Key Performance Indicators

Key Performance Indicators

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If your setting goals for your law practice (if you’re not, you should be), you need to establish key performance indicators (or KPI)  for measuring your firm’s performance relative to these goals.

Investopedia defines key performance indicators as a set of quantifiable measurements used to gauge a company’s overall long-term performance. KPIs specifically help determine a company’s strategic, financial, and operational achievements, especially compared to those of other businesses within the same sector.  KPIs can measure firm revenue, client retention, or process outcome. This article focuses on process outcome.

Flow Rate

Flow rate (sometimes referred to as throughput rate) refers to the movement of units into and out of, a business process. For our discussion, units are client files and the business process is the steps taken in from the opening to the closing of each file. Tracking flow rate can provide your firm a treasure trove of revenue.

We all know that clients represent revenue. The more clients, the more revenue. But it is not that simple.  How many times have you said , “we’re so busy, we can’t keep up“?  More clients do not always mean more revenue. In fact, too many clients can be dangerous for some firms.  But how can that be?  Two words.  Flow rate.

There is little doubt that client acquisition is the life source of a practice.  But the reality is, the money is in the billable hours.  Without billable hours, the number of clients is of little consequence.  Therefore, the financial success of your firm lies, not with the number of clients acquired but rather, how quickly hours files are processed. And measuring the efficiency of that process needs to be a key performance indicator for your firm’s financial success.

What is your Firm's Flow Rate?

So, how quickly is your firm processing files? There is a simple way to make a quick assessment of your firm’s flow rate.  Look around your office.  Then, walk around the rest of the office.  Are there piles of files? If so, your flow rate is likely slower than it should.  Each pile is indicative of an inefficiency in the firm’s flow rate (and every file, deferred revenue!).

Though backlogging is one of the more glaring symptoms of slow flow rate, there are other more sinister and insidious symptoms.  Seeing them, however requires your honest assessment of your practice.

  1. Are clients continually calling for updates?
  2. Are colleagues continually calling for updates?
  3. Are you frustrated with staff?
  4. Are you and your staff continually behind?
  5. Are you missing deadlines?
  6. Are bills going out late?

And the problems associated with inefficient flow rate go beyond lost revenue. Others include

  1. Decrease in client loyalty and satisfaction
  2. Decrease in client retention
  3. Decrease in client acquisition
  4. Increase in employee satisfaction
  5. Increase in employee absenteeism and turnover
  6. Increase in bar complaints
  7. Increase in malpractice claims

Are you too Busy to Keep Up?

The magic words I hear all the time are, “we’re too busy to keep up”. Though “too busy” is a good problem, inability to “keep up”, not so much. The good news is, it is remediable.

As an operations consultant, I see slow and inefficient flow rate all the time.  After all, identifying workflow inefficiencies and improving flow rate is what I do for a living.  And though many of my clients use key performance indicators for measuring such things as client acquisition and firm revenue, 99% of them do not use flow rate as a key performance indicator.

If you are not using flow rate as one of your key performance indicators for your practice, you should.  Tracking flow rate to improve its efficiency can be the quickest way for you to increase your firm’s revenue.


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