Brooke Lively | It takes more than a P&L and balance sheet to understand how your firm is doing.
The post What Should Be on Your Law Firm Dashboard? appeared first on Articles, Tips and Tech for Law Firms and Lawyers.

Like the dashboard in your car, your law firm dashboard lets you know your machine is operating at peak performance and warns you if something is wrong.

Key Takeaways

What to monitor: A law firm dashboard should monitor key performance indicators in four main categories: financial health, production, capacity, and marketing and sales.
Leading indicators: By tracking leading indicators such as work in progress, law firms can make proactive decisions and adjust their strategy to hit their goals.
Aligning metrics with your goals. You must have specific goals if you want to affect your outcomes.
Dashboard design: A law firm dashboard should be simple, with graphs and visuals that give a clear view of the firm’s current performance and help predict future performance.

Understanding Dashboards and Key Performance Indicators

It takes more than a profit-and-loss statement and balance sheet to understand how your firm is doing. Think of your law firm’s financial reports as a scorecard — they tell you how you did, but they don’t tell you how you will do. That’s the job of your law firm dashboard. Your dashboard shows where you are going and enables you to make changes that help you get there. It is a leading indicator — like the dashboard in your car, it lets you know your machine is operating at peak performance and warns you if something is wrong.

What is a Dashboard?

A dashboard is a visual view of the key performance indicators (KPIs) for your law firm. Think of it as a customizable tool for tracking tracks progress toward your goals. KPIs are simply the measurable metrics firms use to track their performance. Financials, WIP, leads and sales, cases, wins and losses, settlements, lawyer turnover — there are dozens and dozens of different KPIs you could be monitoring on different platforms, from your case management system to your accounting system.

While the specific technology is beyond the scope of this article, ideally, your law firm dashboard will integrate with your other software platforms (case management, accounting, CRM) to automatically pull in the data you need to track.

A good dashboard can be a game changer for your law firm, increasing productivity, improving client services and increasing revenue. By collating key data points into an easy-to-read format, dashboards help you stay on top of your firm and make decisions more quickly.

Lagging Indicators vs. Leading Indicators

Recently, I was on a call with our company visionary, discussing “leading and lagging” indicators. Everybody onscreen nodded along until a marketing person finally spoke up and asked what we meant.

We explained that lagging indicators tell how you performed in the past—your financials are the biggest one—while leading indicators tell how you will perform in the future.

Many law firms struggle to differentiate between lagging and leading indicators, which can hinder their ability to make proactive decisions.

She still looked a little quizzical, so we explained further.

If you are tracking revenue, you’re only looking at a lagging indicator. To make that data more useful, you need to ask, “How far back in the cycle can we go to find key points that will alert us if we are off track for our revenue goal?”

Time/hours/dollars billed can be a good leading indicator. But keep in mind there isn’t much you can do on the first of the month if your billing number isn’t high enough, so you need to be watching how you’re doing sooner rather than later.

Work in progress is a great leading indicator.

How many hours have your people worked this week? Are they on track to make their goal this week? If yes, great. If not, what needs to change for them to get back on track?

Tracking work in progress is important for understanding and improving your firm’s performance.

The further back in time you can go to start tracking, the greater the impact you make on outcomes.And if you keep moving back in time, you can start asking more questions like:

Why aren’t my people billing enough?
Is it because they don’t have enough work?
Is it because they need help managing their time?

You can start to identify more leading indicators that help you understand what’s happening in your firm and make changes when needed.

Ah. Now, we move into the realm of sales.

The problem could be that your business development team isn’t bringing in enough clients, or your digital advertising isn’t generating enough leads. Obviously, effective sales strategies are key for enhancing your law firm’s performance by keeping a steady flow of new clients coming through the door. But whether or not they brought in enough clients is like asking about the revenue: It’s too late to impact the number.

You need to go back in time and decide:

Is there a goal for how many sales calls you want to take in the first two weeks of the month?
By the end of the month?
Are team members holding themselves accountable for the leads they said they’d bring in?
Does your marketing agency need to adjust its strategy and ad spending?

There must be specific goals to track if you want to affect your outcome.

What KPIs Should be on Your Dashboard? Four Key Performance Indicators You Should Be Monitoring

Now that you understand lagging and leading indicators and know how to find a number you can impact, let’s talk about the general areas you should be monitoring on your dashboard. Monitoring these areas is key to the success and efficiency of your law practice.

