Managing Your Law Firm with Key Performance Indicators

Episode Notes

Transcript

The Legal Toolkit

Managing Your Law Firm with Key Performance Indicators

06/20/2017

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Laurence Colletti: Hello listeners it’s Laurence Colletti, executive producer of Legal Talk Network. I want to tell you about one of our more hilarious yet still very informative podcast called “Thinking like a Lawyer.” Twice a month hosts Elie Mystal and Joe Patrice from Above the Law, dive in what it’s like to see the world from a lawyer’s perspective, meaning, they jabber on about politics, current events, this that and the other, sometimes with the guests, and sometimes not, but if you looking for a filterless podcast, check it out! “Thinking like a Lawyer” on the website of legaltalknetwork.com, in iTunes or in your favorite podcast platform and now, back to the show.

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Intro: Welcome to Legal Toolkit, bringing you the latest legal trends and business initiatives to help you manage your law firm with your host Jared Correia. You’re listening to Legal Talk Network.

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Jared Correia: Welcome to what promises to be yet another fantastic episode of the legal toolkit here on Legal Talk Network. If you are looking for the Royal Order of Water Buffaloes meeting, that’s down the hall. If you’re not and you are returning listener, thanks for coming back. If you’re a first-time listener, hopefully you’ll become a longtime listener and if you’re interested in the true meaning of covfeve, actually I just can’t go there.

As always I’m your host Jared Correia and in addition to casting this pod, I am the founder and CEO of Red Cave Law Firm Consulting, which offers subscription-based law practice management consulting and technology services for law firms. Check us out at redcavelegal.com to find out more. You can buy my book “Twitter in one hour for Lawyers” from the American Bar Association, on iTunes, at Amazon and probably even at Wordsworth Books & Company in Little Rock, Arkansas.

Here on the Legal Toolkit, we provide you each month with a new tool to add to your own legal toolkit, so your practices will become more and more like best practices.

In this episode, we’re going to talk about KPIs for small law firms. Don’t know what they are, hold on. However, before I introduce today’s guests, let’s take a moment to thank our sponsors. Answer 1 is a leading virtual receptionist and answering service provider for lawyers. You can find out more by giving them a call at 800 answer 1 or visiting them online at  HYPERLINK “http://www.answer1.com” www.answer1.com.

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This podcast is also brought to you by Amicus Attorney, developers of legal practice management software. Let amicus help you run your practice, so you can focus on what you do best, practice law. Visit amicusattorney.com and get started today.

And today for your listening enjoyment, we’ve invited to the show one Mary Juetten who is the founder and CEO of Tracklight and founder and Managing Director of Evolve Law. Tracklight is the only self-guided software platform that creates your custom intellectual property strategy and assesses business risk. Evolve Law was built to accelerate technology adoption in the legal field.

Mary has dedicated her more than 30-year career to helping businesses achieve and protect their success, specializing in leading companies and transition or startup phases and helping them to create sustainable, operational and financial growth. Mary is an international writer, speaker, and mentor and sits on The American Bar Association Group Legal Services Association Board. She’s just written “Small-Firm KPIs; How to Measure Your Way to Greater Profits” and that will be the subject of our show today.

So Mary welcome to the Legal Toolkit.

Mary Juetten: Well, thank you for having me Jared.

Jared Correia: This is going to be good. So let’s get into it. I’m going to start by asking the question that most of our listeners have. What the heck is a KPI and perhaps more importantly, why would a lawyer want to use KPIs?

Mary Juetten: So KPI means Key Performance Indicator and another way of looking at it is, they are metrics or measurements. It’s something that you use for your practice to measure the performance and the most important letter in the acronym KPI is the indicator part. It’s an indicator of how you’re doing and why would lawyers want to use them because you start off with creating your law firm, it’s your business that you practice, hopefully it’s your means of making a living, so you need to have performance indicators that you can benchmark or set targets and work against.

Jared Correia: That makes a lot of sense. I think lawyers understand this idea of having business goals and achieving them even if they’re not the greatest at actually doing that and we’ll talk about that in a little bit.

(00:05:02)

Now, you and I both know I think that big law firms use KPIs far more aggressively than small law firms do. So how did you acquire an interest in this topic in the first place and then why did you decide to narrow your particular focus to solo and small firm attorneys?

