What’s the difference between benchmarks and baselines when it comes to measuring your firm’s KPIs?
Often, we set revenue and project-based goals to achieve on a quarterly or annual basis, without having a clear understanding of our KPIs, how to measure them, or how to shift them if they’re no longer aligned.
We dive into all things KPIs with Jeff Smith in this episode. Jeff is affectionately known as “The KPI Guy” as he’s written 7 international #1 best-selling books on KPI and Business Management. He is on record as the most successful author in history on the subject.
Throughout his career, he’s worked with, and is trusted by Royal families, Governments of different countries and Senior Executives in the largest companies in the world.
Jeff gives listeners actionable tips on:
- What KPIs are and why we use them
- How to decide which KPIs you should focus on in your firm
- The difference between a baseline and a benchmark and how to measure it within your firm
- His recommendations on which KPIs lawyers should be using to measure
- Trust as a key component of achieving KPIs
Resources mentioned in this episode:
Connect with Jeff here:
Connect with me
[00:00:00] Karin: This is council cast part of the legal talk network. And I’m your host carne Conroy. When you face a complex case outside your expertise, you bring in a co-counsel for next level results. When you want to engage, expand, and elevate your firm, you bring in a marketing co-counsel in this podcast. I bring in marketing experts who each answer one big question to help your firm achieve more.
[00:00:23] Here’s today’s guest.
[00:00:26] Hey, Karen, thank you for inviting me to the shows. My name is Jeff Smith. I’m the author of seven international number one best selling books, all on the subject of key performance indicators and business management. And, uh, it’s my delight to be with you today. I feel really blessed and honored. Thank you for the invite.
[00:00:46] Karin: Sure. Being here, Jeff. Uh, I think you’re being a little modest and I hear that you’re also the most successful author in history. About KPI. Is, is that accurate? Or am I finding stuff? [00:01:00] Am I mixing you up with somebody else?
[00:01:07] Jeff: Thank you very much. Uh, yes, I I’m on indeed on record as the most successful author in history on
[00:01:14] Karin: the subject. Okay. So we’re going to get into what KPI is. Cause I feel like for the legal industry, that is always a little fuzzy kind of to figure out what that means. Number one, and then how that relates to lawyers and law firms.
[00:01:28] Um, to get started with our big question on everyone’s mind, the question of the episode is what is the difference between benchmarks and baselines and why should lawyers care? So let’s start with that. What’s, what’s your background in kind of all of this stuff. How did you let’s start with the kind of story behind all of this?
[00:01:48] What is your, how did you get into KPIs, benchmarks? All these, all this.
[00:01:55] Jeff: Wow. There’s a lot of questions in that.[00:02:00]
[00:02:01] So many, many moons ago, I used to run car dealerships, all very compliant. And within the law, of course, I’m selling vehicles. And running car dealerships. There’s really five businesses in one. You have, you sell new cars, used cars, you have a service department, you have a parts department, you have a body shop.
[00:02:23] You’ve got the legal side of it and all of this stuff going on. So to really keep a handle on what is going on in each of the departments, you need to learn how to run them remotely without being there. But here’s the important part. You still know what need, you still need to know what’s going on all of the time.
[00:02:45] And that’s why we use key performance indicators. So if I give you an analogy, these five little businesses inside one had like five spinning plates. So you’re not, you know, when you see the guy at the circus and he spins the place and then one starts wobbling and [00:03:00] he goes over and give, gives the stick a shake.
[00:03:02] And I figure, yeah. That’s what I would say. Key performance
[00:03:05] Karin: indicators. Okay. All right. So you’ve got all these spinning plates, you’ve got all these different areas of your business or your law firm that you’re trying to keep track of. So, uh, did you, did you figure this out while you were doing the car dealership or was this something that you did afterwards kind of as, because you, you didn’t have that kind of stuff in place to, uh, keep track of all of your systems and business kind of sub businesses and things.
[00:03:34] Jeff: So I was running one dealership and I was onsite and because I was on site, I could move around the dealership and find out what I needed to find out. Okay. I think I then got promoted to be a director. To dealerships. This is when people foreman, syndicators really came out because I couldn’t, I could not be in two places at the same time.[00:04:00]
[00:04:00] So I figured out what do I need to know? What are these spinning plates? What do I need to make? And then how do I get the information? And then how do I monitor the information? So I don’t have to keep on running backwards and forwards. Okay. Okay. So
[00:04:17] Karin: far I feel like the car dealership is such a good visual.
