In this episode, Mary Juetten explains how to use key performance indicators (KPIs) to “start with the end in mind”—to set goals for your law firm and measure your progress (or lack of progress) towards those goals. Make goal-setting and KPIs a part of your planning for 2017 (and keep an eye on the front page for more tools from Mary to help you implement them).
Just a heads up: the recording did get a bit choppy. We cleaned it up as best we could, but there are a couple of places where we just had to leave it.
Mary Juetten
Mary Juetten co-founded the Evolve Law community of early legal tech adopters, and wrote Small Law Firm KPIs: How to Measure Your Way to Greater Profits. She also created Traklight business risk management software.
You can follow Mary on Twitter and LinkedIn.
Thanks to Ruby Receptionists and Xero for sponsoring this episode!
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Transcript
Announcer: Welcome to The Lawyerist Podcast with Sam Glover and Aaron Street. Each week Lawyerist brings you advice and interviews to help you build a more successful law practice in today’s challenging and constantly changing legal market, and now, here are Sam and Aaron
Sam Glover: Hi. I’m Sam Glover.
Aaron Street: And I’m Aaron Street. This is Episode 100 of The Lawyerist Podcast, part of the Legal Talk Network. Today we’re talking with Mary Juetten about how to measure the numbers that tell the story of your firm’s success.
Sam Glover: Today’s podcast is sponsored by Xero, beautiful legal accounting simplified. Find out more at xero.com. That’s X-E-R-O.com.
Aaron Street: Today’s podcast is also sponsored by Ruby Receptionists and its smart, charming receptionists who are perfect for small firms. Visit callruby.com/lawyerist to get a risk-free trial with Ruby.
Sam Glover: First of all, Episode 100. I’m kind of psyched that we’ve made it all the way to 100.
Aaron Street: What if this is the end?
Sam Glover: It’s not the end, because I’ve already recorded the next couple of conversations.
Aaron Street: Oh, thank goodness.
Sam Glover: But it’s a big number. We’re kind of closing out the year, and since we’re talking about goals, we thought we would tell you a little bit about some of our goals for 2017, what you can expect from Lawyerist.
Aaron Street: Yeah. We have all sorts of cool projects we’re hoping to launch in the next month or two.
Sam Glover: Yeah, like the Florida Bar Association partnership.
Aaron Street: We’ll be starting in January working with the practice management advisors in the Florida State Bar Association to provide them some new additional practice management content from Lawyerist, so that’ll be a fun way to work with a giant state bar association and reach out to some new lawyers who might not otherwise know about us.
Sam Glover: I’m really excited, because right now I’m putting the finishing touches on a pretty good redesign overhaul of the website. So, starting in January, Lawyerist is going to look a little bit different. I think it’s going to be easier to navigate, hopefully a bit quicker, and it’s going to support some other new projects that we’re working on.
Aaron Street: Yeah. I’m also excited because your new redesign is very focused on being even more mobile-friendly. I just looked today, and 40% of Lawyerist’s visitors now are coming from smartphones; so, I think it’s very important that our mobile website be the best it can be.
Sam Glover: Yeah. I kind of thought that mobile visits would cap at something like a third with lawyers, because most lawyers are sitting at their desks looking at a desktop computer most of the day, but maybe not. Maybe it’s just going to keep going up. So, good timing to do that. I think it’s going to look very pretty on your phone from now on.
Aaron Street: Another one of our 2017 goals is, we regularly get requests for help in picking practice management software or other law office software, and so we’re going to build some new resource pages on the site to give readers more tools for helping decide which software is best for them.
Sam Glover: I suppose it’s worth mentioning: We currently help people find IT consultants if they’re looking for help with their systems: buying computers, outsourcing stuff, building processes, assembling documents, document automation, all that kind of stuff, and we help people find website developers and designers, because those are the kinds of questions we get all the time, and we don’t do it. We don’t do consulting.
The resource pages are really cool. We’re going to be starting with practice management software and then hopefully building out a pretty good resource of all kinds of things to help you pick the technology for your firm and other products to help you move on. Then kind of the super-secret skunkworks project that we haven’t started yet is we’re going to finally figure out a way to let people join Lawyerist and become a member.