Cash (Financial Health)
Production
Capacity
Marketing and Sales (Pipeline)

1. Financial Health (Cash)

Cash is easy. Cash is oxygen for a business. Without it, no business can survive. So knowing that you have enough cash — week by week— for the next six to eight weeks gives you the confidence to run your business. It also gives you a heads-up if a problem is looming, so you have time to do something about it.

2. Production (Billable Hours)

In any hourly firm, the work you do this month is next month’s revenue. If there is a cash crunch next month, you need to bill more this month. Flat fee practices should be the same. You should be moving money into your operating account as you complete stages of work, not when you sell the client. If you are contingency, you look out a little further. How long will it take to see actual money if a demand is sent this month?

Everybody in your firm needs a production goal that is monitored weekly. I don’t care what it is, but make sure it allows you to see work moving through your firm.

3. Capacity

Hourly firms really do have it easy since they can measure everything in the billable hour. You know you want your attorneys to bill 35 hours a week, so by extension, you know how much work they can bill. When you multiply billable hour goals by the number of billable people, that tells you, in hours, your capacity (10 billers x 35 hours per week = 3,500 hours capacity). But that is still pretty abstract.

A more useful measurement is cases per attorney. How much work can they juggle at any particular time without dropping balls or ticking off clients?

The same goes for flat-fee and contingency practices. How big of a caseload can your attorneys carry? Inputs to calculate this might include the amount of time it takes to work a case, the number of months a case stays in your inventory, and who is on the team working that case. Then, you need to track the inventory. Is it rising or falling? If it is rising, your capacity is shrinking — when will your people be overloaded?

4. Marketing and Sales

Depending on how deep or sophisticated your marketing and sales function is, you might look at one number here or many. Customizing the same dashboard to include specific marketing and sales metrics can provide a clearer picture of your firm’s client acquisition efforts. The goal is to know if you are going to have enough new cases in the pipeline for production to continue at the desired rate and within capacity. If not, you want to know as early as possible so you can make staffing decisions — whether that is hiring or letting people go.

(Note that if you outsource marketing and sales to an agency, they should be reporting back regularly on metrics you can track together. Make sure you are clear on the metrics to track at the start of your contract.)

Best Practices for Designing a Law Firm Dashboard

Designing an Effective Dashboard

Building a good dashboard takes some thought. Here are some to consider:

Keep it simple: A dashboard should be easy to understand and use. Don’t clutter the dashboard with too much information or complicated graphics. Simplicity means users can get the key data quickly without feeling overwhelmed.
Use visualizations: Charts, graphs and other visuals make trends and patterns more obvious and help speed up decision-making.
Make it interactive: Allow users to drill down into specific data points or metrics to get more information. Interactivity gives deeper insights and lets users dig deeper into the data.
Keep it current: Make sure the dashboard is updated regularly to reflect the latest data and trends. An out-of-date dashboard can lead to bad decisions, so timely updates are key.
Review and adjust: Regularly review your KPIs and adjust them as needed to ensure they are relevant. The business environment is dynamic, and your KPIs should reflect any changes in your firm’s priorities or market conditions.

Choosing the Right Key Performance Indicators

Align KPIs with law firm goals: Choose KPIs that allow you to track progress toward your law firm’s goals and objectives. If you are trying to build a certain niche practice, for example, sales numbers for that practice area should be easy to find.
Focus on a limited number of key business metrics: Instead of chasing every metric, identify the metrics that provide a clear picture of your firm’s overall performance and drive your success, whether wins and losses, production numbers, innovation or financial health.
Use industry benchmarks: Compare your law firm’s performance to that of similar firms. This comparison can provide context and highlight areas for improvement.

Your Law Firm Dashboard Is the Canary in the Coal Mine

A well-designed dashboard is not just a tool for monitoring performance; it’s a strategic asset that can drive law firm growth and success. It should be showing you, in advance, what is going to happen.

Does you have a dashboard that keeps your finger on the pulse of your law practice?

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Attorneys work tirelessly to build their practices and are beginning to realize that these businesses have value.

In her new book Exit On Top, financial advisor Brooke Lively addresses the practical aspects of creating an easy-to-sell law firm, providing the roadmap and tools that will allow you to… exit on top. Learn more at www.ExitOnTopBook.com .

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