[00:04:21] I can imagine. Um, you know, you kind of trying to get that all organized and that you have this physical location that you can’t be in two places at once. And so in that example, What, what were some of those examples of, of your performance indicators that, that you were, um, determining and that, and how did you get those, uh, numbers and that detail?
[00:04:44] How did you get that to you on a regular basis?
[00:04:48] Jeff: Okay. I’m going to slightly rephrase that question. So it’s easier to handle what, what, you’re, what you’re really asking me, which is the question I’m asked most often is. [00:05:00] What are the top 10 KPIs that I should focus on in my business? I think that’s what you mean.
[00:05:06] Karin: Okay.
[00:05:07] Jeff: Okay.
[00:05:12] So the thing is with this. Different people that are at different stages of their development and understanding with business strategy, different companies are also at different stages of their own development and what they want to achieve. Like no two law firms are the same and I probably guessed no two lawyers are the same based on what they’re doing.
[00:05:37] This. You need to decide what it is that you want to achieve. And then that roadmap then is created by the key performance indicators to, to keep you on that road for what’s important for you today.
[00:05:53] Karin: I think that’s such a key part of strategy is that you can’t see. The road [00:06:00] down until you know, where you’re going.
[00:06:01] And so you have to start with that goal in mind. And then, and that’s not necessarily going to be the goal of your competitor or the goal of your neighbor or, um, you know, your best friend or whatever. You have to really sit down and do that work to figure out where you’re wanting to go.
[00:06:16] Jeff: For sure. Now let me put that even more into context.
[00:06:20] If I often go into a company and help them to, to structure their KPI dashboard. So let’s say we define the top 10 KPI for them now I’ll then go back to them. Maybe I’ll get called back in a couple of years time. Um, What I find frustrating is that, do you think they’re in the same place that they were to use?
[00:06:45] Karin: I mean, if they are, they’re not, that’s not good. That’s not good news.
[00:06:50] Jeff: Absolutely. Right. And do you think the people are in the same state that they were two years ago?
[00:06:55] Karin: Are we as anyone in this world right now in the same place? We were two years ago. It’s an [00:07:00] impossible to even think about.
[00:07:05] Jeff: They still use the same top 10 key performance indicators that we set two years ago.
[00:07:12] Karin: So it has to be a constantly moving, evolving.
[00:07:16] Jeff: Okay. It’s completely dynamic based on what you want to achieve and where you want to go. And you will destination in two years time or quite frog, probably be different to what it is to,
[00:07:29] Karin: and it should be.
[00:07:30] And that’s a good thing. Yeah. Okay. So then how do you, I love the idea of the dashboard. And so I want to ask about that, but how do you. Figure this stuff out. If you know, this is a moving target.
[00:07:43] Jeff: Well, first of all, you have to decide what you want to achieve. Where do you want to be? If you don’t have that, you’re going to struggle in whatever you do.
[00:07:52] You can’t put a proper budget together. That’s meaningful. You just come up with numbers. And then, and this is the problem. [00:08:00] People create budgets, they create key performance indicators and they say, okay, we’ve ticked all the boxes we should do. And he, you know, and it’s like being in California and wanting to get to New York, but you only have, uh, a roadmap to get to Chicago.
[00:08:18] You’re not going to make it
[00:08:20] Karin: an interesting little trip there. Yeah. So, how do you, so how do you start? So you, you know, what your, your initial goal is at the beginning of, you know, let’s say those two years and you start to set those goals, and then you said there are the 10 key KPI, um, that you, that you typically start with.
[00:08:42] Is that right? And is that the same for both product and service and.
[00:08:47] Jeff: Um, D it’s not quite what I say. I said, yeah, if we have a dashboard and I’ll use 10, 10 KPI, as, as an example, it was just an easy number to work [00:09:00] with. So first of all, decide what your. I understand where you are now and then define a roadmap for where you want to be.
