Metrics That Matter with Tim McKey

Watch the YouTube version of this episode HERE

Do you want to learn more about how to create and maintain a successful business? In this episode, CPA Tim McKee delivers a presentation on "Metrics That Matter" at the 2022 Maximum Lawyer conference. Tim discusses the many ways to run a successful law firm.

Tim shares how there are only 4 ways to grow a law firm: increase the value of each transaction or resolution, get clients to revisit, take on more cases and increase the value of those cases. Working in law firms, attorneys focus on identifying what the information is and how to go about obtaining it. Obtaining it comes from data systems such as spreadsheets, KPI systems, case management systems, etc.

As law firm owners, communication is key to a successful business and a well functioning team. Tim talks about the importance of communicating to the team about performance, where things are going well and where things are lagging. Most times, teams don't perform well because there is a lack of clear communication on expectations. If this is the case, you need to ask yourself as an owner if you are providing your staff with the right tools to succeed and if they have had the right training to do it successfully.

It is important to train staff in order to get the results you want for your business. No one walks into a job knowing everything there is to know. You also can’t expect new staff to know everything right off the bat without a proper onboarding plan. There needs to be something in place to ensure staff are showing up and performing, otherwise you get turnover and a bad workplace culture.

Tim goes through a few key performance indicators (KPIs) that businesses and firms should consider to understand how well the firm is doing. One of these is diagnostic reporting. This involves categorizing cases which then are turned into numbers and percentages that can be analyzed. This could be closed cases with a fee, closed cases with no fee, cases that didn't make it to trial, cases with a physical injury, etc. The categories are endless, but what this does is take all of the information and pump out numbers that show the performance of the firm and how many cases are being handled each month or year.

Listen in to learn more!

Episode Highlights:

• 1:59 Four methods for growing a law firm
• 9:13 If there is low performance …
• 13:20 Highlighting the need for training and coaching in order to achieve desired results

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Transcripts: Metrics That Matter with Tim McKey

Speaker 1 (00:00:00) - In today's episode, we're sharing a presentation from Max Lakhan 2022. Keep listening to hear Tim McKey as we share his talk. Metrics that matter. You can also head to the Maximum Lawyer YouTube channel to watch the full video. Let's get to it.

Speaker 2 (00:00:14) - Run your law firm the right way. The right way. This is the Maximum Lawyer podcast. Podcast. Your hosts, Jim Hacking and Tyson metrics. Let's partner up and maximize your firm. Welcome to the show.

Speaker 3 (00:00:38) - How many of you have seen the depiction on a chalkboard sometimes as this big circle? And inside that circle it says your comfort zone. And then there's a little bitty circle off to the side that says where the magic happens. Have you seen that? All right. We're going to try it. I want everybody to get up and at least move a seat a little bit closer to me. That's going to put you out of your comfort zone, right? Well, come on, if you can do it, it's where the magic happens.

Speaker 3 (00:01:06) - The reason I want to do this, you can't do it. The reason I want to do this is twofold. One, to get you to move around a little bit. It's after lunch. You've probably eaten way too much. And we're going to talk about numbers. I'm a CPA very, very nerd like, so I want something to happen. Oh, this stage does not have rails on it. And there are pie people here. So if I fall off you're you're in trouble. Okay. So I'll do it. But I'm a wandering speaker. And now my thing fell out, so. Okay. Thanks a lot for that. I'm going to show some spreadsheets that now that you're a little closer, hopefully you can see some of it. And if I think I was told you're going to get a copy of these slides, and if you don't or if you want to give me a card afterwards, I'll make sure you get those slides. So you also are going to get the fast forward version of me today from very rural South Mississippi.

Speaker 3 (00:01:59) - We can't say hello in 20 minutes. Okay. But I'm going to run through this like like you wouldn't believe. So okay, first of all, a quick story about Timmy and Tommy. Two kids in school, one very, very bright, which happens to be Timmy and the other Tommy. His grits are not quite in the middle of the plate. Okay, it's got some issues, so. But anyway, teacher gives them a test. Ten questions. Okay, ten questions. They finish the test, turn it in, and the teacher's grading. She grades Timmy's first. First nine, you know, 100% on the first nine. The 10th question Timmy had written, I don't know this one. Okay, so she starts grading Tommy's paper, who happens to sit right behind Timmy. Okay. And sure enough, she starts seeing, you know, Tommy's getting these questions right. This is pretty cool. First 900%. And at the end, Tommy had written, I don't know this one either.

