July 13, 2005
Benchmarking for law Firms
A very useful set of information to have is comparatives from other law firms or other companies who do something particularly well—like collections, for example. Comparing your firm’s results and operating metrics to other businesses is known as benchmarking. Benchmark data is important because it can identify performance expectations that are unrealistic or expectations that are less ambitious than they should be. For example, it is easy to assume rates can be increased 10%, but what if a 10% increase will put you well above the rates of your competitors? What if clients are already putting you under price pressure? What if you’ve raised rates over the last few years, but haven’t achieved a matching increase in fee revenue because of decreases in realization and more instances of negotiated rates of flat fees? And why not look at non-law firms? Sometimes, you can only find great ideas by looking at other industries. What do credit card companies do so well to keep receivables low? By looking at their processes and benchmarking against their results, you can discover new ways of thinking to improve results.
Other useful information to distribute includes historical financial results and operating metrics (i.e., productivity, realization, etc.), and information about the market in which your firm competes.
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Filed under Management by Tom Collins