As I write this its Boxing Day. I'm bored. But I'm also open to ideas for articles and as I watch the football, an idea has sprung into my mind.

Now I remember when I was young, football was pretty much all about the final score. 


Nowadays we have Sky and football punditry and at half time we get bombarded with statistics and replays.  Why, because apparently it's what people want.

However, the thing about "what people want" is that most people don't know what they want. They do after you give it to them, but mostly they don't know.

The late Steve Jobs hit the nail on the head when he said something like, "you don't ask people what they want because they don't know".  If  said Henry Ford, I asked people what they wanted in 1909 they would have said faster and more comfortable horses!

Ok, so far so what.....here's the so what....sometimes you just have to present something to your clients to see if they like it.

Wow, what a groundbreaker!

But what does that have to do with football?

The changes in the way football has been presented on TV were not as a result of what people said they wanted, it's a result of trial and error, but mostly it's a result of competition.

Before Sky came along, football on TV was a bit rubbish.  First of all it was in black and white! ( ok I made that up to see if you're paying attention!), no really, if you're over a certain age (ahem) TV football coverage was very amateur.  For a start you only saw about four or five games out of the whole league.  in Scotland you didn't really see English Division 1 as it was and when you did, all games were commented on by Brian Moore.  In Scotland you had a choice of Arthur Montford, Archie Macpherson or of you were really unlucky, Bob Crampsey.  There were about four or five angles, replays were a bit non-existent and no body bothered about statistics.

Statistics were all very American.  American Football ( rugby with padding for boys who don't want to get hurt) was all about yards and percentages. We saw, but we didn't care.

Then they introduced it into the Premier League.  We saw, but we still didn't care.

Then one day, about 3 or 4 years after they first introduced statistics, I remember a friend in the pub droning on about the number of corners and shots on target that Team A had over Team B the last time they met, so naturally, Team A were favourites to win.

All of a sudden, statistics meant something.

In fact, the whole betting industry is built around them.

Imagine if the betting industry started to put odds on law firm survival?

If it did, what are your law firm stats like?  

How do you measure and manage referrals or website hits? If you do, how do they compare to last month...the month before...last year?

How many clients do you have? What is the average spend? What is the lifetime value of your clients? And so on.  

The thing about proper statistics ( or as management consultants call them, KPIs or Key Performance Indicators) is that they tell a story. They tell the story of how well or how badly your firm is doing.  And if you don't have any at all, or if your whole team don't know what they are, then your heading for relegation; but in this climate, that means oblivion.

There is a famous saying, often referred to as the McKinsey Maxim, named after the famed consulting firm: “What you can measure you can manage.”

This has become such a cliché in the business world that it is now either hollow or meaningless.

Companies have been counting and measuring things ever since accounting was invented but this has now become meaningless because it does not tell us what ought to be measured.

Besides, has the effectiveness of management itself ever been measured? How about the performance of measurement?

Measurement for measurement sake’s is senseless, as quality pioneer Philip Crosby understood when he uttered, “Building a better scale doesn’t change your weight.”

The Triple Crown Criteria

In his book, From Worst to First, Gordon Bethune details how he was able to turn around the failed US airline Continental, which had filed for  bankruptcy twice in the preceding decade, between February 1994 and 1997, turning it into one of the best and most profitable airlines in the sky today.

It is a remarkable story, and it illustrates the importance of utilising leading key predictive indicators (KPIs) to focus the entire organisation on its purpose and mission. Not key performance Indicators.

Bethune basically tracked three leading Key Predictive Indicators (KPIs), known as the “Triple Crown Criteria” in the airline industry:

1. On-time arrival
2. Lost Luggage
3. Customer complaints

What makes these three KPIs leading is that they measure success the same way that the customer does. And that is critical because, ultimately, the success of any business is a result of loyal customers who return.

None of the three indicators would ever show up on a financial statement, but, as the airlines have learned over the years—by testing the theory—they have a predictive correlation with profits.

Is there a Triple Crown Criteria for Law Firms?

