Canadian Lawyer

w w w . C A N A D I A N L a w y e r m a g . c o m F E B R U A R Y 2 0 1 8 21 mance indicators and they can tell you down to 1/100th on everything. Why do we, as a legal business, think we don't need the same type of tools?" But, he warns, the indicators must be key, and there can't be too many. By keeping track of just five to 10 key areas, comparing them to previous months or years and also to other firms, mem- bers of the firm can easily spot upward or downward trends, giving them the opportunity to investigate further. To get there, Mary Juetten, author of Small Law Firm KPIs: How to Measure Your Way to Greater Profits (published by Thomson Reuters, which also pub- lishes Canadian Lawyer) and founder of Traklight.com, suggests approaching it as a framework and beginning with the pain points. She uses accounts receiv- able as an example. "A lot of lawyers in Canada don't collect the money up front," she says. "What I tell lawyers if they're experienc- ing a bit of a cash crunch, the first place to look is your accounts receivable." The longer period of time that passes after the bill is issued increases the like- lihood of that bill not being paid, she points out. If a lawyer tracks those days that pass, they'll soon discover if this is an area that's cause for concern. But Juetten says one indicator does not provide a full picture. On the other hand, focusing on too many indicators will weigh down the process. So she suggests picking a handful of KPIs that matches the major steps in the firm's workflow. Without them, she says, problems could well build exponentially before they become obvious. Or, she says, it may be difficult to actually find the cause of the problem. "If you try to fix something without the right data, without the right KPIs, it's like somebody taking medicine without being diagnosed first," she says. Edmonton lawyer Greg Miskie says the big picture at Duncan Craig LLP, where he serves as chief operating offi- cer, consists of about three or four KPIs. But there are several subsets that can be examined if there are concerns or issues. The firm's accounting software provides access to hundreds of data points that can be combined in a variety of ways and then transported onto a spreadsheet, providing quick and com- prehensive access to the firm's own data. So if a particular KPI looks off, there is the ability to drill down with little effort. The bottom line, he says, is that KPIs allow trends to quickly become apparent and comparisons of the data could show gaps or opportunities. That can lead to some useful internal conversations. "Everyone works really hard and puts in long hours and is trying to represent their client's interests to the best extent possible, and so we really don't want to distract from that process," says Miskie, adding that he wants to ensure the firm is offering efficient service to clients who are also asking about their KPI tracking. "It's very important to us to have our own data and also to understand how we can meet some of the things they're asking for." A firm may also want to look down the road to see where it's heading. As a way of judging interest in the firm, McAree looks at the conflict checks con- ducted as soon as someone enquires about retaining Willms & Shier. "It is representative of the volume of activity [and] interest in prospective clients looking for environmental legal advice at our firm," he says. "The num- ber of inquiries should, theoretically, result in a certain number of open files, and open files equals either new clients or existing clients with a new file, but, ultimately, conflict checks leading to new files leads to revenue. "It becomes an analytical tool focused on productivity on the whole." Occasionally, the firm will calculate the percentage of conflict checks that turn into files. If the lawyers' collective number of conflict checks drops, they know that a percentage of the revenue will be down in coming months. Including cash per day in a month- ly benchmark report and not just bill- ing hours provides a sense of the firm's financial health. That might be required by a financial institution providing credit facilities. Other areas that can provide some indication of when it's time to put a push on collections include accounts receivables and the number of days reve- nue is tied up in receivables, says Mabey. "Those firms who get the cash to the partners the fastest are the firms that are the most attractive to lateral hires," he says. There is potential to examine a wide variety of metrics and then drill down to specific issues, practice areas and even individual lawyers. That could put additional pressure upon lawyers to not just perform but keep a diligent eye on the financials. "The more pressure we get from clients on rates and the more pressure we get from the bottom up on expenses and having to invest more in technol- ogy, like any business, I think we have to keep an eye on our costs and our productivity and our profitability and understand where there are differences and whether we can improve them," says Miller Thomson LLP's chief oper- ating officer, Orest Szot. An area that is currently develop- ing for many firms is profitability. One practice group might be compared to Stephen Mabey, director of Applied Strate- gies consulting for law firms, suggests that KPIs be realistic and be presented in a way that can be quickly absorbed. He believes their main objectives should: • reflect the firm's strategy and goals; • offer a view of what the firm intends to achieve; • provide a picture of where the firm is going. "I recommend to clients if your benchmark sheet, your score sheet at the end of the month, goes longer than a page, you've lost everybody," he says. "If you stick to the sim- plicity, you get the most meaningful KPIs." Effective KPIs

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