Mary Juetten: Well, I did work at a large law firm and we did use some key performance indicators, but I have to say a lot of the big firms still focus on the indicators that have to do with performance or profits per partner and how I got into this and specifically into the small law side of it was as I was talking to lawyers about using Tracklight which is the software platform that lawyers can put on their website to help triage or issue spot using technology, when I was selling to these lawyers, I was trying to explain to them that it would reduce their cost of acquiring new clients in that this was better that they spent a small amount of money on software rather than giving up an entire hour where they could be generating revenue. And I was met with a lot of blank stares, which you know what you go to law school, you don’t go to business school. There are two different things so I get it, so that’s how I got into it.

Jared Correia: That’s interesting. So you have this notion then that small firms would use different KPIs than big firms do?

Mary Juetten: Well big firms are starting to move over to using more KPIs on sort of what I call the front end, the client development, client intake cost of customer acquisition pipeline. Some of the larger firms are starting to move to that. The smaller firms I think are in a position to implement KPIs simply and quickly because they’re just so much smaller as you know in a big firm and it takes forever to change something so.

Jared Correia: Oh absolutely that makes a lot of sense I think. All right, say I am listening, I’m a small firm attorney and I’m like man I really like this notion of KPIs, so how do you even get started?

Mary Juetten: Well, you get started by figuring out what is your biggest pain point and I like to think of KPIs in sort of different buckets. There’s KPIs that have to do with your clients, there’s KPIs that have to do with cash and there’s KPIs that have to do with your own compensation or compensation of your associates and partners, so it really becomes an exercise to say what is my biggest problem. Do I not have enough cash or do I not have enough clients, are people leaving me, so then that can direct you as to which area you should start measuring.

Jared Correia: That makes a lot of sense. In most law firms that level of analysis to try and determine which areas are largest need is new for them as well. I would imagine has been your experience.

Mary Juetten: Yes, I’ve had a lot of experience with law firms where they just want to do everything. They want to and it’s great that they’re enthusiastic of embracing something that’s coming from outside the law but KPIs are prevalent in all professions and actually something like Net Promoter Score is in all types of businesses. So the key is to focus on one or two KPIs to get started, so that you don’t overwhelm your staff and yourself.

Jared Correia: That’s a good idea. Yeah you don’t want to jump into it too quickly without planning ahead. I like this. So Mary, I want you to hang in for a second but we’re going to try something new in the show. This is first time I’ve ever done this, so I’m a little bit worried. We’re going to do two breaks today, so we’re going to take a break and then we’re going to come back and talk to you for a little bit, but then we’re going to take a second break, so we’ll see how this goes.

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Okay now that you know what to buy, let’s continue our discussion with Mary Juetten of Tracklight and Evolve law. Alright Mary, so we talked a little bit about firms jumping into KPIs, now to get started with that, I think that was a great discussion. So here’s probably the next question that a lot of solo and small firm lawyers are going to have is okay, what kind of technology do I need to implement this and when they ask that question, I think what they really need to ask is what additional expenses are there. So, I’ll let you wax philosophical on that.

(00:10:03)

Mary Juetten: Well, it’s a simple answer. You don’t need to add any new technology to simply start measuring your KPIs. It would be wonderful if everyone could afford to have software that creates a beautiful dashboard and everything, but it’s not necessary and I really believe in keeping things simple and starting at a very high level, so you can use any information that you would already have in your accounting system or in your practice management system and KPIs are universal. It doesn’t matter what kind of system you use. You pull out the data, make sure it’s good data and you can get your KPIs calculated.

Jared Correia: So, there’s a potential for using existing reports if I’m hearing you correct which is good. I think a lot of law firms would appreciate that.

Mary Juetten: Yeah, I mean if you have Excel, it makes life easier and you can create pretty graphs and things in Excel, so that’s pretty low-tech because most offices would have some sort of office suite.

Jared Correia: Oh yeah, yep, I think Excel is the low-level tech entry point for just about every small firm lawyer I know. Alright Mary, so it’s good that you could just use Excel and you don’t have to really jump into any high-level technology to manage KPIs but if you wanted to access available technology solutions, what is out there for small firms that would want to do something on a higher level.

Mary Juetten: Well, there are several practice management systems that are now working on creating some dashboards and really the key is trying to get everything linked together. So if you look at some of the practice management systems that have either lots of integrations like a Clio or have lots a good data like a Firm Central or a Zolo suite, they’re coming up with some dashboards.

