What performance measurements are important for lawyers to consider in their law firms? In this episode of the Kennedy Mighell Report, Dennis Kennedy and Tom Mighell discuss measures and metrics and how lawyers can use them to better their practices. Measuring performance helps lawyers manage their firms with greater efficiency for greater profitability, and metrics create platforms for strategizing new areas of growth.
In their second segment, Dennis & Tom talk about the varying prices of ebooks and whether they are typically a better or worse deal for readers.
As always, stay tuned for the parting shots, that one tip, website, or observation that you can use the second the podcast ends.
Have a technology question for Dennis and Tom? Call their Tech Question Hotline at 720-441-6820 for the answers to your most burning tech questions.
The Kennedy-Mighell Report
Best Practices for Measures and Metrics in Law Firms
Intro: Web 2.0, Innovation, Trend, Collaboration, Software, Metadata… Got the world turning as fast as it can, hear how technology can help, legally speaking with two of the top legal technology experts, authors and lawyers, Dennis Kennedy and Tom Mighell. Welcome to The Kennedy-Mighell Report here on the Legal Talk Network.
Dennis Kennedy: And welcome to Episode #231 of The Kennedy-Mighell Report. I am Dennis Kennedy in Ann Arbor.
Tom Mighell: And I am Tom Mighell in Dallas. Before we get started, we would like to thank our sponsors.
Dennis Kennedy: Thanks to TextExpander for sponsoring our show. Communicate Smarter with TextExpander. Gather, Perfect, and Share Your Knowledge. Recall your best words instantly and repeatedly. Learn more at textexpander.com/podcast.
Tom Mighell: And we would also like to thank ServeNow, a nationwide network of trusted, prescreened process servers. Work with the most professional process servers who have experience with high volume serves, embrace technology, and understand the litigation process. Visit serve-now.com to learn more.
Dennis Kennedy: In our last episode we went way, way out there to the edge and discussed the basics of quantum computing and how it might impact lawyers in the next few years.
In this episode we’re back in the practical world, but it’s also another math related episode in a way, very practical and important math, measures, metrics and how you can use them to help you be better at what you do.
Tom what’s on our agenda for this episode?
Tom Mighell: I just want to note for the record that when I signed up for this podcast how many years ago, you or nobody else told me there would be math and I’m just going to note that objection here for the record before we get started.
So Dennis anyway in this edition of the Kennedy-Mighell report we will indeed be measuring things talking about what to measure, how to take action on what you measure. In the second segment we are going to dive into the script says our frustration but I think we’ll find out it’s more Dennis’ frustration with the way ebooks are priced today.
And as usual we’ll finish up with our parting shots of that one tip website or observation that you can start to use the second that this podcast is over. But first up measures, metrics, KPI’s, dashboards, something called OKRs and more.
There are a number of things you see in corporations that you don’t see as often in law firms mostly because lawyers practice for so long as a profession rather than a business so they didn’t do things that other businesses actually did.
One of these things is metrics. Companies use metrics of all types to measure, success, compliance or other things but law firms I think not so much although that’s been changing a lot lately in the past few years.
The management guru Peter Drucker once said if you can’t measure it you can’t improve it or maybe it was that he said you can’t manage what you can’t measure. He said something like that, there are a lot of variations on this quote.
Dennis, we hear people talking about measures and metrics and things like that, what’s the difference? Is there a difference?
Dennis Kennedy: Well Tom I think that this is where we get like a little bit of math. So I think that measures really mean anything that you can measure. So we could, in our law firm we could measure profits and say our revenues and metrics are like a relationship between two measures so we might say profits per partner or revenue per month. So I think it’s as simple as that and it’s clear that the terms get used interchangeably.
So what I’ve noticed is that there will be this notion where people say we need metrics and they usually say we need some metrics and almost like let’s go find ourselves some metrics and we’ll jump into this, it probably got it exactly backwards, but so that’s my notion of measures and metrics and there is this sort of demand like I said to go get some metrics.
Tom Mighell: Well yeah, I agree it’s not necessarily getting metrics, it’s using metrics, it’s saying what can we measure to be successful or what can we measure to figure out how successful we are and I think you’ve given some examples, let’s give a few more examples.
