Thought-Provoking Management Metrics (Part One)

At a recent gathering of the profession, while bemoaning the lack of demand for legal services, the pathetic state of the economy and begrudging the increasing power of clients, one discussion centered around metrics – financial and performance-oriented measures. While we are all familiar with the usual billable hour, collections, matter profitability, and so forth, this discussion provoked me to think about some of the more unfamiliar and unorthodox, but vital metrics that I believe law firm management should be looking at. After all, it wasn’t that long ago that the late father of modern management, Peter Drucker, reminded us all that “ if you can’t measure it, you can’t manage it.”

Here are a few unusual metrics that I think are worth taking a look at in your firm:

Metric #1: Management Time Spent Exploring New Opportunities

If you are a firm leader, look at the issues that are currently consuming your time.

I often ask of managing partners a couple of questions that painfully illuminates where they spend their time. First: “What proportion of your management time is spent solving problems versus what proportion is spent on exploring new opportunities?” After a rather awkward reflection period, the answer I usually elicit is about 80% on solving problems and maybe 20% on exploring opportunities.

I suspect that it is really more like 95% on problems and 5% on opportunities, but let’s analyze what this division of time infers. This means that as the firm leader, you are spending 80% of your time and energy looking backwards and fixing things, while only 20% looking forward and creating things. Firms operating in this mode will find it hard to lead in their marketplaces.

So why does this happen? Well, it should be obvious that most professionals are veteran problem solvers. We are trained to resolve the issues, put out the fires, correct the underperformance, and generally “fix” the problem. There is a powerful gravitational pull that unconsciously moves us toward fixing things instead of innovating; toward restoring instead of increasing, and toward reacting rather than being proactive.

We need to understand that fixing things, while however noble, simply restores the prior performance or condition, which is comfortable, but limits value. However, if your focus is on improving the condition, on inspiring entrepreneurial endeavors, on being innovative; then your intent is not on restoring the status quo, but on developing a level of performance that exceeds any previous standards.

There is a follow-up question I then pose.

“Of the time you spend on exploring opportunities, (remember it was reported to be 20% of the total) how much of that time is directed toward pursuing billable production, winning the next big transaction or responding to a competitor, (the present) versus pursuing the development of entirely new skills, new services or new technologies (the future)?”

Again, if I were generous in reporting what I have learned, the average managing partner spends about 60% of his or her time exploring present opportunities and 40% on future opportunities.

That drives a point worth scrutiny: What kind of a future is likely to be created by a firm leader spending about 8% of his or her total management time and energy focused on that future?

And this is in firms that have a managing partner who spends ALL of their available time on management matters!

Those managing partners spending less than full-time usually have next to no time for the future . . . except of course, during that one-day, off-site, annual planning retreat exercise. (AND, is it any wonder why so many of these retreat-generated “strategic plans” are dead on arrival?)

Metric #2: Number of new revenue ideas, practice areas, and/or services launched in the past year

At a meeting of partners I posed a number of questions for the group to both express their views and vote upon. One of the first statements that was posed was: “We are good at identifying new areas of client demand and establishing entirely new areas of practice and specialized skill in advance of competing firms.” I then asked the assembled partners to identify, by virtue of electronic voting machines (secret vote), the relevant importance to their firm of being able to establish new areas of practice in advance of competitors. No surprise here, in that 92% of them identified this as an important attribute to their future success. When I then inquired as to their feelings on whether they were better than or worse than their competitors at establishing new areas of practice, 81.6 % scored themselves as “worse than competitors.”

As I explored this further with a number of subsequent questions, I asked the following ‘Yes’ or ‘No’ question: “Do you actually have an idea for a new ‘niche’ area of client demand that with some modest investment and nurturing could become a lucrative new area of practice sometime in the near future?” Surprising to any firm (but not to me as I’ve been asking this question often enough) I will most always elicit an answer of ‘Yes’ from a significant majority (anywhere from 54% to 71%) of partners. In other words, these talented professionals are most certainly aware of lucrative opportunities out there . . . but are they taking any action on pursuing them?

I then ask: “Is there an established procedure or protocol within your firm to encourage new ideas or promote the development of entirely new areas of practice?” And, finally I ask: “Is there any formal mechanism available to advance new ideas or compensate those who might invest what would otherwise be billable time in developing new practices?” Both of these questions continue to receive a resounding “No” by anywhere between 71.1to 93.4% of most partners.

Now what should seem obvious from this and what I have learned is that innovation becomes much harder to stimulate when you are swimming upstream against the currents of firm processes that don’t exactly encourage it. Structures and processes do make a difference. They may not make innovation happen, but they prepare the ground so that any innovative ideas that exist will have some chance of getting a receptive hearing.

Attention is your most powerful management tool. So if you want your professionals to focus on innovation, nothing speaks louder about what is of bedrock importance than where and how everyone chooses to spend their time.

Stay tuned for Part Two.

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