The other approach is to use something like a Tableau, where you’re going to pull from all your systems and set up a dashboard to pull all the data and present it in an easy way, but again it’s not necessary. You can use simple Excel and it’s quite powerful in terms of making graphs and alert you when you’re off target.

Jared Correia: A Tableau very fancy. I believe that’s the first time that term has been used during the history of this podcast and I think that’s appealing to lawyers too because a lot of them especially small-firm lawyers like to cobble stuff together and just use what they like to use, so that’s good to know as well.

Let’s get a little generic here before we take our next and final break and this is a subject that is near and dear to my own heart. Lawyers grew up their law firms in so many and various ways as I’m sure you know. So in your experience, which you’ve had a lot of in a lot of different places, what’s the worst business management mistake, the soul and small-firm lawyers make?

Mary Juetten: They don’t delegate and they don’t outsource. There’s just this need to control that you don’t see in other professions and I’ve worked in the engineering profession, I’ve worked in the accounting profession, and in law firms and there’s this need to do everything themselves and that is a terrible way to do business.

Jared Correia: That’s fair. I like that. Now bring it back around to our general discussion topic so, there are some ways that KPIs might be able to help lawyers delegate better?

Mary Juetten: Yes, because you can look at your KPIs and figure out where your problems are. So for example if you look at your cash collections and you find out that it’s taking you 150 or 120 days to collect your bills from your clients, which that’s not an exaggeration, that’s kind of the average among small-law firms, then you know that you need to delegate a little bit more power and authority to whoever’s doing your collections and you need to look at your billing process and work with your team to figure out how can you bill quickly, what changes can you make, like for example collecting money online what are these things that you can do and that all requires delegation.

Jared Correia: I like where this is going. So the plan is collect more data and analyze it, work less and make more money, is that a good summation?

Mary Juetten: Yes and I have happy clients.

Jared Correia: Oh! Happy clients, yes. That’s a good one too. All right, so this is all good. All right we’re going to take our last break here, which is our second break of the podcast, again very new for me. I’m still wrapping my head around this, but we’ll back shortly with more from Mary Juetten of Tracklight and Evolve Law.

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(00:15:04)

You’ve made it through our second break. This is the first show ever where we’ve had two breaks and you came back and you continue to listen to us, so that’s what podcasting excellence will do for you and we’re back once again with Mary Juetten of Tracklight and Evolve Law and we’re talking about small‑firm KPIs. So, let’s rank them Mary. What are the most important KPIs for solo and small-firm lawyers?

Mary Juetten: Well to me, it all stems from clients. So if you have happy clients, they’re going to tell their friends and/or other companies depending on what type of law you practice, so I think one of the most important metrics is the Net Promoter Score or some other way of figuring out if your clients are satisfied with the legal services that you’ve provided and because you can’t run a business without cash, metrics around cash collection, those are the two most important and you’ll notice that the whole compensation profits per partner and all those type of calculations, I don’t think they’re as important particularly if you’re a solo.

Once you get to have a few people working with you and you start delegating, then it’s very important to measure performance but not necessarily billable hours because you can’t pay your bills with billable hours. You can pay your bills only with cash, so you need to make sure that as you figure out what your performance KPIs are going to be that it all dovetails into how you’re rewarding or compensating your associates.

Jared Correia: I think those are some good points you make, so just for folks out there who don’t know what the specific KPIs you mentioned stand for or work out to be, what is a Net Promoter Score and how does it work within the law firm environment.

Mary Juetten: So Net Promoter Score most of us will see that in our day-to-day life. When you buy something and somebody comes back at you with a quick question on email usually and it’ll be how likely are you to refer, you know, in this case, the law firm to your friends and family and then you’re given a scale where one is not at all likely and 10 is extremely likely.

So there’s a simple calculation for that, so basically use detractors people who aren’t going to recommend you from promoters and then it gives you an absolute number score and that can be used to see how happy your clients are and I always tell people to ask why or why not as part of the follow-up questions, you’ll get some interesting information.

Jared Correia: So, I refer to detractors as haters but that’s the only quarrel I have with the calculation, so one more follow-up is this. The large law firms are obviously interested in data like profit for partner and metrics like that, just because they want to see how profitable their many and various employees are. In a solo or small-firm environment where there are fewer attorneys and maybe one managing partner what is the focus for the financial metrics that you would run in that case?

