No businesses can succeed without timely and accurate management information. This is particularly true for law firms. Legal sector changes, such as the trend towards disaggregated legal services and fixed fee billing, have only increased management information requirements.
Law firms have always been good at recording raw data. But how do you take that raw data, and turn it into useful management information that enables you to make good business decisions?
What is the difference between raw data and management information?
A dictionary definition of data is “facts and statistics collected together for reference or analysis”. Data alone cannot help law firm managers to make decisions. Indeed, too much data can often distract from a manager’s decision-making process.
Data is only as valuable as the information and insight we can extract from it to help us make better decisions. So, in order to be useful, data must be converted into management information.
Management information is, quite simply, information that can be used to support decision-making by managers. Business intelligence is a term generally used for the set of techniques and tools for the transformation of raw data into meaningful and useful information for business analysis purposes.
Interestingly, BBC Bitesize has a great section for teaching teenagers the difference between data and information, yet there remains confusion about this concept among many adults, even within finance and IT professions.
Here are three examples of key differences between raw data and management information:
|Raw Data||Management Information|
|Fees delivered value per bill|
|Value of time recorded|
|Number of matters opened + fee estimate per matter|
(1) Choose the right management information to report on
Good management information should both encourage desired actions and highlight potential problems and risks. This should be the acid test when choosing the right management information to report on.
Ralph M Stair’s book gives a good definition of “valuable information” in his book, Principles of Information Systems:
This list is equally valid for good quality management information.
All law firms record similar kinds of data, but the management information they require differs, according to their business objectives. Choosing the right management information to report upon is crucial.
(2) Combine your raw data with your business rules and context
Creating good management information involves incorporating your raw data with your business rules in the context of your organisation.
As an equation: Management information = Raw Data + Business Rules + Context
Your business rules relate to how your particular business chooses to interpret your data and statistics. So for example, your business rules might be:
Armed with your list of business rules, you then need to consider your business context, which takes us onto the next point.
(3) Decide who needs to know what, and find out when they need it
To be useful, management information needs to provide insight. To provide insight, it needs to be directed to individuals with the appropriate background knowledge. This kind of context will only be known by you or others in your organisation at departmental and individual level. Put simply: who needs what? And when do they need it? Consultation with all departments is crucial to get this right.
(4) Decide how best to display the information
Everyone’s needs are different, but my experience is that there is a lot of common ground in how law firm managers prefer to receive information. I would advise the following basic techniques for data transformation in a law firm:
(5) Build a good management information system
The conversion of raw data to management information should not be an arduous manual task. Management information systems should be designed to automatically transform raw data into meaningful and useful management information – and deliver it to the right person at the right time.
If you have followed the steps above, you should be armed with all the key information you need to build an effective management information system that does all the hard work for you.
Our SmartEye management information software has been developed over a number of years to meet the specific business needs of law firms. Our off-the-shelf version already takes into account the things that all law firms are interested in. But a key part of the process we go through with our clients involves tailoring the software for implementation at their individual firm. We consult with clients to understand their business rules and objectives, and then tailor the software to report to their specific requirements.
Typical tailoring requests cover business rules such as how departments are organised, the different formulas and calculations used to interrogate the data and deliver the right management information for each client.
If you’d like to discuss how management information systems could help your law practice to run more efficiently and profitably, please contact us by email or call 0845 6806 843.
You can also contact me on LinkedIn and Twitter: @EXENLS
This blog post was written by Graham Moore, Managing Director of Exen.
Law Firm Practice Management System and Business Intelligence expert. Managing Director of Katchr.
If you’d like to discuss how large or small law firm software and legal financial reporting systems could help you run your practice more profitably, please give me a call on 03333 010 766.