How to set a debt recovery KPI for a Legal director?

Clearly there are issues here as to why this has happened already and ther may be office politics at play

Otherwise keep it simple

Ask for an analysis of how much in total is outstanding ($).

Agree how much of this could be recovered and how much written off

Agree a timescale for recovery (6 months, 9 months etc)

You can the calculate how much ($) per month should be recovered.

The KPI's are then:

a) the percentage of that month's target actually recovered ( 100% is above target)

b) the cumulative % recovered against target

You can also use a Z chart to track progress over time

Hi Ionut, 

it might be useful to check the following answers for another challenge re: KPIs, suggested by Bogdan and Milena:

https://consulthon.com/challenge/273/the-ivisible-gorilla-experiment-and-the-goals-setting-process

https://consulthon.com/challenge/264/how-to-set-proper-kpis

Hi Ionut, 

on the flip side I can also suggest to you to introduce a table below:

, where you can see what is the debt recovery amount if you have all the information and use probability. 

This is a way how to see where do you have the relatively highest probability of recovery combined with the highest expected average recovery per case. 

You can also introduce time as another factor:

• below 1 year recovery
• above 1 year recovery

which will also be a way to calculate the weights and create KPIs around the target figure. 

Hope that helps, 

Marieta

Hi Ionut, 

Agree with Colin that some of that debt recovery should be outsourced. 

From what I have seen in the legal sector until now, there are several really important ratios that still can be applied at your client and this will define what work will be outsourced and what will stay in-house.

• Lawyer utilization rate  
• Non-lawyer utilization rate

Leverage administrative staff. Evaluate the effectiveness and if necessary employ professional administrative staff to increase the capacity.

• Realisation rate (recovery rate, ideally should be 100%)- how much was recovered from the portfolio of debts.
• Collection rate 
• Contribution rate- what is the contribution of the Legal director to the debt recovery of the company, i.e. money collected from the department minus the salaries- they should be an up to date figure comparable with the market average.

Billings are meaningless until collected. Therefore, you should focus on hours or effort that can be recorded, billed, and ultimately collected. Performance and compensation should be evaluated based on collections rather than utilization. 

• Quick ratio is a standard one for each company- it measures the ability of a business to use the ready cash to pay off the current liabilities. The higher (above 1) the ratio, the less likely the firm will be in financial difficulty. Anything below 1 indicates that the liquid assets are less than the firm's current liabilities. 1:1 is a breakeven ratio.

• Net debt as a percentage of the turnover- this is an individual for each company and sector, so in that decision, the CFO will need to be involved.

At the end of the day the quality of the product/service, the efficiency of the process and the budgetary certainty are equally important. 

Hope that helps, 

Marieta

Really? A competent Legal Director should not need a KPI to focus on this. Debt should not have been allowed to stay unresolved for such a time. Debt recovery at that point is usually better out-sourced to speciallists (I can make a recommendation if you wish). Or is your client looking for measurable reasons to replace their Legal Director?