Now that there are well over a thousand firms that have trashed timesheets, VeraSage Institute is proud to announce, based upon empirical evidence, the Triple Crown Criteria for Professional Knowledge Firms (PKF's) such as Law Firms.

We are emphatically declaring that the following three KPIs are all your firm ever needs to track to predict future customer loyalty and buying behaviour.

Think about it: If an airline can run on three KPIs, why can’t a Law Firm?

An airline is far more complicated than any Law Firm, which is what makes KPIs so powerful: they are measurements (or judgments) guided by a theory.

But the theory is the senior partner. It’s not just measurement for the sake of measurement. It’s measuring—and judging—what actually matters, to customers.
It’s defining the success of your firm the same way the customer does, just like with the airline KPIs.

The Three KPIs

Turnaround Time

Michael Dell likes to refer to the time lag between a customer placing an order and the company assembling and shipping the finished product as "velocity".

We believe professional firms should also be diligent about tracking when each project comes in, establishing a desired completion date, and measuring the percentage of on-time delivery.

As Ed Kless senior fellow at the VeraSage Institute always points out, a firm can measure “time spent” or “duration.” The latter is the only thing that matters to the customer, hence that’s what needs to be tracked.

This prevents procrastination, missed deadlines, and projects lingering in the firm while the customer is kept in the dark.

Imagine installing 360-degree webcams everywhere in a Law Firm. Also imagine customers being able to log onto a secure Web site, type in their names and passwords, and the appropriate web camera would find their project and give them a real-time picture of it, probably laying on a lawyer or manager’s floor awaiting review.

Would this change the way work moved through a firm? Would this hold the firm accountable for results, not merely efforts?

Customers don’t want to hear about the labour pains—they want to see the baby.

FedEx and UPS do exactly this; and in fact some US law firms utilise intranets that provide their customers with real-time access to the work being performed on their behalf.

This one metric would go a long way towards mitigating most of the reasons customers defect from firms (not kept informed, feel ignored, and so on).

Value Gap

This measurement attempts to expose the gap between how much the firm could be yielding from its customers compared to how much it actually is.

It is an excellent way to reward cross-selling additional services, increase the lifetime value of the firm to the customer, and gain a larger percentage of the customer’s wallet.

Marriott International uses predictive analytics through its Hotel Optimisation program. Marriott has developed a revenue opportunity model, comparing actual revenues as a percentage of optimal prices that could have been charged. It attributes the narrowing of this gap, from 83 to 91 percent, to this metric.

One accountancy firm made this calculation part of its partner compensation model. What actions can your firm take to close the value gap?

High Satisfaction Day™

I am indebted to John Heymann, CEO, and his Team at NewLevel Group, a consulting firm located in Napa, California, for this KPI.

When John’s firm held a retreat for the purpose of developing their KPIs, the suggestion of High Satisfaction Day (HSD) was made.

An HSD is one of those days that convinces you, beyond doubt, why you do what you do. It could mean landing a new customer, achieving a breakthrough on an existing project, receiving a heartfelt thank-you from a customer, or any other emotion of exhilaration that makes you happy you got out of bed in the morning.

Sound touchy-feely? John admits it is; but he also says the number of HSDs logged into the firm’s calendar is a leading indicator—and a barometer—of his firm’s morale, culture, and profitability.

Is this too Simplistic?

No.

Compare the above KPIs to what most Law Firms are measuring now—billable hours, utilisation rates, realisation rates, write-downs, write-offs, and other internally-focused metrics that have nothing to do with how the customer defines the success of their firm.

These metrics have zero predictive ability when it comes to future customer behaviour. They are lagging indicators, not leading.

Stop measuring things that don’t matter, and focus on what does matter. The above three KPIs will work in any Law Firm that chooses to adopt them.

The VeraSage Institute stands by this Triple Crown hypothesis for all PKFs.

Prove them wrong.

We’ll all enjoy losing the argument, because it means we’ll learn something new. 

Copyright Ron Baker 2010 VeraSage Institute
This article first appeared on http://www.verasage.com/index.php/community/ 
on 8th July 2010