Key Performance Indicators & Technology

KPIs & Technology: Mary Juetten Oct 4, 2016 1

KPIs Key Performance Indicators & Technology – Oct 4thMN State Bar TechStar


Agenda1:30 KPI Overview 1:45 Start with Clients2:00 KPI Framework & Tech2:20 Questions

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5 WsKPI Overview

KPIs & Technology: Mary Juetten Oct 4, 2016

4KPIs & Technology: Mary Juetten Oct 4, 2016

KPI Overview: WsWhoWhatWhy – billable hour misconceptionsWhenWhere it worked – client experienceQ&A at the end of the presentation


WHOLaw firms are businessesAccounting, payroll, KPIs are in addition to the practice of law & can be overwhelmingOutsource or use technologyKPIs are for all size firms because use the same principles; just add zerosUse small firm examples here


WHAT Key Performance Indicators are metrics for measuring all aspects of business and are beyond the traditional billable hour.Law can borrow from other professional services and industries for KPIs & Technology.Focus on outputs, client experience, collections rather than inputs such as hours billed.Move from Profits per Partner.


WHYNumber one reason for business failure is lack of cash flow.

Cash is King Clients bring Cash & repeat business

Develop KPIs that support positive client experience and collections.Don’t dwell on billable hours; focus on happy clients and collections. Record all hours regardless of fee structure.Use the KPI data for creating pricing and billing models.


PEFORMANCE KPI: Misplaced Focus on Billable Hours.Allan focused on billing, not collecting

At the end of the year, Allan was a billing machine at 116.25% utilization but 86.22% collected.

For one month he was at 88% using Billings Collected KPI

Align your KPIs with firm goals: Cash is King.

Have timekeeper’s focus on collections, not billing. 160 hours does not matter if only 120 hours are collected.


Thomson Reuters Small Law Firm KPI and Benchmark SurveyParticipants:

• 690 surveys sent out to customer panel June 2016• 62 Firms Responded: 10 Solos & 50% under 10 Attorneys

Stats:• 81% use technology (however accounting & practice management included)• 58% do NOT use KPIs beyond traditional billable hours• Only 6 or <10% use more than 4 KPIs

• 19 use Collected Billings by Attorney• 15 measure overdue Accounts Receivable (A/R)• 14 track Matter Profitability• 3 measure client satisfaction (less than 5%)


WHEN58 responses to TR Survey, 31 firms reported using either of the two profitability metrics:

Take-home dollarsBank Balance

KPIs need to be timely to allow for corrective action.Matter profitability was an option on the survey.


WHERE IT WORKEDPositive and Predictable Cash Flow comes from Clients.Satisfied clients tend to pay and it’s easier to upsell or have happy clients refer friends and associates.Start with client development KPIs, including pipeline and cost of client acquisition and measure firm culture and client experience.Borrow from outside the law: Net Promoter Score (NPS)


CLIENT EXPERIENCE: Net Promoter Score (NPS)Net Promoter Score (NPS) (%)

The percentage of total clients responding to the survey question who are promoters less the percentage of total clients responding who are detractors.

Q: On a scale of one to ten (with one being not at all likely and ten being extremely likely), how likely are they are to recommend your firm to their friends, family, and colleagues?

Why or Why Not?” as an optional question

Allow for feedback, good and bad.

Survey must be tracked, not anonymous.

Technology:

Google Documents or Survey Monkey, Excel for responses.

Follow-up emails or calls.

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KPI ExamplesStart with Clients



Focus on Clients: Happy Clients: Profitable Practice

Value of deliveryTransparencyWhat input do the clients have into your practice? Borrow from outside the law:

• Client Pipeline• Client Feedback• Client upsell or referral rate• Client conversion rate


Potential Client Pipeline

Help or support – outsource?Targets – look backwards to measure first history if possible.Just get started with a listing of potential clients & estimated revenue.Terms:• Go | Get• Suspect, Prospect, Lead, Paused


CLIENT DEVELOPMENT: PipelineAdjusted Prospect Pipeline ($)

Total dollar value of the Prospective Clients’ Matters on the Pipeline adjusted for likelihood of success divided by total Attorneys (and Paralegals in some cases*) to yield a dollar value.

Technology:

Can start with Excel and move to Customer Relationship Management (CRM).

Some Practice Management have CRM capability.

Targets:

Should tie into the monthly revenue in your budget.


Focus on Collections

Profitability on paper only if you never collect the cash.Stats show that small law firms collect cash from 90 to 150 days after recording the hours.If you have to pay all your bills within 30 to 60 days, you have a problem.Focus on lowering the days that your cash is ”locked up.”Important to calculate lock-up days for both WIP and A/R. Check on percentage of ”old” A/R.Deeper dive depending on results.


PROFITABILITY: WIP & A/R Lockup Days

Total days in the period divided by the WIP Turnover Days.WIP Turnover Days are the Unbilled Time (WIP) for the same period divided by the average outstanding WIP balance at the beginning and end of the period.Same formula for A/R, for example in a month of 31 days using the numbers here:

31/ ($500,000/(($125,000 +$531,250)) 2

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Workflow OptionsKPI Framework & Tech



KPI FrameworkWorkflow Driven

1. Client Development 2. Cost of Client Acquisition3. Productivity4. Profitability5. Performance6. Client Experience7. Firm Culture


Systems & Data

Systems – from manual to high tech, define your workflow. Pick the appropriate technology.Garbage In; Garbage Out.Check the data sources and set up as many links as possible. For example, QuickBooks data to automatically populate your spreadsheet.


Time is finite; Technology is notInfinite possibilities:Potential client calendaring Client Development – automationPractice Management including time & billing Accounting Client Feedback Excel Document Signing & StorageLegal Research E-discoveryCustomer Relationship Management (CRM)www.evolvelawnow.com


Choosing Tech

Simple to use Demand Metrics | Case studiesMeasure Return on Investment (ROI)Trial or free demoLess is moreFeedbackEvaluate Client ExperienceStart small and buildInteroperable techBe open to change


TargetsJust Get Started

Go back to the Previous Year or Years for a LIMITED number of KPIs.Measure more often at the start, start monthly or weekly depending on KPI.Do a first quarter review and make adjustments.Look for industry benchmarks but also outside to other professional services.

Targets depend on your circumstances!


KPI Framework: 40+ measures but start with 10 or less


Dashboard: monitor frequently

Client DevelopmentClient Acquisition CostProductivityProfitabilityPerformanceClient ExperienceFirm Culture


Continuous Improvement Dashboard Approach

Like the workflow and matching KPIs, improvement requires constant monitoring.Change and experimentation mentality.Learn to delegate and outsource. Budget should not be just revenue divided by 12, build up costs and revenue, including pricing.Enhance your Practice with enabling technology. Measure KPIs regularly on Dashboard.Review and Act upon the results, adjusting targets, workflow, resources, & technology.

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Questions



Small Law Firm KPIs: How to Measure Your Way to Greater Profits

In print October 2016Order your copy today:http://legalsolutions.com/Juetten

Practical Guide to implement KPI framework as a Dashboard requiring only spreadsheets

Mary Juetten@[email protected]

http://legalsolutions.com/Juetten

mailto:[email protected]

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Key Performance Indicators & Technology

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