Speaker 3 (00:02:56) - So what does that mean? Cheating is bad. That life is an open book, folks. That's what it really means. We don't have any real cheating anymore. You have an opportunity to come to conferences like this and learn as much as you want to learn, right? You can read as many books as you want. There is no test, okay? It's about success and you defining what success means for you. Okay, so we're going to hit this talk was mainly designed for PE firms. So I know there are other firms in here because I've talked to you. I hope this hits home and you get a few nuggets out of it okay. This is where you pick up your pencil. There's only four ways to grow a law firm okay. Only four ways. And guess what the second tour subsets okay. Get more cases or clients okay. Increase the value of each transaction or resolution. Get clients to revisit. Or in the case of Pi, you don't want to say I mean, you were in a car wreck last week.

Speaker 3 (00:03:52) - We want you back now. Now, don't do that. You know, what you say is you treat them so well, okay, that they refer to you. Then increase the efficiency and effectiveness of each process. Okay. These last two are subsets. They only will really way to grow right is more cases and increase the value okay. And with Vista Consulting that's the only thing that we concentrate on with our clients. How can we do that? How can we move the needle for more cases or more value? Okay. And we're going to talk about KPIs. Right. In the academic world, we are always given enough information from which to solve a problem. Right. And that's how tests work. They give you the information, you work through it, you solve the problem. That's not how the real world works. Most of the time. The hardest part is getting the information to solve the problem right in our business, in the business world, especially in law firms and especially in plaintiff firms, you've got to figure out how to get that information and what that information is.

Speaker 3 (00:04:55) - And we're going to hit some of those. Okay. First of all, you have to have a system to obtain data. They're smart advocate file vine out or out here. Those are good systems to begin in gathering data. It's a repository. You can get things out of that. There are many other methods right. There's case management. As I said tech mark spreadsheets. We actually helped some of our clients build what we call dashboards or KPI reports. And again we're going to hit on those. So I have a had a partner, Chad Dudley, still a great friend. I'm not sure if I'm a bad ass Robin him out, but he's a great friend and he would always just come in and start talking about these numbers and how you interpret them and go forward. And we had to say, Chad, let's slow down. We've got to help people get those numbers first. Okay? So we're not going to dig too deep on that today, but just know that you've got to get with someone, whether it's if it's you or someone in your office to figure out how to gather data.

Speaker 3 (00:05:51) - Okay, I'm not going to go too deep on that. We're going to look at some of that data today, okay. Generally, two types of KPIs. They're lagging KPIs lagging indicators. And there's leading predictive indicators. Most financial data is usually lagging. This is what happened. Now we can always use the past to predict the future. That's a good thing. Predictive are generally how many cases did we sign. And that you can use that to predict what's going to happen in the future. Okay. And then there are some that are both okay. Just like those we measure the cases that we sign up. How many leads do we get? I'll go into that in just a second. You can you can have one that tells you both and what you look back okay. We need to get this many cases in. It's also going to predict, depending on your average case fee, what you can actually produce from that to other types of KPIs, their objective ones, which is the ones most of us think about, usually financial or some type of operational metric.

Speaker 3 (00:06:53) - And there are subjective things which measure feelings. Okay, subjective meaning, different things for different people. Just because sometimes we say it's hard to measure subjective things, we shouldn't do it. We absolutely should do it. And I'm going to hit it on one very big one through this presentation. Okay. Once you get that data, you use it to do what you analyze and coach you don't use. And there's two types of reports. There's the scoreboard reports, which are are we winning and losing in an area. For example, is your conversion rate on cases. Clients that call in that you want at least 92%. That's great. That's a scoreboard. We're over 92%. We're converting 92% of the cases are the people that call in that we want okay. That's one that's one method. That's a scoreboard. Then there's a diagnostic which says, okay, if you have more than one person taking those calls, someone may be getting 98%, somebody may be getting 80%, somebody may be getting whatever the total can still.

Speaker 3 (00:07:56) - Be over on the scoreboard, but your individuals are not hitting their mark in some cases. So again, just a difference between a scoreboard report and a diagnostic report. Scoreboard reports usually go to owners or very high level managers, and the diagnostic reports are what your team leads do to coach from okay. And there's a coaching tool. They're not a hammer. You don't go yell on them and say you should do better. You should. Your numbers should be here. You figure out what's going on okay. How do you coach them up? Okay. You use those numbers with something going on. Look, your other team members are doing this. Where do you fall in that? What's going on in your life? That's how professionals work. They don't yell at people, okay? You communicate and you do hold them accountable. You use those numbers. And then at Vista we have we're going to trademark this sometime T&E which is tools training and expectations. What does that mean Tim. Tools training expectations. If you have a team member that is not performing well okay, you first should ask yourself, have you given that team member the tools to their job? Have you trained them on how to use those tools to do their job? And have you clearly explained the expectations? Guess which ones we don't do most? We don't explain expectations.

