Measuring the unmeasurable: KPIs for your people strategy

It's fairly common these days for law firms to have a clear people strategy integrated with their business goals. Gone are the days when it was all about hiring and training. The more sophisticated people strategies cover talent management, career development, flexible resourcing, diversity and inclusion, engagement, and knowledge and learning.

But how do firms know if their people strategy is working? Measuring progress in this area is notoriously difficult given the number of variables at play and the long-term nature of many of the investments. In addition, traditional measures used by corporations, such as staff turnover rates and absence levels, lack relevance to the professional services sector.

Given the undoubted truth of the adage 'you get what you measure', it's crucial however to identify key performance indicators (KPIs) and regularly monitor progress against them if a firm's people strategy is to be successful. The most effective KPIs measure outcomes rather than inputs and provide strategic insights into capacity, capabilities and engagement within a firm. They generate data to make informed decisions and establish a baseline for the firm and a benchmark for individual offices and practice areas to measure themselves against.

Strategic priorities?

1. Profitable resourcing

Given the structure of professional services teams, every law firm needs to optimise its 'pyramid' to ensure that work is delegated to appropriate levels so that juniors learn from their work and time spent on matters is not subject to write-offs. To achieve this, a level of attrition is required that provides room for individual progression while sustaining continuity of know-how and experience. But, attrition rates by themselves tell only a partial story.

For strategic purposes, firms need to know if they are losing the right people at the right time and if they are retaining the very best associates for the future. Feedback from exit interviews provides some perspective on this issue, but the data is difficult to quantify and analyse accurately. For more meaningful insights, there are two additional features of attrition that provide a richer picture of professional staff turnover.

The first involves monitoring the seniority of leavers by tracking attrition by PQE or length of tenure. From this data, it is possible to analyse whether associates are leaving at a time that optimises the firm's return on its investment.

The second indicator involves analysing leavers by reference to a common set of performance ratings. This data shows whether the firm is keeping its best associates and whether its performance management systems are working effectively.

2. Quality of new recruits

The traditional measures of recruitment include the percentage of trainee contract acceptances, the number of new hires and the diversity statistics relating to new joiners. This information goes only so far, however, in ascertaining whether a firm is maintaining or improving consistency in the quality of its recruits. As firms expand into different markets, consistency becomes strategically more important to service cross-border clients.

To ensure consistency, common criteria need to be established and each potential candidate measured against them by partners trained in a rigorous process. The data captured from a robust evaluation of each candidate enables the firm to analyse the quality of the recruits it is attracting in each location in a consistent manner. It also provides partners with an assurance of quality when putting together cross-border teams.

3. Investment in knowledge and learning

The training budget is typically a major expense in law firms. Simple measures of the training cost per capita, however, give no indication of the value that the training may or may not have been created, or the degree to which the learning has been beneficial to the firm and its clients. Feedback questionnaires at the end of training courses, or 'happy sheets' as they are commonly known, also provide unreliable measures of training outcomes.

The strategic question a firm needs to be able to answer is whether it is developing lawyers with the skills and experience required by clients, both now and in the future, through its investment in knowledge and learning.

Valuable insights in this area can be gained by tracking and analysing work allocation patterns through existing time-recording systems. For example, measuring the amount of work that is carried out on cross-practice or cross-office matters gives a clear indication of the degree of cross-fertilisation and broadening of experience that is prevalent in the firm.

In addition, by integrating tailored questions concerning the skills and capabilities of individual lawyers in client feedback interviews and questionnaires, and analysing the results on an anonymised basis, the firm can assess ?how well the training it is providing is meeting client needs.

4. Diversity and inclusion

Law firms are under continuous scrutiny ?in relation to the diversity of their recruits and their ability to reach out to and ?access a wide variety of talent pools. Published diversity statistics have become the norm, but questions remain as to whether to introduce targets or not, ?and what the 'right' numbers really ?should be.