[00:09:10] And then you’ll, you’ll keep that we’ll decide which key performance indicators you use and how many of you use that, that will then decide it. And then as you. Going along you’re, you’re questioning each of these key performance indicators to make sure you’re still on the real route to New York and not got
[00:09:30] Karin: it.
[00:09:30] Okay. All right. That makes sense. All right, so let’s talk in terms of an example of a service. Industry, for example, a lawyer law firm. Um, and what, what are some of these KPIs that you typically see for, for that kind of, uh, of, of a business?
[00:09:51] Jeff: Well, well, let’s be quite dynamic and let’s, let’s get to answer the first question, which is what’s the difference between benchmarks [00:10:00] and baselines and why should I care?
[00:10:01] There we go. Right? So I’m going to throw them back at you. What do you believe is one of the most important measures within a law firm
[00:10:10] Karin: conversion rate? So not, not the traffic to the website, but whether that traffic converts,
[00:10:17] Jeff: okay. So this is the number of customers, clients that come to the organization.
[00:10:25] And how many of them pay you money? How many do you retain? Okay. Conversion rate. Uh, a key performance indicator will say, well, first of all, what do you want that conversion rate to be realistically? Okay. So if we S let’s take some nice, easy, let’s go fishing. Let’s let’s, let’s go 50%. So if we get the hundred people knock on the door, would you realistically expect 50% of them to be, uh, paying clients at the end of the day?
[00:10:59] Now, whether [00:11:00] that’s accurate or. It doesn’t matter. We’re just talking conceptually. Now I’d put I put,
[00:11:06] Karin: yeah. And that’s that’s ideal. I mean,
[00:11:10] Jeff: okay. Let’s, let’s play with, let’s play with 30%. So 30% now what’s the difference between a benchmark and a baseline for this particular key performance indicator. And this is really, really important for understanding the mindset of people who were involved.
[00:11:31] In the activities of converting people. Because if we said, for instance, your, the benchmark is 30% psychologically, what does that mean to
[00:11:47] Karin: you? I just have to get to 30%. That’s it. And then I’m done so
[00:11:52] Jeff: box. Yes, absolutely. Right now. There might be a number of key performance indicators [00:12:00] where you actually want that to happen.
[00:12:03] So in terms of understanding how much working capital you need, you don’t want too much. You don’t want too little. Yeah. So that’s the time to use a benchmark. Okay. You have an upper limit and you have a lower limit. Don’t go above. Don’t go below. Don’t move outside of this topic. So the purpose of the benchmark is to say, Hit this don’t go outside of it.
[00:12:29] Don’t a baseline changes the mindset considerably. So let’s go back to this conversion ratio. 30%. Would you want any
[00:12:41] Karin: with them? No. No, because at any lower than that means that I’m not meeting. To use your language, the baseline of where my costs and what I need to cover in order to keep the lights on, basically.
[00:12:55] Jeff: Okay. So a baseline then, if I said to [00:13:00] you, your baseline for this is 30% psychologically, what would that mean to you?
[00:13:06] Karin: Baseline is where I don’t lose. And so I need to get there. And then if I want to Excel at my job, I really need to do much better than that.
[00:13:20] Jeff: Yeah. So a benchmark means get there and stay within that tolerance.
[00:13:28] And a baseline means. Hey, this is the minimum expectation for this criteria. It’s okay to go as high as you like. You can do 40%. If you want to don’t let me stop you. You can do 50%. Who are, you cannot go below 30. This is the minimum expectation. Now he’s he’s interesting one. We’ve used conversion ratio.
[00:13:53] Now, when it comes to company profitability, it’s critical because. [00:14:00] What we don’t want to do is put a glass ceiling on how much profit we can make. So when talking profitability never, ever talk about benchmarks, Because people will achieve what you ask and then they turn the lights
[00:14:16] Karin: off and go home.
[00:14:20] That is so I have not, I have not heard this, this distinction before, especially when you’re talking about KPIs and it’s so critical because these are really what people set as their goals. And you’re talking about. Mindset with goals. And so I think if you, if you don’t do that, you’re setting yourself up for failure and you’re setting your, the rest of your company and your team up for failure, because you just haven’t communicated that very clear distinction just in language like that is, that is really a game changer.
[00:14:53] I love that. Yeah.
