The Drive Toward Performance Measurement in Law Firm Administrative Functions

In the aftermath of the massive cost cutting and staff reduction programs undertaken by law firms in 2008-2009, 2010 appears to be a year in which law firm administrative functions will remain under the microscope. Despite some signs of improved demand for legal services, administrative and operational groups within law firms (e.g., marketing, finance, IT, HR and others) all face ongoing and intensified pressure from law firm leaders and other members of the partnership to take a closer look at work processes, staffing and spending. In response to this increased pressure, administrative leaders are seeking out ways to measure the performance of administrative functions ' to justify the function's staffing and costs and to demonstrate the group's value to firm leadership. The drive for performance measurement programs in law firms entails a shift toward careful assessment and analysis of the overall performance of various law firm administrative functions and their respective value to the firm.

A New Approach for Testing the Old Model

For many in the legal industry, the concept of performance measurement represents relatively new and unexplored territory. Relative to other industries, law firms have been slow to adopt performance measurement and improvement processes, viewing the nature of services provided by lawyers and the operations groups supporting lawyers as “unmeasureable.” However, in today's highly competitive and bottom-line-driven law firm environment, leaders are actively testing old assumptions about law firm operations, and in this process, they are seeking to develop a more rigorous approach to measuring, managing and improving administrative function performance.

So what does performance measurement mean for law firm administrative functions? Various definitions of the term exist, but in the context of law firm administrative functions, the most appropriate explanations describe performance measurement as a means of evaluating the efficiency, effectiveness and results of a particular operations function.

The performance measurement process seeks to assess (and ultimately manage and improve) organizational, functional and individual performance. It typically involves developing an appropriate set of measures (in some cases, derived from the function or firm's mission, goals and strategies) that are used to monitor progress of a function, program or activity in achieving the results or outcomes that partners expect. Examples of current approaches to performance measurement for law firm administrative functions include highly successful corporate models, such as the Balanced Scorecard, as well as more focused tools involving the measurement of workloads or benchmarking of best practices. Some real world and law firm applicable approaches include:

• Measurement of Work Activities. This tool measures the number of full time equivalent (“FTE”) staff required to complete various work activities, listing detailed descriptions for sub-activities and the relative value or output of each. This approach is designed to provide insight into the range of job tasks and responsibilities being managed by a particular administrative function. As a first step, the core activities of the function are identified and listed as key areas of responsibility. For each core activity, detailed descriptions are developed, with breakdowns of the FTE counts required for completing each core and sub-activity. Such a tool creates transparency in administrative function staffing and workload allocation, and allows users to better understand the responsibilities, roles and activities of the function.
• Measuring and Benchmarking Current Practices. In a recent project, a mid-size law firm hired legal consulting firm Hildebrandt to conduct benchmarking interviews with roughly 10 of their key competitors to collect information about each competitor's current practices relating to the firm's marketing function. Hildebrandt consultants interviewed one or more senior marketing function leaders at each firm. Questions asked of each competitor related to structure, reporting, career path, staffing, workflow, and other topics associated with the management of the function. Responses to questions were then organized and mapped. Core service areas and processes were identified, and for each, the consultants cited the variations among the groups they interviewed as to that core practice, noting the most common as well as their view of the “best-in-class” practice.
• Satisfaction Assessment Programs. Satisfaction assessment programs involve regularly and systematically collecting information to measure user or client satisfaction. Common forms of satisfaction assessment programs include user or client surveys and live interviews. Such tools provide invaluable insight into administrative function users' perceptions of the function, as well as direct, high-value performance feedback about the nature and quality of services that may impact the function's role within the firm.

Weighing the Benefits of Performance Measurement

Performance measurement offers administrative functions both strategic and operational benefits. In the shift toward more rigorous department planning and management, administrative leaders can leverage performance measurement as a tool to set department goals and objectives, to measure progress against goals, to align department resources, services and activities with the goals of the firm, and to document and report on department activities and accomplishments. Such advantages represent a marked improvement after years of nonexistent or ad hoc planning and a failure to link planning efforts to results achieved.

In addition, from an operations management perspective, performance measurement provides further benefits, such as enabling functional leaders to manage better, describing and improving processes within the department, identifying operational areas that need attention and opportunities for improvement, planning department operations and activities to accomplish goals and objectives, and supporting decision-making on resource allocation (e.g., internal vs. outsourced work allocation). Once again, this approach represents a more robust methodology for managing department operations, improving service levels, and driving greater firm efficiency.

However, although performance measurement programs offer significant strategic and operational benefits and represent a major step forward in law firm administrative function management, they also face limitations. Some aspects of services provided by administrative functions are simply too subjective or qualitative to measure effectively, and as with any measurement program, you get what you measure. In other words, if not properly developed, such programs may drive leaders to manage to the wrong, or too many, metrics, undermining the success of the program and limiting the firm's ability to capitalize on potential benefits.

Keys to Success

In order for any performance measurement program to be effective, law firm leaders should start with a clear understanding of the overall goal of the program and design the program to meet that goal. In addition, firm leaders should seek to understand which factors will be most critical in the development and implementation of a successful performance measurement program for their particular firm. The following list represents several of the key features of success factors that have shaped the development and adoption of highly successful performance measurement programs in a number of firms:

• Relevant to the goals that the department and firm aim to achieve;
• Defined clearly, such that data is collected consistently and measures are easy to understand and use;
• Timely, producing data regularly enough to track progress and quickly enough to ensure relevance;
• Reliable, ensuring data is accurate and can be validated;
• Avoids incentivizing undesirable outcomes or behaviors;
• Comparable with either past periods or similar programs in other areas of the department or firm; and
• Balanced, such that benefits provided exceed the investment of resources required to implement the approach.

Designing ' let alone implementing ' a performance measurement approach for a law firm administrative function can be extremely difficult. How do you measure quality, advice and services, intellectual capacity, and qualitative service outcomes and results? Operations professionals and the lawyers they serve can challenge the merits of virtually any individual metric or tool to measure an administrative function's performance, as the range of metrics and approaches is extensive and application is complex.

However, in the current economic environment, the need for performance measurement is intensifying, and few law firms or administrative functions can continue to hide behind the rationale that support services are “difficult to measure.” Measuring and communicating about administrative function performance is rapidly becoming a business standard for many law firms and offers a range of both strategic and operational benefits. But in order to succeed at performance measurement, law firm leaders must recognize that there is no single “right” answer. The goal is to develop a program that is credible, relevant, and useful to the function measured ' and the law firm as a whole.