Aaron Street: Whatever that will mean.
Sam Glover: Yeah. We’re not exactly sure what it’s going to mean yet, but people are always asking like, “How do I join Lawyerist? How do I support Lawyerist?” We want people to be able to do that and we want to build up our community and make it even more tight-knit if we can, so we’re going to figure that out. Honestly, if you have ideas, go ahead and email us. We’d love to hear about it.
Aaron Street: Absolutely.
Sam Glover: Those are some of the things in store for 2017. Anything else you can think of?
Aaron Street: That’s a good list. We have the next TBD coming up in February.
Sam Glover: Oh, yeah.
Aaron Street: That will be an exciting event in St. Louis. I need to interrupt, though. In Episode 99 we had a very interesting, thought-provoking, but not funny, intro.
Sam Glover: That’s true.
Aaron Street: We promised that in Episode 100 we would swear more and be funnier.
Sam Glover: Damn it.
Aaron Street: So far we’ve just listed a bunch of goals we want to accomplish, which is basically the least funny thing we could have possibly done with Episode 100.
Sam Glover: Do you have any jokes?
Aaron Street: No. I don’t do that.
Sam Glover: We did swear in the title of Episode 99, though, so I feel like we got part of our promise through there.
Aaron Street: Okay. I can accept that. I can accept that.
Sam Glover: Lack of hilarity aside, let’s move on to today’s podcast with Mary Juetten, which I think you’re going to like, because it’s a really good way to launch your 2017. We’re going to be talking about key performance indicators: why you should have them, what they should be, and how to implement them. Speaking of what’s coming in 2017, Mary is going to put together a worksheet for us so that you can do it yourself. So, tune in to the conversation now.
Mary Juetten: Hi. I’m Mary Juetten, and I’m excited to be here. My background is a mix of accounting—I am a professional accountant in both Canada and the United States, and I do have a law degree, but I’m not a practicing attorney. I spent eight years dabbling in process re-engineering for folks like Pricewaterhouse and then off to run a software division of a company. I’ve worked for an engineering company. I was a director of finance for a large law office. I spent most of my 30 years in business in and around billable hours.
Sam Glover: What is it that you do now? It’s Evolve Law and Traklight, right?
Mary Juetten: Oh, yes, only looking backward. Evolve Law is a community to increase the adoption of legal technology and actually foster change within the legal profession that I started with Jules Miller who is out of New York and formerly of Hire an Esquire. We got together and we were commiserating about the long sales cycle into the legal industry.
My day job is Traklight, which is a software platform that I came up with and founded shortly after law school, and the idea is that we’re using software…It’s like a TurboTax for business risk and intellectual property, or IP, identification. We built this system that will help potential clients or customers figure out what their legal needs are or their business needs, and then it, of course, then is basically issue-spotting for the attorney. That, plus writing this book, is what I’ve been doing for the last about 18 months.
Sam Glover: Right. So, we’re here in part to talk about the book, Small Law Firm KPIs. I think it’s a really good time to be talking about that, because it’s the end of the year, time for New Year’s resolutions and goal-setting for 2017, and KPIs are really all about goal-setting, right? And then evaluating whether or not you’re meeting them.
Mary Juetten: Exactly. People think, “Oh, I’ll get started on that after Q1,” but it’s really great to get started at the end of the year, because you can go back to a full year of data. Right now we’re in December ’16, so you could go back and pull certain measures for all of ’15 and then have ’16 to look at also and set some targets and goals for next year.
Sam Glover: Let’s start out by just talking about what KPIs are, because I’ve been throwing that term around now for the last five minutes and I don’t think that I’ve stopped to define it. What are KPIs and what are we doing?
Mary Juetten: Well, KPI, it’s a fancy acronym. It sounds daunting, but really it’s just any kind of measurement that you are going to benchmark yourself against, either your own goals or your industry goals. So, they are not unique to legal, which is good, because key performance indicators have been around in business and other professional services for many years. The idea is that you’re going to measure something that is a driver of the success of your business, which…I’ll go out on a limb here. Your law firm is a business. It’s figuring out what [inaudible] to your overall mission or goal of your law firm and then backing into how you’re going to measure that.