[00:14:55] Jeff: Yeah. Psychologically, you really want to ensure. [00:15:00] All of the things that you want to put limits on you put limits site with an upper and lower limit on a bench. And then peop people know communication within the companies. Also a lot better expectations are better. And then with things that you do not want to put limits on, you make sure you never use the word benchmark.
[00:15:20] You own use the word patient. Yeah,
[00:15:22] Karin: that is that’s fantastic. Okay. So let’s, that is going to be such a key point that I know we hone in on as. You come back and talk about this episode, but let’s talk a little bit more about just KPIs in general. I feel like for the service industry and service companies, uh, they feel confused by this, that it’s, it’s harder.
[00:15:44] It should just be. The number of sales or the number of conversions, and there’s so many different kinds of KPIs and ways to measure your success that are not just, you know, for a brick and mortar, retail kind of store. So [00:16:00] what, what kind of things do you typically see or recommend for lawyers? Law firms kind of service based industries in terms of what KPIs they should be tracking and following and, and, um, keeping their eye on.
[00:16:14] Jeff: Well, w what’s fascinating. The one you chose earlier is the end result of a sales process. So it’s all of the people that come to see us. How many do we actually convert into fee paying clients? But the interesting thing is within the sales process, there are so many activities that happen prior to that happening.
[00:16:37] if you measure the activities of that, then you can make a difference to the outcome. Now, what I’d like you to think about here is most people think that’s key performance indicators, KPI, they’re seeing their answers. So if we have a 30% closing ratio, that’s not an answer. It’s a question. [00:17:00] Yeah, for sure.
[00:17:02] So, so we now have to think, well, what is the question? So life is about cause and effect. And if you don’t like the effects in your life, you have to change the cause. In fact, we can’t change the effects. We can only change the causes. So let’s think about this closing ratio. If you resolved, if your result was 30% and you decided that your baseline is 30%, which means.
[00:17:33] This is the minimum expectation I actually want. And let’s say your goal for the next six months is to increase that 30% up to 35%. The purpose of this closing ratio, the effect is to question the causes. What are the two leavers in there that make the difference? Because as a business leader, you can’t say.[00:18:00]
[00:18:00] Your closing ratio is too low. It’s 30%. Get it higher. Right? What you must do is open the back doors of the KPI and say, what are the two leavers here that are feeding the information to this key performance indicator that we can touch and make a difference with? So let’s think about one is the number of customers.
[00:18:23] And, and the other one is, do we actually close them into fee paying customers? Now that doesn’t happen automatically. We have to say, well, how many customers do we get? Is that an increasing trend or a decreasing trend? And then how do we get them? And then the other thing is once we get an inquiry, what do we actually do with it?
[00:18:48] What’s our meet and greet process. He’s a fascinating one with this, which was incredible with cars, but I said so much in business. [00:19:00] People are afraid of rejection. And what that means is they’re often afraid to attempt to close the ask for the business
[00:19:13] Karin: and they don’t have a system in place to do that because I find for myself as soon as I created systems for.
[00:19:20] The parts that I’ve, I kind of hesitated with and just had a, kind of a personal, emotional reaction to, I just close my eyes and I’ve got the system and I may have a script for that. And I just plug it in and hit send, and it’s done. And I don’t have to sit and emotionally go through the process of, oh, you know, what does this mean?
[00:19:38] How do I say this nicely, blah, blah, blah. As soon as you have that system in place, it’s done. You don’t, you don’t have to, it takes all that, that kind of difficulty.
[00:19:47] Jeff: Okay. So coming back to this closing ratio, what has to happen before someone says, yes, I want to do business with me. There’s two psychological factions that are going on in our head completely [00:20:00] automatic.
[00:20:00] And it happens with everything you buy, every decision you make and it’s trust. And like, so trust is binary. So trust means, do I trust you or do I not trust?
[00:20:16] Karin: And do you find, do you have some KPIs behind kind of determining whether there’s a trust factor there?
[00:20:24] Jeff: Well, it’s part of the process that will determine your results on your closing ratio and your conversion rate, because why do people call lawyers?
[00:20:35] They don’t want to write.
[00:20:40] No, nobody wants to call a lawyer. It’s a distress purchase. So, so you have to think when someone calls a lawyer, especially for the first time, how are they fee? And then the way that you deal with the web [00:21:00] inquiry or answer the phone or the zoom call, or however you do it, this is something that these two things you absolutely must address very, very early on or you lose.