A lot of law firms decide to measure how successful their marketing efforts are, the total marketing spend, total number of leads generated, converting leads into clients, how much it costs to acquire a client, these are metrics that relate directly to the success of the firm. Those are things that are more easily measured.
You may want to measure how much revenue you generate from a particular client on a case-by-case basis too. That can help you decide what types of cases or what types of clients you want to handle. So that’s why figuring out what to measure is important. You might want to measure the number of new clients that you get per month or the revenue billed per month, or the revenue you collect per month.
There are things that are maybe less directly related to the bottom line that you could measure like client satisfaction or even your employee satisfaction. There’s a novel idea but it also might be your internal business processes, how long from a client call does it take for you to open a case.
One of the things that we measure a lot with the companies that we represent is how long before a claim comes in, do you put a legal hold down because you want to make sure that you’re protecting information as soon as possible.
There are dozens and hundreds of things that you can measure and really I think what we’re going to talk about today is how to prioritize what it is that you want to measure and it’s really those types of things you need to think about, is it about how successful your marketing is, it is how successful your revenue generation is, it is how efficient you are in the practice of law, I think that one of the first things you have to decide before you can start to use metrics is to figure out what measurements are going to be important to you.
Dennis Kennedy: Yeah Tom I think there is this sort of job to be done sense to metrics where are you saying okay what is it that I want to accomplish and what am I using this tool to do. So what you may say is my clients think that we’re really slow and they’re unhappy with that.
So if you say well I’m sort of focused on improving client satisfaction and I don’t feel I’m slow. We do — we turn around things the way we always do. You could say oh well what we could do is we could measure the time that it takes say from initial client meeting to the when they get drafts of documents and start to see what that number is and then and then start to question it or if you will interrogate that metric and say is that reasonable, can we make it faster, set goals on that with the idea of saying what would it take for our customers, our clients to feel that we’re not slow.
And so that that sort of time from meeting to first draft let’s say of a contract or will or something that could become a really important metric for you, because you are trying to fix a specific problem.
You could also look into the future and say if, as Tom said, there’s a bunch of metrics where you’d say like if how are we doing on our costs of acquiring new clients, how do we look at profitability over a period time, employee satisfaction so I think that if you say here’s what we think we want to do so with a metric I think that is really going to help you.
I guess Tom one of the big resistance to me always with lawyers I see is one is sort of get me some metrics, go out and find what metrics other people use. So I think there’s a tendency to do that and I also think that lawyers sort of feel everything they do is totally unique and that they can’t really standardize on anything sort of like each client, each case, each matter, each deal is completely different and unique. And so I think that that keeps them away from metrics and they ignore some possibilities there that can be really helpful.
Tom Mighell: So I think there’s a point to that. I think that lawyers may have a point that their practice may have some unique qualities to it that they feel like any way is incapable of applying metrics to, I think the way that I conceive of metrics is that no matter how unique the matter is, you can still compare it against others and come up with a kind of a mean that can help you gauge a relative measure of success.
To me the metrics kind of float a little bit higher above the uniqueness of any particular case and they look at the commonalities of the things that you’re trying to measure. So it really doesn’t matter if all of your cases are different. There is a commonality to what you do that a metric can measure.
So I think it’s a little short-sighted to say that they just can’t work out and frankly of all the different examples of metrics that we’ve talked about, how many of the ones the examples I just gave have absolutely nothing to do with the type of practice you have, the type of law that you practice or the type of case that you have there’s always a way to find a metric that will help.
And one of the things that you mentioned about solving problems by using metrics, I think metrics are also useful for identifying problems. If you don’t know what’s good, you have a sense that something’s going wrong, why are we not getting clients, why are we having problems with X, Y & Z, then a metric can be used to figure out where your problem lies and thereby let you solve it.
So again it doesn’t matter how unique your cases or your practice might be, there are lots of issues that lawyers and law practices have that can be solved or at least better understood by looking at a few measures and/or metrics in their practice.