Sam Glover: The idea is, they’re key performance indicators. Is your law firm performing? You’re right. If you’re not willing to acknowledge that your law firm has a business element, then I guess stop listening to our podcast.
We can’t measure everything, but it turns out we can measure most of the things that indicate whether or not this business is healthy, growing, successful, and even, are we doing right by our clients? Are our clients happy with us? We can really measure, is our pipeline healthy? You phrase it in the book as, “You’re measuring inputs and outputs.” We’re trying to figure out what’s coming into the firm, what’s going out of the firm, comparing the two to figure out whether or not things are going the right way.
Mary Juetten: Right. The other piece that you can lay over it is that there’s cash and clients. Your clients come first, because they’re the ones who provide you with the cash. It’s like taking the analogy from business: Your clients come first. They really do come first in terms of measuring, because happy clients are going to give you a profitable practice. It’s not the other way around. So, we really focus on metrics that impact cash. The other reason we focus on cash is that the reason that most small businesses fail is a lack of cash flow.
Sam Glover: That makes a lot of sense.
Mary Juetten: The other thing about inputs and outputs is that, in the law historically, we’ve been focused on what we’re providing. We’re providing to the client our expertise, our hours. It’s not to say that [inaudible] of hours isn’t important, but it is really important not to focus just on what you’re providing to the client, or the output, but actually look at what the client’s needs are and the client’s experience.
Sam Glover: Traditionally, firms that are tracking anything are probably tracking things like utilization rates or realization rates, meaning how many of the hours that you work are you actually getting paid for, which is a KPI, right?
Mary Juetten: Mm-hmm (affirmative).
Sam Glover: I think.
Mary Juetten: Yes, it is.
Sam Glover: It’s one, and it doesn’t really reveal much about the health of your business, although maybe it’s helpful. So, what are we talking about? Should firms have one, or two, or 20 KPIs? In your book there are a bunch. I think the idea is that, if you’re really tracking your firm’s performance, you should probably be tracking most of these things; but, is there a guideline of how many things a typical firm should be tracking?
Mary Juetten: Well, the way that I approached it is this—This is my accounting background—from a framework perspective and mapping that over a lot of the lawyers that I spoke with. They think of their practice in terms of workflow, so we tried to figure out a way of matching the workflow and the KPIs. So, if you think of your workflow broken down into…What we did in the book was seven different areas. You want to make sure that you’re measuring at least one thing from each of those seven areas.
Then it gets into the old law school “It depends.” It depends on your firm and where you are in the lifecycle of developing your firm. If it’s a new firm, you certainly don’t want to start out measuring all…I think there’s 43 or 41 KPIs in the book. I don’t advocate that anybody does that. You want to start out with measuring KPIs in each of the areas, but maybe go into depth in an area where you might be having some challenges.
For example, if you haven’t been seeing a lot of repeat clients, like, you feel like, anecdotally, you see clients and then you’re not getting referrals from those clients; you’re not getting repeat business if that is the type of practice that you’re in, you might want to start looking right away at the KPI which is the net promoter score around client experience before you waste too much time worrying about your firm culture or how much it costs you to acquire those clients. You better figure out if something’s wrong or if there’s something that you can do better around the experience that you’re giving your clients.
Sam Glover: One of the things that struck me as I was reading is that there are a lot of things where I already have the numbers, and I could look back over the last 12 months, or probably three years, and just pull the numbers out of my accounting software, out of my billing software, and I can probably just figure a lot of these things out, but some of the things are not so clear.You just mentioned net promoter score, which a lot of firms aren’t doing and we’ve talked about in some depth before…Billie Tarascio and I went into some depth about it on the podcast…but also things like your client pipeline. You recommend doing some things, like assigning a few different values to potential clients, deciding when somebody is an actual qualified potential client, and then, are you winning that business?
You just mentioned net promoter score, which a lot of firms aren’t doing and we’ve talked about in some depth before…Billie Tarascio and I went into some depth about it on the podcast…but also things like your client pipeline. You recommend doing some things, like assigning a few different values to potential clients, deciding when somebody is an actual qualified potential client, and then, are you winning that business?