Speaker 3 (00:09:13) - We say so-and-so is not performing well. Well, have you told them what you really expect? No. Well, you can't hit a target. You don't know that, is there? Okay, so if you're having high performance, I mean low performance, and you go through this thought process of tools, training and expectations, I propose to you, you do not have a people problem. You have a management problem. Okay. So but let's say the converse of that happens. You actually have done it. Tools, training expectations. You've done what you need to do. And you're still not getting performance that you expect or need or want or is the norm. Okay. There's only two reasons for that. Your team member is unwilling or unable to do the job. There's simply nothing else, and it's up to you as leaders and managers to figure out which and decide how to coach them. Decide if they have another spot in your firm, if that spot is just not for them. Or it may be, heaven forbid, time to free up their future to go and find something else to do.

Speaker 3 (00:10:12) - It has nothing to do with them personally. But if you don't go through this first part, those KPIs, have we done this then I suppose so you need to really look at your leadership and management abilities, okay. Very important stuff. Okay operational and financial KPIs. Let's look at again plaintiff law firm intake statistics. I'm going to hit them pretty quick. This particular firm gets 3000 leads. Let's just say it's a year. They want 1500 of those. In other words that of those 3000 1500 meets the criteria that that firm would accept. Okay. Then they signed 1395 of the 1500. Okay. So here's our stats. Here's the KPIs. The wanted rate is 50%, right? Leads a once divided by leads. The signed rate is 47% sign divided by lead. Here is the big one conversion rate. What do we sign of the ones we want? That's huge because a two point improvement in the conversion rate at $5,000 average fee is $150,000 in revenue. Those numbers obviously vary depending on your average fee.

Speaker 3 (00:11:23) - Hopefully $5,000 is a low average fee for you, but these are the type of statistics. These are the things that you should look at. This is a scoreboard report okay, of how to manage and look at your intake productivity. And this is the reason I want you to move a little closer to the front okay. This is an intake summary report. Notice as a scoreboard it has the things I just talked about. These are case types. Here's the total number of leads. Here's the wanted ones. Here's the signed up. Here's our wanted rate. Conversion rate okay. This information is very important especially for plaintiff firms. When you're getting you've marketed you spent money in most cases to get people to call you get leads. And then if you fumble the intake, you don't convert the ones you want. It's a it's in my opinion, it's a tragedy. Okay. And we've gone into firms and one of our teams is here Amanda Hankins. Raise your hand. Stand up. Turn around. Now.

Speaker 3 (00:12:20) - You don't have to do it. She's here. And she knows that. We go into firm sometimes and they say we get everyone we want. Bzz. Okay. Barbra Streisand, you don't. Okay. We have you measured it in a lot of times. No, no, but we know we get them all. Well, yeah, let's measure it. So, anyway, this is a scoreboard report. This is an example of the diagnostic report. We blocked out the names over here, the team members. But it's the same thing. You know total needs wants signed up wanted conversion but by team member. So then you can manage and go in and coach these folks. The ones that are not getting that conversion rate that you want. That leads into a lot of training, right? Customer service intake sales and some some speaker at some point during the day, talked about getting their best team members from places like chick fil A or or Hardee's or somewhere. But we've gone into firms where they say we can't get our people to do what we want them to do.

Speaker 3 (00:13:20) - How does Disney train all of those people to stay in character? How do they do it? How does Chick-Fil-A, you can't get out of there without somebody saying, my pleasure, you know it. Just how do they do it? Well, they train, okay. We don't train. And again, I'm talking to myself a little bit here too. We do not train, but we have to do that to get the results that we want okay. So keep going here. Intake summary by source. You can slice and dice this data in the thousands of different ways. This is the same data. Again remember Leeds wanted sign up but it's by the referral source client referral. Google reviews lean letter outdoor et cetera. Because we're asking how did you hear of us now? We always get that right. Not always. The client may say, hey, I got your name from a billboard, and you hadn't had billboards in five years. But you get something. You've got to get something better than nothing.

Speaker 3 (00:14:14) - Okay. How is your marketing working? Brooke talked about ROI. We got to believe that. I got five minutes left. This ain't going to work. Diagnostic report. This is closed. Cases by case type. We want to look at closed with fee. In other words, enclosed no fee. What does that mean? We've accepted a case. How many of those cases actually make it to the finish line? How many do we accept that we end up booting out of our firm, out of our practice line because we learn something new, okay? Or we didn't get the right information up front? Okay. So we want to measure those things. We want to measure close with fee rates. We'll just look at motor vehicle accidents here 89 closed and 51 of those closed with a fee for a 57% closed with fee ratio. Kind of interesting number right. We like to see around 70% there, 75% there. Usually the norms that we see once they're in the firm usually boot about 25% of them.