Dennis Kennedy: Well I think on the in-house side, I think that the metrics can also be useful in communicating with your business owners to say if we look at this and we’ve looked at the metrics for how long it takes to do, let’s say like a standard type of contract and then we say we know there are outliers so we can pull those things out.
And then you go to the business owner and say, okay if we were able to get, like a seven-day turnaround or whatever would make sense but let’s use that as the example with the understanding that if we’re doing a brand new say like total enterprise software agreement, it is not going to be a 7-day agreement.
Then I think that the business owners were always happy about that because they would say, okay if it’s standard we know what to expect and we can make plans on that and we can put that into our project plans and our project manager can build that in and then we have an understanding that there are going to be outliers and if we identify them ahead of time then we’re in that magical world of communication where things just go better and people get happier.
So I like that. Tom I don’t know what as you because I know there’s things that you do, there’s things that I did, but what do you think are the things that typically law firms and lawyers are using as metrics these days that you would say there’s sort of the common ones?
Tom Mighell: Well I mean I think that the metrics that most lawyers would use all revolve around money. They all revolve around either how much it costs to do something or how much revenue is generated by doing something. That would be my guess is, is that one of the more useful metrics will be to determine how much did it cost me to gain this client and how much money do I make from them doing the type of work that I do.
If you are doing a criminal defense practice where you’re not making a lot money, a lot of money versus on the other side you’re doing a corporate litigation practice where you’re making considerably more money, I think those are the types of metrics that you want to be able to understand is what are the most profitable clients that I can get at the lowest possible cost to get them.
So to me the most logical metrics for firms to use are going to be around money, although I would argue that some of the most useful ones are the ones to say what are the — what are some of the factors in the firm that can help me make money. The client satisfaction, an employee satisfaction, to name just a few I think are equally as important but lawyers don’t think of those quite as often as I would like.
Dennis Kennedy: I also think that lawyers tend to look because it is so front and center for lawyers is it is the whole billable hours. So you have the time billed, the time actually invoiced, the time actually collected and some efficiency metrics around that that the people focus on and that becomes just –
To me that gets isolated because you say okay so what improvements are going to come out of that. You’re going to tell people you need to bill more hours, typically good thing find more profitable clients and then because it’s really that next step where the metrics are going to help you.
But I also think that metrics are really useful when you have a small number of them and they come, they’re easily come to mind. So to me a great example is that if you look at the cost of acquiring a new client, in simplest terms it’s going to be your marketing budget divided by the number of new clients you get in a year if you’re looking at an annual cost.
So I think that’s a really important number but I would challenge our listeners to say do what that number is at your firm right now and do you think you should know that number because that may tell you something about how much effort it makes sense to put it into new client and then also to look at the revenue side because that can help you sort out clients and triage and do those sorts of things.
So I think it’s metrics time but we definitely want to talk about KPIs which are sort of metrics on steroids in a certain way, but there are also a simplification and going really specific to identify the metrics that are most important either to you or to your business. Tom you want to take a stab at KPIs?
Tom Mighell: Sure so KPIs are Key Performance Indicators, and I think that one of the best ways I’ve seen them described is that all KPIs are metrics but not all metrics are KPIs. Key Performance Indicators they’re just measurements, the same way that we’ve been talking about them but they are just be obvious they’re key but not everything that you measure can be key because if everything you measured was key then it wouldn’t make a lot of sense.
So there are metrics are still important though. So I guess give an example kind of the difference between a KPI and a metric, is that let’s say one of your KPIs is generating leads to get new clients and you figure out that you see that that has taken a nosedive that you’re not getting as many leads, you’re not getting as many clients and you need to figure out why that happened.
Well you can look at other metrics to figure out what caused that KPI to suffer. So maybe you had traffic to your website dropped because a couple of days your internet provider was out of service and your site was down and so people weren’t clicking on links, they weren’t able to get to it or there were broken links that stopped them from communicating with you to say I’m interested in your services.
That’s a metric that can lead you to like I said before solve a problem and so the KPI is lead generation, that’s the key indicator is how much, how faster are we converting clients, leads to clients and it’s being affected by other metrics which are not as key, doesn’t matter how many days your website might be up or what the broken links were things like that but it all lead somewhere.
