Performance measurement is critical for law firms, writes Lexvoco principal Anthony Wright.
(Opinion) -- Measuring performance is critical in most organisations as it allows teams to chart their progress and measure success, allocate resources efficiently, and demonstrate value to stakeholders. Performance measurement is important in business as it helps improve the management and delivery of products and services, and ultimately affects outcomes.
Despite its importance, few legal teams are effective at measuring their performance – mostly because suitable metrics are not always easily identified, legal work is typically reactive, and performance measurement just hasn’t really been ‘a thing’ that in-house lawyers have had to consider.
Many in-house lawyers have been conditioned to believe that ‘no news is good news’. Their CEO and managers will let them know if they’re not performing and if nothing is said, it is assumed that the job is being done adequately.
This is changing however. Today every dollar counts in business and many in-house lawyers now find themselves in a position where they are required to prove their ‘value’ in a commercial sense. Therefore, being able to measure performance efficiently and effectively to demonstrate worth is increasingly important.
There are three overarching reasons why measuring performance is commonly practiced in business, and why it should be in legal.
Conversely, measuring performance can waste time and demotivate staff if not done well. Legal reports are often not streamlined and instead are just a dump of all the data that could possibly relate to legal services. Capturing data can also be time consuming and when it feels like data is being collected purely for data’s sake, it can be demotivating for staff.
Measuring performance involves identifying what to measure, determining good methods for data collection, collecting the data, and analysing it.
Below is an approach to measuring performance successfully
Can the KPI be defined reasonably well? Is it easily collected? Will it drive the right behaviours? The answer should be yes to all of these. If it’s not, question the value of the metric.
By Anthony Wright, principal at Lexvoco.
Despite its importance, few legal teams are effective at measuring their performance – mostly because suitable metrics are not always easily identified, legal work is typically reactive, and performance measurement just hasn’t really been ‘a thing’ that in-house lawyers have had to consider.
Many in-house lawyers have been conditioned to believe that ‘no news is good news’. Their CEO and managers will let them know if they’re not performing and if nothing is said, it is assumed that the job is being done adequately.
This is changing however. Today every dollar counts in business and many in-house lawyers now find themselves in a position where they are required to prove their ‘value’ in a commercial sense. Therefore, being able to measure performance efficiently and effectively to demonstrate worth is increasingly important.
There are three overarching reasons why measuring performance is commonly practiced in business, and why it should be in legal.
- It sets goals, motivates teams and spurs competitive drive. This in turn improves staff engagement, purpose and performance. Lawyers are generally motivated people who will react positively to SMART (Specific, measurable, attainable, relevant & timely) goals.
- It helps demonstrate value to employers and clients. Lawyers understand the concept of proof, yet are not typically expected to prove their own value.
- It helps with the allocation of resources (staff time and capital) to what matters most.
Conversely, measuring performance can waste time and demotivate staff if not done well. Legal reports are often not streamlined and instead are just a dump of all the data that could possibly relate to legal services. Capturing data can also be time consuming and when it feels like data is being collected purely for data’s sake, it can be demotivating for staff.
Measuring performance involves identifying what to measure, determining good methods for data collection, collecting the data, and analysing it.
Below is an approach to measuring performance successfully
- Select metrics that may be helpful, and start with a top down approach.
- Better – for example does it reduce claims or risk, balanced with the most “helpful” and valuable advice?
- Quicker – given most clients assume the advice is technically correct, speed is a key, if not the most critical, driver. If speed improves, cash flow should as well. This is overlooked by many legal teams when reporting KPIs/value.
- Cheaper – this is the evaluation of total resource consumption, internal and external plus overheads and on-costs.
Can the KPI be defined reasonably well? Is it easily collected? Will it drive the right behaviours? The answer should be yes to all of these. If it’s not, question the value of the metric.
- Test the metrics over a few months.
- Settle on the most helpful ones and try to minimise the number of metrics you use. Ideally they should be “MECE” – mutually exclusive and collectively exhaustive.
- Report the data simply and helpfully. Consider borrowing someone from another business unit, for example finance, to help set up the most effective spreadsheets.
- Develop continuous improvement initiatives, with feedback loops so the team knows what is, and isn’t working and why.
- Celebrate success and react to poor performance.
By Anthony Wright, principal at Lexvoco.
