A vast majority of small law firms – 88 percent – describe themselves as successful or very successful, according to Thomson Reuters’ new State of U.S. Small Law Firms Report.
But how exactly do small law firms (those of 1 to 29 lawyers) calculate success? A closer look shows their assessments may be rooted more in hunches than data.
Indeed, when asked which factors lawyers included in their definition of success, respondents provided what looks like a very solid list:
- Repeat business – 86 percent
- Client satisfaction ratings – 85 percent
- Work-life balance – 84 percent
- Overall profits – 80 percent
- Overall revenues – 75 percent
- Case win percentage – 45 percent
- Profits per partner – 37 percent
- Revenue per partner – 36 percent
The problem: Thomson Reuters then asked which metrics the law firms were actively tracking.
For four of the eight success factors identified, there was a significant disparity between the number of firms that counted these attributes in their definition of success and the number of firms that actively monitored them:
- Repeat business: While 86 percent of law firms included this in their definition of success, just 57 percent actively measure it.
- Client satisfaction ratings: Counted as critical to success for 85 percent of law firms, this is tracked by just 41 percent.
- Case win percentage: Touted by 45 percent….counted by 21 percent.
The most striking gap: work-life balance. It’s heartening to see this rise as an indicator of success in the legal industry – even besting revenue and profit in this particular survey. Yet while 84 percent of firms consider it a part of success, only 22 percent quantify it.
The Thomson Reuters survey is enlightening for lawyers in 2022: It reflects an aspiration throughout the industry to make law firms better for attorneys, professional staff and clients. (Consider the top three purported success measures: repeat business, client satisfaction ratings and work-life balance.) Yet it also shows that most firms are mired in the traditional ways of keeping score, as evidenced by overall revenue and overall profit leading what’s actually counted, at 89 percent and 86 percent, respectively.
Lawyers are drawn to entrepreneurial firms for the opportunity to define success on their own terms. But to ensure you actually achieve it, it’s imperative to get specific.
The adage “What gets measured gets done” is cliché for a reason: According to a Censuswide survey of hundreds of small businesses, organizations that set and track key performance indicators are twice as likely to hit their targets than those that do not.
In 2022, take these four critical steps to ensure you are meaningfully tracking the measurements that will help your firm achieve your definition of success.
Step One: Be Honest.
What matters most to you in your specific context? Meaningful business measures are not a one-size-fits-all; priorities will vary widely for partners looking to build a practice for the next 40 years versus partners wanting to retire in five. You will make different decisions on pricing and products if you are looking to maximize profit over revenue.
Moreover, what matters enough to warrant investment in time and resources? If, like 84 percent of your peers, you believe “work-life balance” is an important part of success, are you willing to change your policies, processes and maybe profitability to achieve that? If you are not, that is not a federal offense – but avoid disingenuous lip service that suggests otherwise.
Step Two: Track It.
Set up a system to accurately and consistently track your priority data points. While timekeeping and billing data is often the easiest to access through firm software, do not overlook straightforward ways to monitor the more qualitative facets of your business.
For example, for repeat business, consider adding a field to your intake form that notes whether the client that corresponds to each new matter is a current or former client. At the end of the month, quarter and year, divide the number of returning clients by the total number of clients, and multiply by 100 to show the percentage.
While work-life balance is an evolving area of the legal practice, there are a number of assessment tools that can help you establish a baseline level at your firm and monitor progress throughout the year. The Centers for Disease Control and Prevention’s Quality of Worklife Questionnaire can provide a good start.
Step Three: Share It.
Your firm’s potential for success does not hinge on the managing partner or partnership alone. Let’s stay with the hypothetical goal of more repeat business. Relationship partners play a big part, to be sure – but your clients also interact with receptionists, professional staff, associates and more.
While you need not open the books on all of your firm performance data to every employee, choose a set of priority metrics to share firmwide. For each:
- Share the goal. “We are going to track repeat business throughout the year, with a goal of increasing it 10 percent over baseline.”
- Explain the context. “We have found that matters from repeat clients are 15 percent more profitable and 28 percent less hassle.”
- Encourage ownership. “You can help us improve repeat business in these three ways.”
- Welcome new ideas. “Since you are on the front lines with our clients, we would love to hear any suggestions you have.”
Step Four: Adjust.
Update your success measures regularly – at least quarterly, if not monthly.
Start to look for the stories behind your numbers, as this will help you make informed decisions about your operations and business development. Continuing with our hypothetical goal of more repeat business: How is this trending over time? Who are the clients that keep coming back, and are we giving them proper VIP attention? Who are the lawyers and professional staff who generate the most repeat business – and the least?
Keep sharing, too – and celebrate success publicly.
This kind of data-driven approach does not require complex statistics or artificial intelligence; it just takes curiosity and focus. With this minimal time investment, you can make sure you are directing your firm to intentional and purposeful success – and you can prove your progress toward your goals.