So I sort of look at KPI as being strategic, metrics being tactical. KPI is reflecting a business goal or objective, how successful the law firm is in meeting that objective, that metrics support KPIs. KPI support a strategy, those are sort of the ways that I would look at KPIs, anything that I missed?
Dennis Kennedy: Yeah I think you did a really great job there Tom and the thing that that I got really interested in as I start to dig more into KPI is this notion of KPI as being a process. So you have this process and you’re trying to I think really go with a small number of KPIs that really tell you important things and then you’re adjusting those and you’re challenging them and you’re okay so you’re interrogating them and looking at the results.
So I think that traditionally if you looked at hours billed by attorneys and you would on a monthly basis you would have these numbers and I’ve seen this before and somebody would go our billables were significantly down in February and you’re like there’s only 28 days in February, that’s probably the explanation.
So I think that you start to say as Tom was talking about, you have these numbers you go, here’s something that doesn’t look right, do we need to change it a little bit or is there an explanation for something that happened — was the weather bad as it’s been here in Michigan where people might not be working, is that going to have an impact.
So that’s the sort of thing I like because you may have something where you go oh we’re looking at employee turnover and that may not be what’s important to you, it may be turnover of long-term employees, may be turnover most important employees and you can start to kind of tweak these things.
I guess Tom I did want to recommend this short book that that I read from Harvard Business Review press they have something called The Pocket Mentor Series and it’s called ‘Measuring Performance’ and it’s $9.99 on Kindle and if you want a metric that would be really important to you, $19.99 to give you a great overview with specific examples of metrics. This is probably the best 19.99 you’ll spend this year.
Tom Mighell: So I think what I’m interested in Dennis I think you’ve got some kind of specific ideas on really the best way to develop the KPIs, the best way to put them into place maybe you could spend some time talking about that what you think the best strategy would be to leverage KPIs in a practice.
Dennis Kennedy: Well I think first is you do want to sit down and say, what is our strategy, what is it that we want to accomplish say this year and how will we determine that it’s successful and is there what they sometimes call a critical success factor, is that something we can measure and track and sometimes, this is surprisingly easy once you get the hang of it so it’s always good to see examples of metrics.
So if you’re just in a business and want to be more global, you would say we have a strategy this year to have more revenue outside the US, then the KPI you might track will be the percentage of your revenue that’s coming from non-US markets and then you might have a dashboard there is a little chart like a pie chart and see that percentage, you might see whether it’s going up or down, you might track to certain goals and you might have sort of a color system, red, yellow, and green to see how you’re on track with that, and you might have this dashboard.
And so I think that it’s one of those things where if you spend the time upfront which people always don’t like to do but if you do that and you align strategy and try to pick a few things and track those that really gets you off to a good start and then you can get those sort of more in alignment with what you want and get better information that you can turn into action on.
Sometimes, you just have to pick a metric that may make sense. So my friend John Alber when he was at Bryan Cave was doing some metrics to look at how they wanted to analyze what they’re doing, to make decisions on that basis. And he told me he had like maybe four or five possibilities but the one they decide to go with was profit per partner, and they decided they could start with that and key a system to that.
So when they budgeted cases and stuff like that they looked at the impact on profit for partner and as a starting point it’s a really good way to go. So I think that sometimes you can over complicate but I think you want to kind of take a look at what’s important to you and where you’re going and to avoid the thing of saying okay, go out, somebody go out there and find a book or website that tells us what metrics we should be doing.
There are some good examples out there but you want to apply it to what you’re doing.
Tom Mighell: Okay, so I think if I hear you right, some of the best practices we want to talk about with metrics and KPIs is small number, small is best, helps you measure more, helps you get more effect out of that and you want to map those KPIs to a given specific smart goals, strategy that you can measure. You don’t want to use the easiest measures, you don’t want to make them simple because then you can’t stretch, you can’t grow, you can’t learn from that.
You want to figure out what’s easily available and reliable data that you can use. You want to experiment and evaluate and try different and new things and don’t be afraid to try something new if it’s not working, make changes if necessary. I will also say that this is a technology podcast, you need some technology to track the KPIs. You can’t measure what you can’t track, isn’t that what we said before.