Even before that happens, you use two terms which I like, the ‘go’ and the ‘get.’ How likely are they to go ahead and get legal services, and how likely is it that your firm will get their business? Just give it 25, 50, 75, 100% likelihood and then set a value on the likely value of that business, and you can start putting a dollar value on your potential client pipeline, which probably tells you how healthy your firm is going to be in one or two or six or 12 months, depending on how long your workflows are, which kind of blew my mind. I was like, “Wow. You could totally do that at any firm. You can figure out how healthy you’re going to be in six months. That’s amazing.” Love that.
Mary Juetten: Thank you, but I did not invent it. In the last about 18 months I was always focused on the front-end piece when I was selling Traklight. I’d be talking to lawyers and I’d ask them questions like, “Well, how many clients do you have in your pipeline?” but not using those exact words. Most potential law firm clients, or lawyers, could not answer questions like, how much does it cost for them to acquire their client? How much are these different types of clients going to be worth to them?
I had lawyers tell me, “Oh, I have enough clients,” but then they couldn’t quantify if that’s enough for the next three months. Is that enough for the next six months? Do you have to hire more people? The pipeline is something that has been used for years and years and years in sales.
Sam Glover: You mentioned in that chapter about client acquisition costs another thing, which is sort of the lost opportunity costs of the time you spend talking to clients. If you have a billable rate … or even if you don’t, if you use flat fees, you can still work backwards from that and figure out what an hour of your time is worth. If you’re spending an hour of time with every client, and an hour of your time is worth $200, then your cost of acquiring a client is the number of hours you’re spending with potential clients plus whatever other marketing expenses you might have divided by the number of new clients you get in a month.
Most lawyers seem to think that, “Well, I get all my work by word of mouth, so my cost of acquiring a client is the cost of a few lunches and dinners,” which isn’t right. Your math is off, right?
Mary Juetten: Right.
Sam Glover: That should blow some minds, because I know a lot of lawyers like to think that being a lawyer means you have these really huge return on investment numbers, right? Like, “Oh, yeah. For every dollar I spend, I make $10 or $20.” But what’s really going on there is you’re failing to capture all of the costs that go into acquiring a new client. I think actually putting it on a spreadsheet and tracking it over time is going to blow some minds.
Mary Juetten: Exactly, because the whole idea that if you do get your clients through word of mouth, that is the best way to get clients … Even better, though, can be if your existing client, if you can upsell that client. If you’re in there meeting, working with them, and then you can suggest something new and then provide your services, then that’s great. Then you truly haven’t given up any time to acquire the client. Acquiring brand new clients, it does take a lot of effort and it takes time, which, it doesn’t matter how you’re billing, your time is still worth something.
What people tend to do is look at it. If they are costing into the cost of client acquisition, they’ll say, “Well, I pay this person $50 an hour, so that’s how much it’s costing me.” It’s that lost opportunity. If that $50-an-hour person could be billing out at 200, that’s the number that you have to use, because you’ve lost the opportunity for that person to be billing at the 200.
This is how I got back into KPIs. I did them 20-something years ago on a project. Out of college, where I went in to do a turnaround, we were putting in place student satisfaction, a lot of these same KPIs. It’s funny, because the framework there was a framework of seven also, and, of course, this has changed considerably over 22 years. But it was explaining opportunity costs and how Traklight reduces the cost of client acquisition for certain types of lawyers. That was how I got back into talking about KPIs within law.
Sam Glover: You sort of had to prove the value to your potential customers.
Mary Juetten: Exactly. We have a little video that shows it on the Traklight [inaudible] which shows an attorney spending 10 hours. He only gets two clients, and each of those clients are worth X; so, you have to take the dollar value of all of his time and divide it by two. That was $1500 for each client. That’s our little math example.
It’s one of those things where, even if you don’t go to the trouble of tracking it on an ongoing basis, if you just sit down and think about it, it can lead to some significant changes in the way that you do your client prospecting or client development.