Diversity statistics have undoubtedly helped firms to focus on the issues and to compare themselves with other firms within and outside the legal sector. As importantly, however, firms need to find ways of assessing whether they are creating an inclusive culture where everyone, whatever their background, gender or beliefs, feels they are being treated fairly and are able to flourish.

One way of measuring inclusivity is to monitor the allocation of work on the firm's top-billing matters by gender and seniority. Analysing this kind of data identifies if the most challenging and career-enhancing work is being disproportionately allocated to particular individuals or groups of individuals.

For example, many senior female associates complain that they are not given as much access to top matters as their male peers and that this holds them back from progressing within the firm. Analysing a sample of time recorded on particular matters can prove whether this is an issue that needs to be addressed.

5. Motivation and engagement

It can be difficult to find quantifiable measures of motivation and engagement, given their inherent nature. But, without some way of testing the temperature among associates, firms can fail to identify the need to address morale and the consequences of that can be expensive in terms of work quality and client service.

Many firms now use engagement surveys to assess partner and staff views on the firm, their colleagues and their work. The crucial factors in successful engagement surveys are to keep them simple, to focus on key issues and to accept and act upon the feedback provided. Short 'pulse' surveys often work well with busy lawyers, giving the firm the opportunity to hear about people's views on a regular basis and to share the results easily shared among teams.

Appraisals are another important factor in motivation and engagement. Most firms have sophisticated systems and track the number or percentage of completed appraisals. To really understand how well the process is working, however, an indicator based on the outcome rather than the input is required.

For example, asking a key question of everyone each year - how motivating was your appraisal discussion? - gets to the heart of the issue. Analysing the answers by practice, office or even by partner will increase the motivational value of appraisal discussions across the firm and will show where improvements need to be made.

6. International reach

In today's increasingly global business environment, many law firms are looking strategically to increase their international reach through mergers, office openings and lateral hires.

In people terms, this means developing lawyers with the skills and experience to work across borders and integrating teams across countries to provide seamless service to clients. One way of measuring progress in this area is to track mobility in terms of the percentage of associates by practice area and geography who take up an international assignment, or who record significant amounts of time on cross-border matters.

It may even be beneficial to set targets of say ten per cent of associates from each practice area working in another office each year. Organising international assignments and secondments by practice area avoids some of the resistance factors from offices not wanting to lose their best associates with no commercial advantage to their practice.

In addition, insisting that only associates with top appraisal ratings are considered for an international secondment demonstrates that mobility is career enhancing and strategically important to the firm.

Tracking language capabilities is another useful way of identifying how global the firm really is. By capturing data accurately from new joiners, the firm can track progress on widening its language capabilities to serve clients in emerging markets such as China, the Middle East and South America.

Accountability

With any system of KPIs, it is vitally important that there is clarity about who is accountable for the results. In some areas, there may be multiple levels of analysis - at the firmwide, practice area or even individual partner level - and each one needs to be owned and acted upon. Accountability needs to be devolved to the level where decisions can be taken and a sense of responsibility can be generated.

Transparency

To increase the prospect of delivering a people strategy and improving performance against KPIs, firms need to be transparent. This applies not only to communicating what the KPIs are, but also to publishing the results.

Partners and associates will respond more positively to measurement if they ?can see the alignment with the firm's strategy and if they feel the firm is genuinely interested in sharing and discussing the results.

The whole picture

As with medical diagnosis, it is important to consider the whole picture in evaluating the progress and success of the firm's people strategy rather than focusing on isolated measures. When looked at together, the chosen KPIs should tell a story and indicate where further work needs to be done and where interdependencies exist.

In addition, it pays to cross-reference the results of people-related KPIs with other measures such as revenues, productivity and client service feedback.

In the retail sector, it has been proven that, taken together, high scores on 360-degree feedback, customer satisfaction and staff engagement can predict profitability levels. The legal sector may have some way to go before it can match that degree of accurate forecasting but, by aiming for it, law firms and their clients can only benefit.

Jill King is a consultant and the ?former global HR director at Linklaters (www.jkinsights.co.uk)