What Should Be on Your Law Firm Dashboard

Your law firm’s financial reports are 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’s dashboard.

Understanding Dashboards and Key Performance Indicators

What is a Dashboard?

A dashboard is a visual view of your key performance indicators (KPIs) for your law firm. Think of it as a customizable tool to track progress towards your goals, monitor KPIs and make data driven decisions. A good dashboard can be a game changer for your law firm, to increase productivity, improve client services and increase revenue. By collating key data points into a easy to read format, dashboards help you stay on top of your firm and make decisions quickly.

What Should Be on Your Law Firm Dashboard?

It takes more than a profit-and-loss statement and balance sheet to understand how your firm is doing. In addition to financial reports, integrating a case management system into your dashboard can provide a comprehensive view of your firm’s operations and performance. Your law firm’s 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.

Lagging Indicators vs. Leading Indicators

Recently I was on a call with our company visionary discussing leading indicators and lagging indicators. Everybody onscreen was nodding along in understanding 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. A leading indicator, on the other hand, tells how you are going to perform. 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.

See how we went further back in time to start tracking? That’s how you can make a difference in 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 biz development team isn’t bringing in enough clients or your digital advertising isn’t generating enough leads. 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 call 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?

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

4 Key Performance Indicators Your Dashboard Should Be Monitoring

Now that you know how to find a number you can impact, let’s talk about the areas you should be monitoring on your dashboard. Monitoring these areas is key for the success and efficiency of your law practice. These are the four that are important:

1. Cash
2. Production
3. Capacity
4. Marketing and Sales

1. Financial Health

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. 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. A demand sent this month will take how long to see actual money?

Everybody needs a production goal that is monitored weekly. I don’t care what it is, but make sure it is something that 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 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 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.

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.
• Focus on key metrics: Identify the most important KPIs for your law firm and put them on the dashboard. That way the dashboard stays relevant.
• Use visualizations: Use charts, graphs and other visualizations to help users get complex data quickly. Visuals make trends and patterns more obvious and 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.

Choosing the Right Key Performance Indicators

Choosing the right key performance indicators (KPIs) is critical to designing an effective dashboard. Here are some tips to help you choose the right KPIs:

• Align KPIs with law firm goals: Choose KPIs that align with your law firm’s goals and objectives. This alignment ensures that the dashboard supports your strategic direction.
• Focus on key business metrics: Identify the most important metrics that drive your law firm’s success, such as billable hours, client satisfaction, and financial health. These key business metrics provide a clear picture of your firm’s performance.
• Monitor progress: Select KPIs that allow you to track progress towards your goals and objectives. Regular monitoring helps in identifying areas that need attention and celebrating achievements.
• Use industry benchmarks: Compare your law firm’s performance to that of similar firms using industry benchmarks. This comparison can provide context and highlight areas for improvement.
• Review and adjust: Regularly review your KPIs and adjust them as needed to ensure they remain relevant and effective. The business environment is dynamic, and your KPIs should reflect any changes in your firm’s priorities or market conditions.

Following these steps, law firms can design dashboards that help them track progress, enhance productivity, and achieve their goals. A well-crafted dashboard is not just a tool for monitoring performance; it’s a strategic asset that can drive law firm growth and success.

Your Law Firm Dashboard Is the Canary in the Coal Mine

It should be showing you, in advance, what is going to happen. Do you have a dashboard that keeps your finger on the pulse of your firm? going to happen. Do you have a dashboard that keeps your finger on the pulse of your firm?

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