Sam Glover: Right. As I’m reading, I’m thinking, “Okay. Like, I see the value of tracking goals and metrics for every firm, but it seems to me that there are two types of firms that would really benefit from this. One is probably already doing it, and that’s the entrepreneurial lawyer who is really trying to figure out how to do things differently, or better, or scale up, build a different business model.” If you’re already thinking in terms of business strategies and models, you’re probably already thinking in terms of KPIs in one way or another and you probably should just get this book so that you’ve got the spreadsheets.
The other type of firm which I think is all over the place is the lawyer who’s just working his or her ass off and doesn’t feel like they’re ever doing as well as they want to do, right? Like, they just can’t figure out why the numbers aren’t working. The numbers are working somehow. You just need to kind of sit down and put them all together and figure it all out, and it’s going to become very clear what kinds of changes you need to make. I think some of the examples you gave in the book really illustrated what this type of firm could look like. I thought, “Those are the two types of firms that really could take advantage of KPIs, even if they’re a good idea for just about every firm.”
We’re going to take a short break to hear from our sponsors. When we come back, I want to follow up on that thought, and then I want to talk about how to implement this: what kinds of tools you might need and what sort of things, specific digits and numbers, you need to track. We’ll be back in just a few minutes.
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Okay, we’re back. Mary, if you wanted to follow up on that, let me hear it.
Mary Juetten: One of the things you were mentioning with these lawyers that are killing it and then not really understanding where they’re at…When I was writing the book, Thomson Reuters did a little survey of some of their customers and the Firm Central customers, who provided some really interesting feedback in terms of how they measured success with respect to profitability. A lot of them were measuring whether they were profitable by looking at their bank balance.
Sam Glover: Which doesn’t really tell you anything.
Mary Juetten: No, particularly if you’ve written a lot of checks, for those of you who do balance your checkbook…the whole idea that you are looking backwards, in the rearview mirror. You’re running around. You’re delivering great client services. But you look at your bank, and you’re thinking, “Well, I’m not doing well.” Well, is that because there’s a lot of your work that hasn’t even been billed out, or is that because you haven’t collected it? Is that why you don’t have enough cash?
KPIs are kind of like levers of…Hey, if I feel like I’m doing well, then what are the different levers, what can I change to actually demonstrate that I’m doing well? Or, am I really doing well? Just because you’re busy doesn’t mean you’re profitable.
Sam Glover: They’re a forensic tool, but they’re also a forecasting tool.
Mary Juetten: Yes, and that’s why around the pipelines you [inaudible] some of these spectacular failures, not of law firms, but of businesses, where they kind of wake up one morning and can’t make payroll. Well, you don’t want that to happen with your law firm, and it starts with making sure you have enough clients in the pipeline. That’s why the framework starts with client development, because that’s where the whole process starts.
Sam Glover: I realize that KPIs, and goal tracking, and measuring has been around forever in the normal business world. In the law firm business world, this sounds a little bit new, and so people may be thinking that most of this stuff involves technology. I think the message that you are trying to hand out is that technology can make it easier, but it doesn’t really have anything to do with that. Is that right?
Mary Juetten: Correct. You can basically run your entire firm using a calculator…I wouldn’t suggest this…and printing out invoices, and you could record it all in Excel, and not even use an accounting package, or a time and billing, or practice management. As long as you have Excel, you can do key performance indicators. Now, you could even do them without Excel.
Sam Glover: Yeah. You could do it with pencil and paper on a ledger, right?
Mary Juetten: Yes, but now we’re flashing back to like 30 years ago, when I did accounting on those 14-column sheets, I think they called them.
Sam Glover: But if it makes you feel better, and if carbon paper, and pencil, and ledgers, and graph paper is your thing, you can do it that way.
Mary Juetten: You can. I would not suggest it.
Sam Glover: Let’s not, though.
Mary Juetten: Let’s not. Let’s not. But you don’t have to go any further than Excel. When I was writing the book, I wanted to make it so that anybody could do this. You don’t have to say, “Well, you have to go buy Firm Central fill-in-the-blank with every other legal practice management system,” or “You need QuickBooks,” or “You need Xero.” It doesn’t matter what system you have. The most important thing is that you have good data, and it’s not the system.
