How Smart US and Australian Personal Injury Firms Incentivise for Maximum Cash Flow

If you are the principal of a law firm then you are in business. You've got customers (clients), costs, creditors, cash flow. You've got an organisation to lead, employees to feed, and goals to exceed.

But you will never achieve lift off without reliable cash flow.

Why is it that so few law firms seem to put real thought into how to systematically maximise their cash flow?

In the past the approach has been to treat employees like cash flow pinatas. If you're not seeing the results you hoped for, then you mustn't be whipping them hard enough.

But this leads to burn out, frustration, 'quiet quitting', 'malicious compliance', viral LinkedIn articles re-coining old buzzwords...and staff turnover. Not to mention, a solution that requires you to always be in the office cracking the whip does not scale.

Smart law firms, like other smart businesses, know that you lead through incentives and measurable outcomes. Identify the results that you want, the outcomes that will drive those results, how you will measure the achievement of those outcomes, and attach incentives to them.

Your law firm will be shaped by what you incentivise (intentionally and unintentionally).

Many firms simply resort to mandating things like hours in the office and billable hours quotas. But neither of these things drive cash flow.

Cash flow is king. Your bills are due now. You need to hire and pay people now. 'Money now' is worth more than 'money maybe'.

For personal injury firms, the most important driver of cash flow is matter velocity - the time it takes the firm to take a case from sign up to settlement. You get paid for finishing cases, and the faster you finish the sooner you get money into your firm.

Merely setting an over all matter velocity goal for your cases is not enough. Personal Injury cases run too long for that. You need 'lead indicators', indicators that allow you to become aware that a case is off course when you still have enough time to fix the problems and get it back on target.

Smart US and Australian firms have started to realise this over the years. These firms pick key events, deliverables, and other common milestones in their cases that mark meaningful progress.

These firms then attach a target to the reaching of these milestones (i.e. X number of days from X event) - these are 'lead indicators', they let the firm know in advance whether the case is on target to achieve its matter velocity goals.

As all principals know, the sooner that you know about a problem, the more that you can usually do to fix it.

For example, the thriving New York personal Injury firm of John H. Fisher, P.C. picks 4 key milestones for their cases and awards bonuses to the team work on that case if those milestones are achieved on time or early.

Those milestones are:

1. Discovery Responses (days between receiving defendants' discovery demands and the service of the plaintiff's responses) 30 Days
2. Depositions (days between service of plaintiffs' discovery responses and the first deposition) 90 Days
3. Completion of Discovery (days between receipt of defendants' answer and the filing of of the note of issue) 180 Days
4. Completion of the Lawsuit (days between filing of the lawsuit and the first day of trial or the settlement of the case) 18 Months

There are of course more milestones to a personal injury case than this, and you do need to set clear lead indicators for those milestones as well. However, for John Fisher's firm, these milestones have been determined to be the most critical, and so bonus incentives are tied to achieving them.

Another approach seen in one highly profitable Australian personal injury firms is to set lead indicators for milestones on their cases to track whether cases are on target, but instead to attach the incentives and KPIs to the number of claims completed each month (as opposed to incentivising specific milestone targets).

Setting clear measurable expectations that drive your cash flow is now more important than ever. KPIs that are tied to cash flow have indisputable legitimacy for staff (as opposed to, for example, mandating an arbitrary number of days in the office, or incentivising client bill shock through billable hours quotas), and they provide the accountability required for modern hybrid working arrangements.

As an aside, meaningful KPIs will boost staff morale and resilience. The kind of people that you want in your firm are those that got into law to help people. Finishing cases efficiently helps people. It changes lives. The right people will be drawn to your firm to do just that.

If you are looking for a simple 'just works' solution to implement these kinds of cash flow maximising policies in your law firm, Hivelight has you covered. Hivelight makes it easy to break cases into milestones, set lead indicators, and be alerted when cases are are approaching the target dates and due dates set for each milestone to be completed.

More than that, Hivelight will come with built-in roadmaps (aka workflows or work plans) of milestones and tasks for personal injury and other matter types in Australia and the US (Starting with New York State) - roadmaps that you can edit and adapt for your firm to get started fast! Head to Hivelight.com and submit your email to register your interest, or email us at [email protected].