[00:21:12] Okay. So one is, one is trust it’s binary. I either trust you or I don’t trust you. I can’t, I can’t trust you a little. It’s like you can’t be a little bit pregnant. You are all your rights. So if I trust you I’ll do business, right. If I don’t trust you yet, I don’t care. How much he charged me, even if it’s free, I will not do business with them.
[00:21:41] The other one is like, no, this is not binary. Like, like he’s on a sliding scale. So if, for example, you use a scale of zero to 10. If I really like you 10, and I trust you, I will work with [00:22:00] you and I’ll pay you more money just for the privilege. If I trust you, but I don’t like you I’ll do business with you, but I won’t come back, but it will, it will come at a price.
[00:22:15] I won’t come back a second time. The referral process won’t be there. I’m just there because I trust. Yeah.
[00:22:22] Karin: So, so in terms of trust, I feel like, um, lawyers are inherently risk averse. And so they are generally, uh, trying to make sure that they’re protecting their ideas, they’re protecting their kind of intellectual property.
[00:22:37] And so a lot of lawyers that I talk to. I don’t want to basically give away free legal advice. They’re worried that that could get them in trouble and, and whatever. And so in those initial conversations, they are holding that tight and they are kind of hanging on to that information in fear. And so they’re worried that.[00:23:00]
[00:23:00] You know, they’re going to get themselves in trouble or whatever the case might be. Whereas on the other side of that conversation, that potential client is seeking help and counsel and support and that kind of emotional trust connection. And they’re getting kind of a brick wall. So how do you kind of cross that boundary between those two people in the conversation?
[00:23:24] Jeff: Okay. So establishing trust is not about giving away free counsel. You go to a lawyer for a reason, and you go to a specific lawyer for a specific reason. One lawyer doesn’t do everything right. We specialize. So, so if, if I didn’t know you, I didn’t know the lawyer that, that, that I’m going to credibility has to be established.
[00:23:53] And in order to establish that credibility, let’s think about the beginning of this program. [00:24:00] I introduced myself, I’ve sold seven books and you went, oh no, wait a minute. There’s more than that. You’re the most successful guy right now. What happened there? The people who are listening to this podcast to go, ah, this guy should know what he’s talking about.
[00:24:15] And trust is established. Now I hadn’t said anything about key performance indicators at that stage or late said is if you are interested in key performance indicators and you’re listening to this podcast, here’s a reason why you should try. Yeah,
[00:24:31] Karin: that’s awesome. And so kind of establishing your expertise, establishing the, uh, those kinds of things that we call trust indicators, but things where, you know, you talk to that potential client about how you’ve done this kind of work in the past, how you know, and understand the problem and how you know that you can help them solve whatever that issue is without saying, without laying out the case and doing the work over the phone, obviously.
[00:24:59] Jeff: A hundred percent. [00:25:00] Yes. And that, that also comes from the wording on your website, because if you don’t establish trust, credibility, relevance on your website, then people won’t click to send an email, pick the phone or. Because it’s binary. It’s do I trust these guys? Yeah.
[00:25:20] Karin: I love that. I love the idea of trust being binary.
[00:25:23] I feel like people, people don’t see it that way. They see it as this sliding scale where, you know, I’ll slowly kind of develop this idea, but it’s, it’s not it’s on or off. And I feel like once you’ve lost it too, it’s nearly impossible to get it back once you’ve done, you know, kind of made those mistakes or hiccups where all of a sudden somebody might have trusted you and then, then they flip forget about it.
[00:25:45] That’s the end of it. Um, okay. So moving on to the, the awesome part of our book review, our audience is full of tireless lawyers who don’t have time to read a book that isn’t worth it. So, uh, what [00:26:00] is one book that you’ve read that is worth it?
[00:26:05] Jeff: I think one that I would like to recommend is understanding paradigms it’s by Joel Arthur Barker. And it taught what it really talks about is when you are in a world and the rules change and your beliefs about how the world works, changes your left. Frozen and everybody else overtakes.
[00:26:37] Karin: So in terms of what’s been going on the last two years and the entire world has changed and especially in the legal industry that has been hesitant to.