Sam Glover: The data is stuff like, how many people contacted our firm seeking representation last month? How many qualified potential clients contacted our firm last month? How did they find us? How much money did we make last month? What unbilled time is sitting out there that we haven’t converted to invoices? How many invoices have we failed to convert to cash? It’s digging out all of those numbers and then keeping track of them.
Mary Juetten: Right. A lot of the systems, if you are using technology, a lot of them will export files that are Excel files. You can either have someone in your office, or you can outsource … Outsource what you don’t know. That’s another theme in the book, is that you need to do all of this. You might have gone to law school to escape the numbers, which is fine, but then make sure you’re paying somebody to actually do this for you.
You can link all these spreadsheets together. You can put them in Excel. Wouldn’t it be lovely if all of this was in your legal practice management system? But, for now, it’s not; so, creating the Excel for now is kind of the basic starting point. My hope is that somebody will take what’s in the book and put it in a legal practice management system and have this be on a dashboard. For now, though, we use Excel.
There are some very fancy software that the bigger firms are using; like, McCarthy Tetrault in Canada has implemented a net promoter score, and they’re doing like a firm-wide pipeline, but they’re using the bigger versions of tools, like Tableau and things like that. That’s just not cost-effective for a small firm; so, Excel it is.
Sam Glover: Pick a KPI that you think everybody should be tracking, and let’s walk through what kind of data are we trying to collect to put into it, and then how often should we be tracking it, and then what do we do with the numbers. What are they actually showing us, and how should we react to them? Is there a KPI that you particularly like that you could kind of walk us through the process of collecting it, measuring it, and evaluating it?
Mary Juetten: Sure. I usually do net promoter score, but you mentioned that you and Billy worked on net promoter score. We could talk about-
Sam Glover: Let’s talk about the cost of client acquisitions, since it’s something that we’ve talked about a little bit already. What are the data inputs that you need for that? How do you collect them and measure them? Then what does the number look like? What are we comparing it to? Then what do we do about it?
Mary Juetten: Client acquisition costs. What you’re trying to do is figure out how much you spent to acquire the new clients that month. We’ll just use that as an example. In a month you have the amount that you spend on sales and marketing, like the lunches … You might be advertising … so in your financial statements, you should have a line which is the sales and marketing spent. You want to have that number link in to where you’re calculating this for each month. You’re not trying to figure out which client you spent that money on [inaudible] this, kind of how much did you spend all month trying to get new clients.
Sam Glover: Do I count stuff like going to a bar committee meeting? That helps me get the clients, but it’s more of like a professional membership thing that I do.
Mary Juetten: It’s an interesting question for two [inaudible]. It depends, and there’s kind of no right or wrong in terms of …You’re going. You’re meeting other lawyers who might refer new clients; so, maybe it’s professional development. But, if you really want to examine how much you are spending even indirectly on your client acquisition, put it in. It’s better to put more things in than leave them out and sort of fool yourself. So, you have that type of spending. Then you want to calculate the non-billable, or the client development, business development, whatever you’re calling it. You might have somebody in your office specifically assigned with marketing. Some of the firms that are above the 10, crowding into the 30 lawyers, will have a marketing person. That person’s salary should be included in this calculation. If that person is not billable and they are only working on marketing initiatives for the firm, then put in their salary. If they are billable, then you would be putting in the hours that they spent that would otherwise be billable.
Sam Glover: That’s non-billable time, but I still want to track it so that I can figure out how much it’s costing me.
Mary Juetten: Right. Let’s say you’re a startup lawyer, so you went and you presented and sponsored an event. You have the cost of the sponsorship, but then there’s also the time that you could have been billing, and so that goes in. The easiest way to do that is to have a non-billable code that’s called Client Development and have that tracked.
What you do is you throw it all in and you [inaudible] that number with the number of new clients that you’ve opened. It depends which system you’re using, but you want to have New Client Matters or Number of New Clients. This is where the KPIs, they start to overlap.
Sam Glover: Are we getting out a percentage, or ratio, or what are we looking at there?
