Issue link: https://epubs.iltanet.org/i/30285
These 12 success factors are not intended to be comprehensive, but illustrative of how the critical success factors will be derived from the firm’s strategic planning process, and will be consistent with the firm’s vision, mission statement and culture. The benchmark performance goals should emphasize the firm’s strengths with only a few, if any, addressing known weaknesses. The factors should balance short- and long-term objectives. A significant amount of recent research points to the link between operations and bottom-line success. Norton and Kaplan cite many case histories in their research on the balanced scorecard. David Maister, in his book Practice What You Preach, created the following table based on extensive empirical research of professional services firms. He concluded that if a firm could improve performance by one point on a six-point scale for a factor listed in the left column, its net income would increase by the multiple in the right column. Effect of a 1-Point Improvement in the Factor Score on Financial Performance (on a questionnaire scoring of six points) Factor Quality and client relationships Employee satisfaction High standards Coaching Commitment, enthusiasm and respect Empowerment Fair compensation Long-term orientation As an example, if you improved quality of work and client relationships by one point on a six-point scale, his study suggests that your firm’s income would more than double. Increasing work standards by one point would result in a 40.4 percent increase in net income. Regarding the potential benefits for firms who link operational performance measurements with their strategies to improve firm profits, consider the following questions: Would your firm benefit by linking department/location profitability analysis to quality and client relationships? Would your most satisfied clients drive the highest profits? Would your 44 Financial Management ILTA White Paper Effect of a 1-Point Increase 104.12 42.06 40.40 16.98 13.92 10.47 9.98 9.28 employees reporting the highest satisfaction also belong to departments rated highest in coaching? Would your attorneys feel more motivated if their contributions were measured on these factors and not just billable hours and cash collections? Would your firm be more profitable if your attorneys were more motivated? Would your firm put a higher emphasis on these factors if the causal relationship were proved based on your own firm’s empirical results? These types of analyses were difficult if not impossible in the past, but can now be determined using business intelligence.