When you set your KPIs make sure that you have systems that are capable of tracking them. That may be your practice management system, it might be your billing system, it could be a social media monitoring tool, it could be something but make sure that you have the capability of tracking what you’re trying to measure or else you’re not even going to be able to know what your metrics are.
Dennis, what’s next up in terms of metrics that we want to talk about or maybe give us a sneak preview for a future podcast?
Dennis Kennedy: I want to touch on one topic and then we’ll talk OKR just briefly. I think there is this notion of when you look at metrics is to really think about cause and effect as opposed to correlation. So I think if you choose a metric, you want to actually be sure that you’re tracking something that you do that has the effect that you want.
And the other thing you have to watch as people gaming the system so try to design things in a way where people can’t kind of alter their behavior to turn the chart green or turn the symbol green, and it doesn’t accomplish what you want for your business purposes.
So that gives you KPIs and metrics and there’s a new thing that we’re going to come back to in a later podcast called OKR and Tom you want to tease that up just briefly and take us out of the segment.
Tom Mighell: My only tease there is OKR stands for Objectives and Key Results. It’s something that a lot of very big very popular companies are using now to measure their success, to measure the goals that they have. My initial thought when I start to think about this is that is that it’s not a lot different from metrics and KPI’s but maybe it is and that’s why we want to talk about it in a future podcast.
But right now, let’s take a break for a message from our sponsors.
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Tom Mighell: And now let’s get back to the Kennedy-Mighell Report. I’m Tom Mighell.
Dennis Kennedy: And I am Dennis Kennedy. So Tom and I were talking recently or Tom might say maybe I was talking and he was listening about the high price of eBooks. So the e-book prices initially at least to me were set around $9.99 or less but they’ve definitely crept up in price.
And since we know that the production and distribution costs have to be much less than a physical book. I’ve been wondering why that is and whether we’re just seeing a repeat of the way high prices for CDs and DVDs at a proportion to production distribution costs moved us to streaming and other online options.
Tom, this is something that I’m an outlier on and only I worry about or is this something that maybe I’m onto something here. Do you wonder what’s going on when you see that a hardback version of a book is cheaper than the Kindle version?
Tom Mighell: Okay so I did a little, I didn’t do a little research, here’s the simple answer for this. When Amazon first went into business or when they really got into the business of selling books, they used a wholesale model that allowed them by contract to set the pricing at $9.99 maximum sometimes less but $9.99 was the most that they wanted to charge for a book and they wouldn’t let any publishers charge more than $9.99.
Back in 2012, the Justice Department you may remember they filed a lawsuit against a number of publishers that were alleging that they had colluded to raise the price of eBooks and then over the next few years from 2012 to about 2014 or 2015, Amazon started making deals with most of the publishers, where the publishers finally got the rights to set their own pricing.
So I think Dennis to the extent you’re seeing higher prices on eBooks, this is the reason why they’re higher. I think this is what started it. I would argue in speculation that publishers are afraid that cheaper eBooks, will steal sales from hardcover books and so that’s why they raised the price.
But I’ve also seen lots of statistics that say that eBook sales are actually down that people aren’t buying eBooks very much because the price is so high. So not sure what to make about that, but then let me wrap up with this and say that I did a very highly unofficial, highly unscientific study where I took my list of the books I’ve planned to read, I’ve got a very long list of books that they’re on my too read list and I took the top 20 and I went to Amazon, and I did a test, and I wanted to do the average Kindle, paperback and hardcover price.
And the average prices turned out to be the average Kindle price for the top 20 books on my list were Kindle price was $10.28, the average paperback price was $13.31 and the average hardcover price was $17.77. So if we’re playing a pardon me interruption game here I’m going to have to call No Deal because I’m not seeing the problem that you’re seeing.
And frankly there’s a lot of the paperbacks that are on my list that I can get for free on Kindle Unlimited or I can get for $4.99. So maybe I’m not reading fancy books like you are but I’m not seeing the same problem that you are.