Mary Juetten: That’s a dollar value. For example, let’s say I spent $30,000 and I got three new clients, just because that’s very easy math, because I don’t have a calculator. So, $10,000 per new client.
Sam Glover: So, you better be making more than $10,000 per client.
Mary Juetten: Exactly. It’s one of those things where you get the metric, and then people are like, “Well, what’s the right answer? What should my target be?” It depends. If those three clients are going to generate you $100,000 each in billing, then that’s great. That’s positive. If they’re going to generate $1500 each, then you need to look at, is there a better way of acquiring these clients?
Sam Glover: So, you really need a second KPI to assess this, which is like the average dollar figure per client or something like that.
Mary Juetten: This is where the KPIs, where you start to see why it’s dangerous just to go off and say, “I’m only doing one KPI from one area.” You want to look at your pipeline, and figuring out your average value per client helps you with this KPI. The good news is a lot of the data you’re going to collect and use, it goes in multiple places, which is why, even within your KPI spreadsheet, you can link it so that your number of new clients is used in four different calculations, for example. So, you would want to look and say, “Okay. Is $10,000 reasonable?”
I did a presentation with Billie Tarascio, and her firm had done some of these KPIs. She did a whole study on conversion rate: How many clients was she converting out of the numbers that she talked to? That led her to then figure out, “Well, it’s not a very good rate.” She and I got together and we figured out her cost of client acquisition, just using her time, and she was shocked. So, she changed up the way that she was prospecting new clients, what technology they were using.
What ends up happening is, it’s a little bit like pulling on a string, like on the yarn, because it will unravel first before you put it all back together. So, another thing with KPIs is you have to be open to change, unless you just want to look at your KPIs once and then sort of shove the spreadsheet.
Sam Glover: Well, I was going to say…So, once we’ve tracked them and we have them, what do we do with them? How often do we check them and then the end result? You really start out from the premise…I think in the instruction you say, “Look. If you’re not willing to change your firm, shut this book and walk away,” because there’s no point. Right?
Mary Juetten: I don’t remember being that direct.
Sam Glover: I’m paraphrasing.
Mary Juetten: It’s true. There’s no point, and it’s very frustrating to your staff and anyone else who’s supporting you by creating these KPIs if no one’s going to look at them. If no one’s going to look at them, and worse, if nobody’s going to take any action. If you’re cool with the status quo of the firm and how much you make, and you don’t want to learn anything more, then don’t implement KPIs.
Sam Glover: Right. Ignorance is bliss.
Mary Juetten: Yeah. Be happy and then retire. I just think that, particularly around net promoter score and some of these other metrics, it’s going to be the differentiator for some firms.
Sam Glover: The net promoter score’s one where, when people start tracking it, they’re, “Oh, my clients love me.” Then they get their net promoter scores back and they’re like, “They don’t? Like, I was really sure that they did, and I guess they kinda don’t.” So, you might find out more information than you want to know.
Mary Juetten: Exactly. The net promoter score one…It’s funny. I was at an event in Miami, and Dan Lanier was talking about it from Avvo. He was saying, “People don’t recognize it can actually be a negative number.” So, when somebody’s very freaked out because their net promoter score is 30, the worst it could be is negative 100; so, you have to put it into perspective.
I know most lawyers that I’ve talked to, they want to set their net promoter score at like 75, because that’s human nature, right? You want to think that more people than not like you.
Sam Glover: So, do I get up every morning and check my KPIs and decide what changes to make, or is this a weekly, monthly, annual thing? What do I do with them?
Mary Juetten: What I recommend is that in the first quarter…Let’s say you get all excited about KPIs and you are off to the races. What you need to do is figure out what’s a reasonable number. Then, once I’ve calculated them, I’m not going to look at these every day or every week. I think to start you should look at everything after the first month to make sure that you don’t have any really wacky results. Even the ones that I recommend are quarterly or annual, just take a look to make sure that the data’s at least going in. Then it becomes a monthly. When you sit down and review your financials, you should be also looking at your KPIs. In the perfect world, you wouldn’t [crosstalk].
Sam Glover: Because you are sitting down and reviewing your financials monthly, right?
