Key Performance Indicators – art, science or luck?
More of my clients and contacts are thinking about, or implementing ways to better manage performance of both the firm as a whole and individual staff.
Unsurprising perhaps. If economic growth continues to be slow, how does the firm grow profitability? Either by acquiring/merging (which of course brings its own challenges and concerns about the quality and sustainability of revenue accessed) or gaining more and/or higher margin work. In other words, not tracking the market but building market share in profitable areas. Performing better.
But the responses being made are interesting. In one case, the firm was initially looking at measuring the quantity of documentation produced by fee earners to evidence business development effort. There’s an understandable desire to measure something that you can get your arms around, but the implications of going down that route are;
- high amounts of bureaucracy/unproductive time both in documenting and reviewing effort
- grudging compliance by fee earners (at best) and avoidance by others
- “the document stays the same, but the date on top changes…” to meet the measure
- little evidence of a strong relationship between documents and extending client relationships.
I’ve said elsewhere (and I can’t claim any original thought on it) that key performance indicators need to be strategically relevant, important, influenceable by those being measured, and without an inordinate burden of time being placed. The other key piece of course, is that there has to be some form of reward and recognition for fee earners and any other staff meeting or exceeding the KPI.
The following isn’t a fully comprehensive list, but some of these indicators are worth considering for any professional services firm:
- Client satisfaction with firm
- Share of spend by client in relevant area
- Number of cross practice referrals generated
- Likelihood of recommendation
All of these meet the criteria noted above and have a much more direct link with the ability to extend client relationships, win more work, and generate higher quality earnings.
So a bit of art, a bit of science, but definitely not luck.
