This column will be the first in a series that will explore the design, development, common mistakes, critical success factors, implementation, strategic value and ROI of performance dashboards, and how law firms can use them for making good business decisions.
Why a Dashboard?
Dashboards are a simple way for law firm management to monitor KPIs across the firm. Because dashboards can provide graphics and visuals that encourage storytelling that demonstrates the active interaction with the data being presented, they can provide a law firm a wide perspective of overall functional area performance. The most common functional areas are financial and operational, but with the increased focus on client service, marketing and business development, KPIs in these areas are fast becoming more valuable. The review of these various metrics establishes a platform for law firm business and operational excellence and uses these KPIs to drive productivity. Also, dashboards direct process improvement efforts by converting business data into action-oriented information—helping coordinate actions among all stakeholders (law firm and clients) and assisting in execution of strategic goals. Dashboards assist law firms in establishing the foundation for benchmarking organizational processes through goal alignment across the firm. In short, align law firm personnel, implement strategies and measure performance.
The Dashboard Design: What Gets Measured Gets Done
Designing a dashboard can sound like a tedious task, but to keep your dashboard on target and focused on the metrics required, you need to ask yourself a few questions:
- Why are you creating a dashboard?
- Do you need to track certain KPIs?
- Who needs to see the dashboard?
- Where will the data come from?
When designing a dashboard, you must first identify the KPIs you wish to analyze. The KPIs should be firm specific, meaning specific to your law firm and not blended data from other survey resources. It is important to remember that no law firm uses the same KPIs, so it is critical that your dashboard include KPIs that will drive success and assist in implementing/ tracking performance to guide your firm’s strategy.
When selecting your KPIs for your dashboard, remember to categorize the information and identify the data sources as quantifiable, practical, directional, actionable and financial. This will assist law firms in focusing on the correct KPIs. Examples of target setting or firm business objective KPIs to consider include:
- Financial performance. Billable hours per timekeeper, average billing rate, leverage, billings, revenues per lawyer.
- Learning and growth. Employee development, education/ CLE, desired performance, human capital, organizational effectiveness.
- Client service. Process improvement metrics and efficiency, focus and added value, client service and retention, growth rate/growth in top clients, practice areas per client, number of lawyers per client, number of matters per lawyer.
- Internal processes. Process improvement and project management, work managed, quality of work, innovation, excellence, results.
While the above-mentioned KPIs are vast and have several subsets, the challenge in designing a dashboard is deciding which KPIs to include. The goal is to have consolidated information, ideally limited to one page, that tells your story and provides the objective criteria to make good business decisions. A rough example could be a financial statement, which broken down can illustrate the balance sheet, the profit/(loss) statement and a cash flow statement, and how they flow to one another to tell a story of how the law firm is performing. Good or bad performance and the reasons why can be seen on the dashboard, but if the information is not on the dashboard, it creates an opportunity to perform a more detailed data review and possibly add a few other KPIs that continue the story.
Good Metrics, Good Decisions
As the story evolves, the objectivity of the data provides the great reveal. If dashboards are going to be effective in assisting law firm leaders in making good business decisions, KPIs must be clearly defined. Law firms need to identify what data needs to be collected. When attempting to identify the data needed, the best advice is to go for the “big rocks” first and chase the “pebbles” next. Carefully and methodically identifying data is essential because accuracy is crucial. Law firms should not try to collect every KPI at once or go down the road of “analysis paralysis.” Accurately interpreted, KPIs can be appropriately analyzed and acted upon—good metrics, good decisions!
In our series of columns, we will dive deeper into the dashboard design, including the importance of benchmarking KPIs and reviewing some of the common “check engine light” mistakes before implementing an effective performance dashboard.