Measuring performance is the first step in improving a company’s operational efficiency. Legal software makes benchmarking easy, but too many companies make one of these six common mistakes that undermine the value of performance metrics.
1) Not understanding the data – Legal software can easily produce pages and pages of statistics about your company’s performance, but without context, the data is just noise. Managers need to know how these values map to performance; only then can they make effective decisions that will have a positive impact on performance. It’s better to focus on a few well-understood key metrics than to produce huge reports that no one will read or understand.
2) Emphasize numbers over other information – Revenue or billable hours are easy metrics to quantify in legal software, but don’t forget to look at less concrete values such as customer satisfaction rates or repeat business. Don’t focus so much on hard numbers that you ignore other aspects of running the business that affect perceived customer value. Consider hiring an outside company to survey customers about your company to ensure you get unbiased results.
3) Playing Stats – Once lawyers realize what metrics are being tracked using legal software, they can start manipulating those numbers. They focus on driving some measurable statistics, like hours billed per month, and pay less attention to other aspects of the job that can actually drive customer perceived value. Often this is not a deliberate attempt to skew the numbers, but rather an unintended side effect of benchmarking and operating with a performance metric.
4) Focusing on the past – As investment advisers warn their clients, past performance is no guarantee of future results. Companies that spend too much time trying to match this year’s financial performance to previous years end up making the same mistakes year after year, or failing to respond to changes in the market. Past performance is a valuable benchmark, but you still need to consider how to grow your business in today’s environment.
5) Ignore Competitors – If you compare yourself only with yourself, you are limiting your potential. Instead, include information in your lawyer’s software about the performance of companies in the same region or the same legal areas to gain a more strategic view of the industry. Don’t be afraid to compare yourself to much larger companies, as the basic principles of efficient operation do not differ by company size.
6) Playing it safe – Many businesses reach a comfortable level of operation and become complacent as long as legal accounting software shows acceptable profit each year. An annual profit does not equal growth, so implement a strategic plan that seeks new customers or new market sectors.
Any company can perform comprehensive benchmarking activities with the latest generation of lawyer software, but like any tool, software is only as good as the experience and policies that underpin it. Take control of your law firm by using performance measures to chart a course for future success.