Mary Juetten: I skipped right by that. That’s an assumption. When you sit down with your accountant, or your admin, or whoever, or yourself, if you’re doing your own financials, you should be able to look on your KPI spreadsheet. There’s some things you can do with Excel, where you can make little graphs, so you can have a visual depiction of it, but it’s really one of those things where it’s not…It’s not Facebook, so it’s not a daily view.
Sam Glover: Right, and it’s those long-term trends that in many cases are more revealing and interesting anyway. A spike is a spike. It may or may not mean anything until you see it over the long term.
Mary Juetten: Exactly. We also suggest that you go back at least a year. For anything that you have gathered, I recommend that you go backwards and try to create things. Obviously, you can’t go back in time and do net promoter scores. I wouldn’t suggest sending out surveys to clients from two years ago, anything like that. I think you need to go forward with the things that you haven’t done. Measuring firm culture…There’s some easy surveys out there. If you haven’t done that before, don’t worry about it; just go forward.
But there’s a lot of these, like you mentioned at the beginning, particularly around profitability or productivity, where you could go back in your information. When you’re trying to figure out kind of what’s the average type of matters that I have for my firm, you’re probably going to have to go back a couple of years.
My other piece of advice is don’t get too detailed or granular right away. Look at it from an overview. I like to use the example of collection. If you have a cash problem, it’s either because it’s jammed up. You’re not billing, or you’re not collecting. So, do a quick calculation to try to figure out where is it jammed up, or look at your accounts receivable, your aging. Look really quickly. Like, “Oh, wait. Half of my receivables are over 90 days.” That’s where the problem is. So, I don’t have to change my billing necessarily. I just need to change my collections.
Sam Glover: I don’t want to go against the whole premise of KPIs, but some of these things, if you can just grab the numbers real quick, you can just pull them up to answer a question that you might currently have about the health of your firm. Even if you don’t track it over time, you just pull some information out of your accounting software and go, “Oh, I see what’s going on here.”
Mary Juetten: Right. Yes, it would be nice if everybody was methodical and perfect, but then we’d all be accountants. No, I’m just kidding.
Some KPIs are better than none, and really, people can spend a lot of time worrying about things. I suggest that you just kind of dive in, try to look at something; but, as you mention, look at each month for the first quarter and then let things go and start looking at them … Particularly, don’t change your targets every month. That defeats the purpose of budgeting.
Sam Glover: Let me wrap up with a couple of things here. One, you’ve got a few days left to plan for the new year. I think one of the things you should do during that time is get a copy of Mary’s book. We’ll have a link in the show notes on lawyerist.com. Get a copy of her book and implement some of the KPIs. If there are particular areas of concern in your practice, go with those. As she recommends, pick one from each of the seven categories, whatever, but start tracking some of the things that concern you about your practice, especially if you either feel bogged down by your practice or you really want to grow, or change, or do something cool in the coming years.
Keep an eye out on our site. We have a plan for Mary to do kind of a starter spreadsheet for KPI tracking. It might be a month or two before that comes out, but keep an eye on our site. You’ll be able to download that, and she’ll kind of explain and walk you through how to implement it. I think this is a great way to start the new year, is with a new set of goals and a plan for tracking them and meeting them so that you can improve your firm.
Mary, thank you so much for being with us today. I really appreciated the introduction to KPIs and I hope that you come back someday to talk with us more about it and to help people move their practices forward based on the numbers.
Mary Juetten: Well, thank you very much, Sam. It was fun to be here.
Aaron Street: Make sure to catch next week’s episode of The Lawyerist Podcast. If you’d like more information about today’s show, please visit lawyerist.com/podcast or legaltalknetwork.com. You can subscribe via iTunes or anywhere podcasts are found. Both Lawyerist and the Legal Talk Network can be found on Twitter, Facebook, and LinkedIn, and you can download the free app from Legal Talk Network in Google Play or iTunes.
Sam Glover: The views expressed by the participants of this program are their own and do not represent the views of, nor are they endorsed by, Legal Talk Network. Nothing said during this podcast is legal advice.
Podcast #100: KPIs and Starting with the End in Mind, with Mary Juetten was originally published on Lawyerist.com.