Legal Geek North America is under way, virtually, covering a broad range of topics in legal innovation. A hot topic at the conference was the session How to Use KPIs to Measure Success and Identify Issues, presented by Greg Nilsen, manager of Product Management for Thomson Reuters.

Legal Current had the opportunity to talk with Nilsen about why we use key performance indicators and how to make sure they’re measuring the right things. Below is a recap of the conversation.

LC: Let’s start with the basics. What’s the difference between an organization’s KPIs and goals?

Nilsen: It’s a good question, because it can be very easy to conflate the two because they can overlap. Goals should be a target to aim at, and are often ambitious or aspirational, whereas KPIs, as the name implies, should be an indicator of how we are performing. The goal can be the mark we are aiming for, and the KPI can tell us if our course of action will get us there or if we need to make adjustments. And, in the end, all good KPIs are tied to business goals.

For example, we could set a goal for the year to bring in $1M in new business. If we want a KPI to measure that, we could start with “new business won” and determine boundaries that indicate if we need to make adjustments to reach those goals. Maybe the goal is really ambitious, so we can tolerate being 20% short, or maybe it’s more conservative and our tolerance is only 5%. Maybe the goal is too conservative, and being 20% over means we may not have the capacity to handle the new business properly. If we set these boundaries and the KPI ventures outside of them, we know action needs to be taken.

LC: Why do we use KPIs?

Nilsen: Common answers to what KPIs are for range from “tracking performance” to “comparing to the competition” to “measuring business success.” However, I think those all avoid the core benefit of good KPIs, which is identifying anomalies that trigger actions. These anomalies can be either positive or negative, but should still trigger actions.

KPIs can also be used at various levels of granularity. They can be applied to teams, groups and organizations. However, be sure to keep your lower-level and higher-level KPIs complementary so that they don’t conflict with one another. Different groups pulling towards different goals and KPIs will lead to organizational disharmony.

LC: What are some guidelines for departments or organizations looking to establish and utilize KPIs?

Nilsen: There are four core tenets of good KPIs:

  1. They must be measurable and simple. If you can’t measure it, it shouldn’t be a KPI. Also, you should only measure what you can control. Setting a KPI that you can’t react or respond to with an action from your organization won’t have any real benefit.
  2. They must tie to business goals. We want to avoid misalignment with what we are trying to accomplish as a business. For example, “number of new clients” may not be a good KPI if your business goal is to maximize revenue from existing clients.
  3. They must be timely. KPIs shouldn’t be alerts calling for immediate action (“Steve, you have more than 30 hours in WIP, please submit them now!”), nor should they lag behind their usefulness, such as finding out you are 50% short on billable hours in December.
  4. They must be visible. Keeping KPIs visible not only makes them easier to digest and keep front and center, but it also demonstrates your organization’s commitment to them. Setting a goal that’s “out of sight, out of mind” shows employees it’s not really important.

LC: How do we know if we’re measuring the right things with KPIs? 

Nilsen: Primarily, you’ll have insight into how your organization is tracking to its goals and if anything needs to be done to keep on course. There’s lots of discussion about organizations being more agile today, and KPIs are a key component of building that agility by putting critical information in the forefront sooner. If you are monitoring KPIs and you already have 200% growth in a practice area in Q1, you can adjust your plans to grow effectively with it.

LC: What’s the one thing you want Legal Geek North America attendees to remember about KPIs?

Nilsen: Most importantly, no KPIs are one-size-fits-all. Sure, there are common metrics like realization rates, but each organization has different goals and initiatives. Whatever your goals are, be sure to pick KPIs that fit your organization’s desired outcomes.


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