South-Western - Management  
Is Benchmarking the Master or Merely the Servant?
Topic Planning
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Key Words Benchmarking, strategy, best practices
News Story

Benchmarking, setting up statistical guidelines to identify best management practices, has long been used in industrial settings, and its principles also apply to law and professional service firms.

For the typical small law firm, the most important benchmark measures progress toward achieving goals and strategies. Performance standards used in other industries can be helpful, but they have to be fine-tuned to match the needs of each unique firm.

For example, a lawyer recently wanted to know what percentage of his gross revenue should be allocated to rent, which is usually the second or third biggest expense for lawyers. This lawyer wanted to measure his percentage of rent paid against other lawyers’ percentages. A consultant told him that the average was 12%. Yet, there are many issues that can affect the percentage and what is reasonable for any given lawyer. Geography and quality of life issues play a part in determining the amount of money spent on rent. Also, would the firm be able to attract better clients if it had better offices? Before the decision can be made about what is an appropriate benchmark for rent, it is important to know what the firm’s goals are and to make appropriate decisions.

Statistical information can be helpful, but it should not be the only factor used to make decisions. Knowing your goals and strategies is the most important first step to making the right decisions for any business.

Questions
1.

What is benchmarking typically used to achieve?

2.

What does the author of this article see as the pros and cons of benchmarking when applied to industries other than manufacturing?

3.

Give at least two examples of benchmarking applications outside of the manufacturing world.

Source “Is Benchmarking the Master or Merely the Servant?” Minnesota Lawyer, Jan. 8, 2007, pNA.
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