Setting the Standards
A key theme in our approach to performance management is to collaboratively set professional standards, together with each key group of fee-earners. Individuals must know what they are expected to achieve, and how their current performance compares to these objectives. This provides the basis for using management information to improve performance.
The crucial point here is that, if we have agreed upfront that the “standards” are reasonable, we cannot be accused of being unreasonable when we subsequently expect people to perform to them.
The Individual Pipeline
You need user-friendly, comprehensible management information that addresses all aspects of the individual’s Pipeline – i.e. not just chargeable hours, but aged reports for debtors, WIP and disbursements. You can also use charge-out rates and hours billed to establish realisation rates (as well as new client instructions, to which we will return).
From a financial management point of view, performance can then be identified which does not meet the agreed standards, and can be presented in a report that can be used with fee-earners, team leaders, heads of department, and management staff. Therefore, it is possible to use exception reporting to boost individual and overall performance.
Performance improvement is not a simple task, but by using the Pipeline approach as the basis for analysis, processes can be designed that will identify what the exceptions are; where (i.e. in which department/team) they occur; why they have not been dealt with; who is responsible for dealing with them; and when and how they are going to be eliminated.
Improvement Across the Firm
For the firm overall, there should be user-friendly reports created on a daily, weekly or monthly basis. Reports should also contain forecasts for performance this month, in the next quarter, and the year’s performance. When it comes to improving the cash position, emphasis should be placed on WIP – it should be fairly straightforward to forecast billings on the basis of (accurate) WIP figures.
Exception reporting and billing overdue WIP turns WIP into debts, which are more visible and can be acted upon – by the accounts department, by the client, and ultimately by debt recovery.
What Gets Measured Gets Better
Whether billing and collection is carried out by the fee earner or by a credit controller is a decision for the firm’s management, but in either case they must be suitably trained to perform the task efficiently and effectively. If this is a fee earner’s task, then they should be measured upon it.