One common issue in the management of law firms is that performance falls short of expectations for a period of time, but the firm’s management only finds out when it is too late to make the requisite improvements. One way of rectifying this is to have more frequent interim measurement and reporting – so that progress can be understood and corrective action be taken in time to be effective.

How Often?

Most Law Firms have two main cycles; monthly and annual. Our experience in performance improvement has been that implementing a reporting calendar on differing cycles pays great dividends.

There is some disagreement over the optimum frequency of management reporting. The American commentator Ron Baker believes that “expecting more frequent measurement to produce results is like expecting to lose weight just by weighing yourself more often”. On the other hand, a hospital in India (subject of a BBC radio documentary) has driven up its performance and driven down its costs by using a data-driven approach to health-care management – constant measurement and rapid feedback used to drive change and innovation.

In our experience, just as effective diet programmes do include regular weighing to check progress, so an effective approach to performance measurement will involve regular reporting – but only if it is used not for its own sake, but to provoke corrective action where results are not up to standard.

Monitoring Cycles

Our view is that it can be greatly beneficial to have inter-related reporting cycles operating on a daily, weekly, monthly, quarterly and annual basis.

Daily monitoring at firm level is focused primarily on cash flow and, interestingly, the SRA sees this as one of the key “good behaviours” in ensuring financial stability. This has had positive effects in areas such as the under-recording of time, but the key to improving results lies in visibility of reports and follow-up by heads of department or managing partners. In firms with significant amounts of process-heavy work (e.g. conveyancing or PI), daily reporting can be extended to cover matter intake and billing.

Weekly monitoring in most firms is largely to monitor progress toward monthly objectives. If the key metrics of New Matters, Hours Charged, Bills Raised and Cash Collected are not on target, the laggards can be identified and persuaded to catch up before the month end. A bad month should therefore never come as a surprise.

Monthly reporting is well established in most firms and is appropriate at all levels – partnership, management and individual. Reports should cover all aspects of the operations, and should be designed so that they can be used both for information and for action.

Quarterly routines are rare in law firms, but in our view they are absolutely crucial. The annual cycle is well embedded, but business is simply too unpredictable for key issues to be left for a whole year before being reviewed. It is important that future prospects are reassessed more often than this.

Looking Forward

Many firms have well designed reports, but they are often exclusively backward-looking. Business management is about making things happen in the future – the analogy being of trying to drive a car exclusively using the rear view mirror. Regular, forward-looking reports are key.

The annual cycle, which typically ends with targets being met by a billing surge in month 12 (or Q4), can be very destructive for the management of cash flow. The amplitude of the financing cycle can be dramatically reduced by employing a quarterly reporting cycle that encourages more regular year-end style billing ‘pushes’. A major emphasis on quarterly results – with corresponding reports (and incentives) – would therefore radically affect the financing requirements for many firms.

A combination of reporting cycles, each with a clear purpose and accountability but also clearly related to the other reporting cycles employed by the firm, would help many firms to spot problems earlier and deal with issues before it is too late.

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