Dennis Kennedy: Well I think that it seems like the pricing is directed to publishers the same way that CD pricing was directed to the music producers and not the artists or the consumers and then it also as you said there are things like Amazon Kindle and these big discounts or things that you can read for free or $4.99, and it’s a matter of timing and whether you know about it and there are a bunch of production costs and other things like that but the fact is that to distribute a digital book in a Kindle format conceptually feels like it’s nothing, right.
So that’s one thing and then I also noticed Tom that there is a sense of with books what I’ll call the movie pricing, so that when a book first comes out, the price is very high then like a movie is when it’s in theatres becomes available in conceptually a less expensive way when it goes to DVD and on Netflix that sort of thing and so you have that that idea of hardback audiobook, Kindle paperback and they all have different pricing and sometimes the Kindle book or there’s a delay of paper book or an e-book and then there’s some new books are available in hardback and an audio right away.
So that’s one thing and then also think it has become really interesting to me as I really like Scribd, which is S-C-R-I-B-D, which has been described as a Netflix for books model and I think that that’s become more interesting because I don’t know that I want to pay $15.99 for a Kindle book as opposed to just paying $9.99 a month that you might do for a Scribd or the Amazon’s service and read whatever books that I that I want.
So now it’s time for our parting shots that one tip website or observation you can use the second this podcast ends. Tom take it away.
Tom Mighell: So for those of you who use the Chrome browser, Google’s Chrome browser you may or may not notice that when you open a new tab there are I think usually Google will give you the last sites that you’ve been to or the ones that you go to more most frequently but for those of you who open tabs a lot or have open tabs wouldn’t it be nice to have something a little bit more interesting. And so I’ve got a link we’ll put it in the show notes to the 15 best new tab extensions for Google Chrome fans.
And so just as an example there is one that does earth view from Google Earth. So you get a different earth view from Google Earth every time you open your tab. Google Arts and Culture will give you a new painting every time you open a new browser tab. There’s one for Dennis’ favorite stock photography site Unsplash which will show a new picture from Unsplash every time.
I use one from Product Hunt where every time I open a new tab I see what the latest products that have been unveiled or rolled out the startups that have rolled out new tools on Product Hunt are all the time. It’s a great list of things to make your opening tabs just a little bit more interesting, will include the link in the show notes.
Dennis Kennedy: Tom I just imagine that if I were to walk up behind you while you’re a computer would be like the most busy thing in the world.
Tom Mighell: No, no, nope.
Dennis Kennedy: But okay so what I have is people always wonder what’s going on in the world of legal innovation and Dan Linna law professor at Northwestern decided to do something about that and he created the Legal Services Innovation Index to kind of let you know what law firms are doing things in innovation and to kind of track that.
So there’s a new version that he just put out and you can find it on his site at legaltechlever.com. And so this is version 1.02 and I think they added a 112 new additions to that catalog of law firm innovations. So if you want to see some of the things that law firms are doing that they categorize as innovation, this is probably the best place right now to see all of that it was at one place and big thank you to Dan Linna and his group of students who worked on the update.
Tom Mighell: And so that wraps it up for this edition of the Kennedy-Mighell Report. Thanks for joining us on the podcast. You can find show notes for this episode at tkmreport.com. If you like what you hear, please subscribe to our podcast in iTunes or on the Legal Talk Network site where you can find archives of all of our previous podcasts. You can suggest a topic at bit.ly/2QNwhZU. If you’d like to get in touch with us please reach out to us on LinkedIn or remember you can always leave us a voicemail, we love getting voicemails for our B segment, that number is 720-441-6820.
So until the next podcast I’m Tom Mighell.
Dennis Kennedy: And I am Dennis Kennedy, and you have been listening to The Kennedy-Mighell Report, a podcast on legal technology with an Internet focus.
If you liked what you heard today, please rate us in Apple Podcasts. And we will see you next time for another episode of The Kennedy-Mighell Report on the Legal Talk Network.
Outro: Thanks for listening to The Kennedy-Mighell Report. Check out Dennis and Tom’s book, ‘The Lawyer’s Guide to Collaboration Tools and Technologies: Smart Ways to Work Together’ from ABA Books or Amazon, and join us every other week for another edition of The Kennedy-Mighell Report, only on the Legal Talk Network.
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