[00:26:45] Technology and being online and, you know, all of a sudden it was, it was just, this is how we have to do it. So I did see a lot of people freeze up and freak out and not know what to do. So what, so what do we need to know? What did, what did you get from this book [00:27:00] about how you, how you do that? How do you move forward?
[00:27:03] Jeff: It’s about understanding what a paradigm is, what a new paradigm is, what is a paradigm shift now? The interesting one, the fascinating one for me. When we guess a new paradigm, there’s only one paradigm shifter. In other words, when the world change, when the world changes, one person will change and then everybody else will follow that person or die.
[00:27:32] That’s what happens. Now, let me give, let me give you a slight, um, Diversional on this, the four, the four minute mile was said to be impossible to run. Yes, it was broken three minutes, 59.9 by. So Roger Bannister as he, he’s not at the time the medical professional was saying it’s [00:28:00] impossible. The lungs cannot survive.
[00:28:03] His liver will collapse and it will die of exhaustion before he makes it to the lie. It cannot be done. So Roger banister did it, which broke the paradigm. It could be done. How long did he record last?
[00:28:21] Karin: I don’t know how, how long,
[00:28:23] Jeff: 43 days. Gosh. And then it was broken 23 times that same.
[00:28:31] Karin: That is fascinating that it’s such a mindset issue.
[00:28:35] And all of a sudden that is amazing. That is such a great visual to imagine. Like all of a sudden you shift your thinking about it and boom there’s there it is. There’s that new level of achievement. That is, that sounds, that sounds like a great book. Adding that to obviously our library on the website, but I’m adding that to my own list too.
[00:28:55] That sounds fancy. Yeah.
[00:28:58] Jeff: In business, what’s fascinating. The [00:29:00] paradigm shifter is the one that becomes the multimillionaire.
[00:29:03] Karin: And then the second,
[00:29:06] Jeff: well, let, let me ask who was the first man to break the four minute mile. Everybody knows through Roger.
[00:29:14] Karin: Nobody knows. Yeah, exactly. Right. It doesn’t matter. Yeah.
[00:29:18] You’re all just lemmings at that point. You’re all just the people following along behind. Um, and even in business school, there’s the, you know, the whole first to market idea, you’ve got to just be out there first because the rest of those people are just trying to do the same thing, slightly different in offer.
[00:29:34] And then you, they have to sometimes compete on price or find some other level of competition, but they are there. They will never be. There’s only one person who will ever be first. Uh, that’s great. That’s that sounds fantastic. I can’t wait to dig into that one. So Jeff, what’s one big takeaway that you want listeners to get from this episode.
[00:29:55] Jeff: The difference that, that between benchmarks and [00:30:00] baselines and the impact on the psychology on your staff, about the key performance indicators that you use. You’re always using key performance indicators, whether it’s closing ratio, the amount of cases that you win, the amount of profit that you make, the profit per head, there’s lots and lots and lots of them.
[00:30:22] Yeah. Just be very, very careful on the terminology of benchmark and baseline because you do not want to hold it. Performance when there’s absolutely no need
[00:30:34] Karin: to do it. It’s like putting a core set around it all of a sudden, you know, there’s, if you’re just shrinking it down to something that isn’t, uh, isn’t necessary, you’re, you know, you could have got much bigger, but just because of the language, you’ve put a limit on it.
[00:30:48] Um, well that is, that is so great. And I really appreciate that. That kind of reverse. Not reversed, but a new way of thinking about it. Um, so Jeff Smith is known as the [00:31:00] KPI guy, the also the most successful author in history about KPI’s, you’ve written a whole bunch of books. They’re all out there on Amazon.
[00:31:06] We will link to your books as well as the book about paradigms in the show notes. And thank you so much for being here. That was such a fantastic conversation. I really appreciate it.
[00:31:16] Jeff: I feel blessed, Karen. Thank you very much, indeed.
[00:31:20] Karin: Thank you for listening to this episode of the council cast podcast. Be sure to visit our [email protected] for the resources mentioned on the episode. And to give us your feedback. If you enjoyed this episode, I would appreciate it. If you could rate and review the podcast on apple and subscribe to your favorite podcast platform, see you on the next one.