Speaker 3 (00:15:11) - But again we want to know what your firm is doing. We can't put everyone in the same bucket. That's why our work is all very custom to your firm. It's tough to give a talk like this when you're talking to a wide array of different types. Firm. Are you a high value, low volume firm? Are you a low value, higher volume firm? Differences in ratios, differences in analysis? Diagnostic report. Something else that we like to see which is a KPI which is time intervals. Intervals between open to maximum medical improvement. Maximum medical improvement to the demand, demand to the settlement settlement to received. And then you get the check. So these are things when you measure you start to see okay, here's what my firm is doing. And then we start talking about how can we shrink these. What can we do to make these better. We often get, well, what's a good time frame. Well let's measure yours first and improve it okay. There's a lot of these are just simply not standard.

Speaker 3 (00:16:10) - We want to know what yours is and then move that needle. Overwhelming 3.24 seconds. This is a case management report. This is a total built out dashboard report. Some of the big things on here are treating needs a contact non treating needs contact. These are things that go into a case management system. If your firm has a client contact requirement of every two weeks or 21 days or 30 days where the paralegal or the attorney must contact, we track that. And if they're not making that contact, then we know they have to go and do that. Okay. And this is how we gather that information. Mad Records KPIs. Getting Mad Records is usually a big backup in pie firms. What we like to see is that that you might have on this one, we've got 103 records are out, but it's only 47 providers. So when you when you call a provider, are you asking for everyone or are you having different paralegals calling ask for records okay. There's some efficiencies and effectiveness and systems that really need to be looked at.

Speaker 3 (00:17:19) - I'm going to roll through some of these. I wanted to get to this one. This is a quick what we call a condensed PNL analysis. I know that Brooke talked a little bit about some of this, but this is there's really only three major expenses for pie firms attorney comp, non attorney comp and case acquisition costs, usually marketing. And there are different phases of firms start up turnaround realignment sustaining success. So we we kind of put our firms in buckets. And then we run this analysis and kind of see where their stats are. Don't go out of here and say Vista says if you're sustaining success, you should be at a 25% profit margin. This is an example. We always want to look at where you are and then decide how to move the needle. And guess what? Taking Twinkies out of the breakroom is not going to move the needle very much. Okay, changing attorney comp, getting more efficient at the work with paralegals and legal assistance can move the needle much quicker. Looking hard at marketing.

Speaker 3 (00:18:20) - Marketing. It's easy to throw money at it. Lots of firms like to do it. Are you doing internal marketing? One minute left. No freaking way. This is diagnostic that goes into the individual attorneys how much they brought in their compensation, their team's compensation. Really looking at a profit center analysis per attorney team. Oh, this is the one that 37 seconds Hugh Laurie. This is a subjective key performance indicator. We call this performance attitude grit. At least once a year we'd like to see your you do an analysis of your team members with a grid like this. Top left you see top performer bad attitude. And then you come down to Karen on Will and Grace. Poor performer, bad attitude. Got Betty White, poor performer, good attitude. And Jimmy Fallon, who I think is very, very talented and seems very happy at what he does. If you've got the Hugh Laurie in your office and you've all most of you who've seen House who do thing gets a great result but is a terrible bedside manner, that's a farce.

Speaker 3 (00:19:22) - It doesn't happen. Okay. Those people are toxic. You should probably get them out of your your firm. Numbers can lie. Not going there. This is what I hope you can get from the slides. These are a list of key performance indicators that we like to get from plaintiff firms. Again, if you give me a business card I'll be happy to send you these slides if you want them. I'm out of time. Last thing is dog on the porch. Don't be the dog on the porch real quick. Two old guys sitting on the porch. And one. It's his home and the other is visiting. And the visitor says, you know, why is your dog whining and moaning like that? And the guy says, well, I think he's laying on a nail. And the other guy says, why doesn't he move? Well, he's just uncomfortable enough to whine and complain. He's not uncomfortable enough to move. Don't be the dog. Don't bitch and complain. Go do something. Thank you.

Speaker 2 (00:20:14) - Thanks for listening to the Maximum Lawyer podcast. Stay in contact with your hosts and to access more content. Go to Maximum lawyer.com. Have a great week and catch you next time.