I have been preparing for a managing partner leadership conference. One of the topics I am discussing is law firm Key Performance Indicators “KPI.” In reviewing recent articles and posts on the issue I was struck by two things:

  • the disproportionate representation of relatively short-term performance snapshots; versus,
  • the almost total absence of the two most important factors for any business, including law firms.

Ask any executive associated with the leadership of a law firm to define the most important asset of their firm. Virtually all will either say, “our people” or “our clients.” A handful might say both our clients and our people.

Yet the dominant metrics in most law firm KPIs include revenue per …, profits per …, productivity per …, debt per …and so on.  In my experience, it is rare to see a metric that reflects the loyalty/satisfaction of the firm’s clients or its people.  This is startling when you compare this with what firms say is most important.

Add to this the following:

Our clients are our most important asset

BDO, the mega-advisory firm, surveyed more than 100 in-house counsel regarding change they are experiencing. As described here, the report which includes a lot of interesting findings, described one result I found fascinating, “Thirty-six percent of legal departments are contemplating throwing over their current outside law firms in favor of new ones.” This is more than one-third —This should be frightening to firms that are only able to guess about the loyalty of their clients.

Our people are our most important asset

There has been much written for years about the dissatisfaction level of lawyers with their chosen profession. This article at Attorney at Work, and a related study here, describe the increasing and expensive level of turnover in law firms. According to the article, the combined annual cost to the 400 largest U.S. law firms approximates $9 billion, and this doesn’t count the cost of dissatisfaction among law firm professionals and support staff.

The Number One Worst Job?

The point of this post isn’t turnover per se, but the unhappiness that drives turnover. It seems undeniable that to a significant degree the practice of law in today’s environment equates to dissatisfaction. This Above the Law post describes a study that found the number one worst job in America to be an “associate attorney.”

In case we need to underscore the problem, the dissatisfaction in law firms isn’t restricted to associate lawyers. A very recent post by, my friend and marketing strategist, Eric Fletcher discusses lateral turnover (mainly partners), and the fact that a quarter of hired laterals leave the firm they joined within three years..half leave within five years.

Happy people generally stay where they are and unhappy people leave.

Why Should You Care?

If those KPIs that chart the short term — especially profits per— look good for the next two or three quarters, it is tempting to operate as if everything is fine. And if those metrics don’t look good, you’ll take steps to correct them, right?

But if you’re uncomfortable repeatedly addressing baseline problems with short term KPIs, and the unhappiness of colleagues isn’t enough to get your attention, here’s why you should take steps now to address the real issue.

Unhappy people don’t do their best work and clients sense the unhappiness. Law.com had thisgreat article in January in which the relationship between unhappy lawyers and clients is discussed. Here are three telling quotes from that article,

“Clients we interview also say how important it is to have lawyers who love what they do and are passionate about their work, and not wallowing in negativity about their frustration with fellow partners or firm dynamics,” 

“There are clear credit wars within the firm that drive behavior that is counter to great client service. We have received calls from partners asking us to make sure when we send the firm a matter to send it directly to them,” one client said.

“There is a noticeable tension between a few lawyers. I don’t need to know or want to know if they have issues, but it certainly raises eyebrows when fellow partners are not getting along” 

If your firm is serious about long term stability it will pay at least as much attention to these two long term KPIs — how your clients feel about the firm, and how your people feel about the firm.

Does your firm know?