Mary Juetten: In that case, you should be looking at what is a profitable matter or type of matter. For example, let’s say you have you know five different types of start-up law packages that you provide and you also do kind of outside, in-house counsel type work. You need to analyze the different types of offerings and see which are profitable. Are you staffing them properly? Are you creating proper pricing and all of that comes from figuring out that KPI around what I call contribution margin or profitability or if you think of it as like little mini income statements for your matters.

Jared Correia: And that’s a great way to look at in a smaller firm environment. So now for probably the most important question of the day, a lot of people have like a favorite monkey, I’m not talking about like a rhesus monkey or a spider monkey, I’m talking about the 1960s monkeys. Mine, for example, is Mike Nesmith he was my favorite monkey. I still like a green pom-pom hand and stuff so Mary first of all who is your favorite monkey and second of all what is your favorite KPI?

Mary Juetten: Okay, so my favorite monkey would be Davy Jones.

Jared Correia: Understand that.

Mary Juetten: I was a small person back in the 60s, but I was alive in the 70s, so I did like Davy Jones and so my favorite KPI for small law would be the pipeline and actually it’s my favorite KPI for large law too because it’s the idea of looking at what business is there coming down the pipeline and how you set up your law firm to service those folks whether that’s using your own staff, stepping up using some of the cool technology that we have out there today or staffing up using contract lawyers and everything. I think by measuring your pipeline, you actually start running your firm more like a business.

(00:19:59)

Jared Correia: Davey Jones is a legit choice. I mean, I like him. I’m a Nesmith guy myself as I said but like sadly we will never know what Davy Jones’ favorite KPI is but I would encourage you for if you’re one of our younger listeners to look up the Monkeys on Wikipedia and then after that get your pipeline score settled.

So last question, Mary much of what you’ve done in some is advocating for efficient business practices regardless of what business you’ve been working with and now you’re focused on law firms, do you have any favorite productivity hacks that you can share with the listeners?

Mary Juetten: So as has been alluded including in the introduction, I’ve been doing this for quite a long time, so I was around before email but email has been part of my life ever since Lotus Notes and that’s over 20 years ago and I use my email inbox. I aim for zero. It’s rarely zero, but I use it as my to-do list and it’s how I don’t lose track of any of the number of things that I’m doing and it’s also a great way of feeling like I’ve accomplished something when that email box goes down to zero.

Jared Correia: That’s good. I like that. Well we made it. We’re at the end of another episode of Legal Toolkit and I should just take a moment give some props to producer, engineer, extraordinaire, first being Laurence Colletti, and Adam Lockwood who pulled this stuff together for us. I really appreciate it.

I and they will be back on future shows of course with further insights into my soul, the soul of America, and the legal market. If you are feeling nostalgic, however, from my dulcet tones, you can check out our entire show archive anytime you want at legaltalknetwork.com.

So, thanks again to Mary Juetten founder and CEO of Tracklight and a founder and Managing Director of Evolve Law for dropping by the Virtual Studio today. Mary can you tell folks how to get in touch with you via Tracklight and Evolve Law and also let them know where they can pick up your new book on small-firm KPIs.

Mary Juetten: Sure in reverse order, the small-law firm book on KPI it’s available on Thomson Reuters, Legal Solutions, but it’s also available on Amazon and should be available in both US and Canada and if you’re listening to this and you’re outside of either the US or Canada, just drop me an email at eveolvelaw, it’s info at evolvelawnow.com and you can check out all the different legal technology companies that we have as part of that community at that evolvelawnow.com and then if you’re a business or IP startup type lawyer and interested in Tracklight, Tracklight is about, tracklight.com and you can always reach me there also at it info at tracklight.com and thanks so much for having me today Jared.

Jared Correia: Oh thanks Mary. This was great and so your order of operation from here on now folks is checkout Tracklight, checkout Evolve Law, and then go buy Mary’s book. Thank you all for listening. We’ll be back again next time and in the meantime, have a very pleasant Valley Sunday.

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Outro: Thanks for listening to Legal Toolkit produced by the broadcast professionals at Legal Talk Network. Join host, Jared Correia, for his next podcast covering the current business trends for law firms. If you’d like more information about today’s show, please visit legaltalknetwork com. Subscribe via iTunes and RSS. Find Legal Talk Network on Twitter, Facebook, and LinkedIn or download the free app from Legal Talk Network in Google Play and iTunes.

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