certified Realtime Reporting, we’ve been providing nationwide court reporting services for trials, depositions, mediations and more since 1995. If you’d like help or more information, you can call us at 954 467 6867 or complete our contact form to let us know how we can assist you.