Key Performance Indicators, Part 1: How to Choose and Integrate Your Firm’s KPIs

KPIs measure an individual’s performance against the business’s primary goals. There are several types; some emphasize financial performance while others focus on customers, operations, and talent management. As KPIs are tracked over time, they reveal trends and other data-driven insights that can guide your business decisions.

Given that there are dozens of KPIs to choose from, how do you decide which ones represent the most value for your firm? And once you’ve chosen them, what about integration? In part one of this series, we will answer both questions of those questions. Stay tuned for part 2 where we provide some examples of what your firm’s KPIs could be.

How to Choose KPIs

Before you choose firm-specific KPIs, consider your practice’s unique goals and how you measure success. As you review your options, answer the following questions:

1. What Metrics Do You Want to Measure?

Start by determining what information gives you important insight into your firm’s performance and what data you require to obtain that information. With law firms, one critical KPI is new client acquisition, which you can measure through caseload numbers. Another might be financial growth, which you can determine by reviewing month-to-month financial records.

2. What Data Do You Have?

Establishing your KPIs begins with reviewing the data you already have available. Using your practice management system, confirm the data being collected and determine whether you actually have all you need. If your systems are integrated with one another, pulling the data you need should be straightforward. If you’re lacking the data needed for a certain KPI, how do you get it?

3. What Are Your Targets?

Every firm must set its own targets before choosing KPIs for measurement since they are unique to the practice. Depending on the ROI per client, your target cost for client acquisition will vary. The amount a criminal defense attorney will spend to acquire clients (who are usually one-time only) will be different from what an estate planning lawyer might spend, given that estate plans are lifetime documents.

How to Integrate Your Chosen KPIs

After you’ve decided which KPIs you want to monitor at your firm, how can you actually use the information they deliver? There are six steps you need to follow:

• Make sure your KPIs are relevant to the goals of your firm.?Understand what each KPI means, and why it’s important for your firm.
• Establish targets.?Make sure your targets are measurable and in line with your firm’s goals.
• Assign accountability.?Who will be responsible for ensuring each KPI reaches its goal? Best practice is for each individual to have one KPI, though it isn’t unheard of for smaller firms to have as many as three.
• Keep track of each KPI’s data.?While some KPIs might immediately reveal actionable insights, others require a few months of data before trends appear.
• Analyze the results.?Make sure everyone has the tools they need to go over their KPI data on a regular basis and make any necessary changes.
• Continually repeat the process.?Check your KPIs periodically to make sure that you’re on the right track. You may have to switch KPIs or change targets to get the results you’re looking for.

Conclusion

When you incorporate KPIs into your business planning, you have better, more actionable insights into how well your firm is performing. With specific targets and key performance indicators, you can make more effective decisions for the firm and its clients.