The path to success in a law firm or law department has changed, yet many continue to rely on outdated metrics to track performance. Both buyers (law departments) and sellers (law firms) rely on billable hours as a proxy for productivity and value. This is silly. Sure, hours are a unit of production and law firm leaders should be aware of what it costs to produce the output of legal work. And yes, law department leaders should be aware of what they’re purchasing. But if I visit the grocery store with a list of 47 specific items, I don’t necessarily declare victory if I return home with 45 or 35 items, or 47 completely different items that cost less.

I’ve also written previously about the lazy reliance on benchmarks — relying on dissimilar metrics from dissimilar organizations in dissimilar markets with dissimilar characteristics is a recipe for mediocrity. A general counsel declaring that “We should reduce legal spend to 1.3% of revenues just like our competitors in the same SIC code” is as short-sighted as a managing partner stating that “We need to reduce our secretarial ratio to 4:1 to keep pace with more nimble competitors.” There are a hundred factors in play that should be considered. Perhaps an investment in the legal department can improve organizational throughput, e.g., reduce the time negotiating contracts, accelerated IP review increasing our speed to market, so cutting funding harms the business. Metrics Scatter PlotPerhaps a practice that derives profits from lower-cost paralegals and secretaries managing large piles of filing will come to a screeching halt when this work is pushed up to associates and junior partners, simultaneously eliminating the benefits of leverage and annoying clients who have come to expect lower rates.

On a recent speaking tour of regional educational conferences hosted by the Association of Legal Administrators, I asked audience members to volunteer the metrics they track. We captured pages and pages of performance metrics and the non-surprising results indicated that they vast majority are lagging indicators, e.g., “What happened last year, or last quarter?” and reflect short-term financial performance, e.g., “Was this matter profitable?” We need to evolve as a profession to also incorporate leading indicators and focus on long-term financial performance. As corporate guru Jack Welch once said, “You can’t grow long-term if you can’t eat short-term. Anybody can manage short. Anybody can manage long. Balancing those two things is what management is.”

My friend Silvia Hodges Silverstein, founder of the Buying Legal Council invited me to participate in recent conferences in London and Chicago, where rooms full of legal procurement professionals, in-house counsel, and law firm lawyers and professionals discussed the evolving world of legal metrics so we can find common ground in measuring and delivering value. For the Chicago session, I recorded my remarks, and you can view the session below.

My friend Greg Lambert, a leading information professional and co-founder of the award-winning 3 Geeks and a Law Blog, then riffed on my session to focus on metrics for a sub-set of professionals within law firms. After you view the video, you should read Greg’s article. How can you incorporate better metrics in your organization?

 

 

Timothy B. Corcoran was the 2014 President of the Legal Marketing Association and is an elected Fellow of the College of Law Practice Management. He delivers keynote presentations, conducts workshops, and advises leaders of law firms, in-house legal departments and legal service providers on how to profit in a time of great change.  For more information, contact him at +1.609.557.7311 or at tim@corcoranconsultinggroup.com.

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Random thoughts on the future of law and technology

October 28, 2015

I have the good fortune of meeting and collaborating with some pretty influential players in this cozy little global profession of law practice. Monica Bay is one of those with whom, and from whom, I’ve learned a great deal. While it’s shocking to comprehend the passage of time, I first worked alongside Monica over 20 […]

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Upcoming Legal Lean Sigma Certification Course in Project Management and Process Improvement

October 28, 2015

What is it? The Legal Lean Sigma Institute is hosting another of its popular “open enrollment” white belt certification courses in project management and process improvement. Join us in Chicago on November 11 for an in-depth dive into PM and PI. We combine lecture and interactive exercises to help attendees understand and then apply PM […]

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The Perils of Income Smoothing

August 11, 2015

Perhaps you’ve been following the criminal trial of former leaders of disbanded law firm Dewey LeBoeuf LLP. The prosecution contends that these leaders purposely misled other stakeholders, including equity partners, bondholders, and the general public as to the firm’s fiscal health. Law360 reporter Andrew Strickler recently asked me whether such shenanigans are standard practice. After […]

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Working Smarter, Not Harder

August 3, 2015

As they say, a picture paints a thousand words. Today’s Dilbert comic poignantly illustrates the disconnect between lawyers who bill by the hour — and who believe the quantity of hours is both a measure of quality and a measure of financial success — and the rest of the business community, in which making money […]

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Leaders in Legal Business

July 28, 2015

The legal profession is changing. Perhaps you’ve noticed? What was once a profession is now most assuredly a business. Of course, it’s always been a business, but when things are going so well that both buyers and sellers are content, we can convince ourselves that we’re above the challenges faced by lesser mortals. Things like […]

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Collaboration – It’s not just for breakfast anymore

July 20, 2015

One of the most iconic and memorable advertising slogans was developed by the Florida Orange Growers Association to expand interest in orange juice from a breakfast drink to an all-day drink. “Orange Juice – It’s not just for breakfast anymore.” This slogan came to mind recently after I conducted a project management and process improvement […]

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The Predictability and Perils of Over-Monetization

July 14, 2015

“There is no such thing as over-monetization!” Until the client catches on. And then you’re screwed. I don’t know when I first learned that money could become a verb and monetize and monetization were a thing. But as a young corporate guy moving up the ladder, these words were ideal additions to my vocabulary. If there was […]

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Law 2023: A Look Ahead for the Legal Profession

July 8, 2015

The future of the legal industry isn’t what it used to be. Or so says a report issued by Law2023.org, a group of industry insiders — including this writer — who spent a year studying the trajectory of the legal marketplace. The approach and the findings are surprising in a number of ways, but also […]

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What’s your RSTLNE?

June 30, 2015

Smart people do their homework, rely on past experience and pattern recognition to guide future behavior, and practice. But really smart people often “wing it,” preferring to use their towering intellect to smoothly navigate thorny situations that would frighten lesser mortals. And so it is with many law firm partners who face the same client […]

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