Articles Posted in Benchmarks

A technique developed in the 1990s by Professor Ben Shneiderman at the University of Maryland has come to be known as tree-mapping. As explained in the NY Times, April 3, 2011 at BU3, tree-mapping “uses interlocking rectangles to represent complicated data sets. The rectangles are sized and colored to convey different kinds of information.” A tree-map is a two-dimensional visualization for quickly analyzing large, hierarchical data sets. Many look like stacked, colored mosaics. To see what one looks like, courtesy of the Hive Group, click here for one of their examples.

As an example, a treemap would allow a law department to depict its spending on outside counsel by number of firms used and the amount spent for each firm by practice area (See my post of May 8, 2008: an online site that enables tree maps.). Much more is possible, however. Viewers can reorganize the display to explore whether other patterns appear or they can drill down on a subset of the data.

Data visualization software for legal departments will someday go beyond the static presentation of data graphics. My earlier posts covered much of that basic level (See my post of May 7, 2008: methods to portray data with 9 references; 22 cited in one.).

Even slightly more elaborate graphics unnerve many in-house counsel. Numbers and patterns are alien and a bit intimidating. For most of them, a modest pictorial effect – no animation, please! – will be quite enough (See my post of Sept. 28, 2008: lawyers are less comfortable with images than with words; Jan. 15, 2009: box-and-whisker plots; March 1, 2009: cartograms; March 20, 2009 #1: Tableau data visualization software; March 26, 2009: offshore data analytics; July 10, 2009: plotlines add much more to timelines; Feb. 10, 2010: business intelligence, data mining, portals draw on data portrayal; June 29, 2010: Codean software for cross references; and Dec. 24, 2010: expertise network portrayed visually at IBM.). Thus, to go beyond charts in a dashboard to an interactive, dynamic presentation stands as far off as science fiction.

Much more is on the horizon for law departments to array and make data compelling. The NY Times, April 3, 2011 at BU3, conveys some of the excitement and “visceral comprehension” that could be unleashed. Imagine ten years of data on the size of law firms paid by a department depicted as spheres and their color showing the yearly amounts. Or budgets to actual each year over a decade could be vividly stretched and compressed in front of the viewer. Maybe the locations of offices around the world could pop up and expand or shrink over time. For a group of cases, key events could show on a timeline next to a rising bar of costs. As the article says, “the brain is more attracted to and able to process dynamic images than long lists of numbers.”

It is inexcusable for general counsel in this decade of cost scrutiny not to know and understand what their lawyers cost the company on an hourly basis, including but far from limited to their compensation. In-house legal talent comes at a cost that derives from pay and benefits, certainly and largely, but also from leverage, outside counsel usage, specialization, seniority, and infrastructure.

Twice before I have assembled metaposts on fully-loaded internal costs (See my post of Aug. 27, 2008: fully-loaded cost per lawyer hour with 31 references; and March 9, 2009: fully-loaded with 7 more posts.).

Since then the topic has remained very much alive (See my post of April 8, 2009: ratio of support staff; April 15, 2009: possibility that inside and outside costs will converge; Aug. 11, 2009: relationship with outside counsel payments; Sept. 5, 2009 #1: credit union expenses; Oct. 11, 2009: law firms bear technology and HR costs that law departments might not; Feb. 21, 2011: three unusual costs; April 13, 2010: fully-loaded costs are more accurate with time tracking; July 1, 2010: Hildebrandt benchmark survey gives $214 an hour in the US; and March 6, 2011: 5% annual increases for German law departments.).

My benchmark survey, General Counsel Metrics’ second year, through yesterday had obtained 190 participants. It is well on its way to breach the 1,000 participant milestone. Interestingly, of the law departments in so far, just under half did not participate last year. If most of last year’s 805 participants re-enlist, and 90 have so far, the prospects for fertile and comprehensive analyses are exciting.

These law departments and all others in April will get their first report in early May. So far it covers a total of 4,993 lawyers and $4.5 billion in total legal spending. About 55 percent are US companies and the other half come from 20 countries, led by Canada, the UK, and Brazil.

This benchmark data will be a useful resource for every law department that participates, and it costs nothing. Submit your basic staffing and spending data for your law department today. Click here to go to the confidential, short, online survey.

An extreme value distribution is a curve that does for abnormal values what the normal, Gaussian bell curve does for run-of-the-mill values. A theory to predict extreme events first appeared in 1928, gained its first real traction 20 years later, and Extreme Value Theory (EVT) has recently become more and more mainstream for insurance companies, financial services companies, and governments that have to decide how much to invest to protect against a calamity. EVT came to my attention in Robert Matthews, 25 Big Ideas: The Science That’s Changing Our World (MJF Books 2005) at 103.

The theory draws on data from the past. For a law department, or a group of them in the same industry, EVT might look back at the number and frequency of law suits that cost more than $3 million in a year, in present dollars, to defend. It appears to be a sophisticated mathematics that could project the likelihood of such a budget-crusher in the future.

People who conduct surveys – I raise my hand high – should be wary when they throw stones at other surveys’ methodologies. Even at risk, I will continue to chide others on how they word questions and expect rocks through the windows of my own benchmark survey in turn.

So, consider this question from the Third Annual Law Department Operations Survey: “Are there plans to improve or evaluate a new matter management and/or e-billing system in the next 12 months?”

Start with praise, Rees: The topic, updating two important classes of software, deserves a question and the findings could be revelatory. Further, to put a time frame on the question gives it more precision – “in the next 12 months.”

Looking at how some metrics varied from last year to this year, based on participants in both the 2010 and 2011 General Counsel Metrics global benchmark survey, I found it hard to reach momentous conclusions. On the whole, the year-over-year shifts were modest by industry yet that aggregation did conceal some significant changes between individual companies.

To read the entire Morrison on Metrics column from InsideCounsel Exclusives, click on this link.

Previous posts on statistics have covered variance and standard of deviation (See my post of Feb. 18, 2011: variance; and Feb. 21, 2011: standard deviation.). Statistical analysts can take the calculations of dispersion one step farther. When they divide the standard deviation of a set of data by the average of the set, they produce what is called the coefficient of variation. It expresses the standard deviation as a percentage of the sample mean.

The coefficient of variation (CV) has one primary purpose. It is useful when you care about the size of variation relative to the size of the observation set, but that is not all. It also has the significant advantage that it is independent of the units of observation. For example, the value of the standard deviation of a set of invoice amounts will be different depending on whether they are measured in dollars or pound sterling. The coefficient of variation, however, can be compared for both as it does not depend on the currency. Alternatively, if a general counsel wanted to understand better the distribution of cases by elapsed months and by total fees – two different measurement units – the CV would tell which one ranges more widely.

To appreciate industry-level benchmarks, compare a few metrics for the law departments of Google and Anheuser-Busch InBev that appear in Practical Law’s February and March 2011 issues (both at page 80). For Kent Walker of Google, more than 230 lawyers support $23.7 billion in revenue plus about 22,000 employees, from 21 law-department locations. For Sabine Chalmers of Anheuser-Busch InBev, 150 lawyers enable $36.8 billion in revenue, support a whopping 116,000 employees, and work from more than 20 law-department locations.

Reflect on the wide disparity between these very different companies on three benchmarks. A legally intensive software company needs one lawyer for every hundred employees whereas the beer manufacturing and distribution company does quite well with one lawyer for every seven hundred employees. A seven-to-one difference!

The software company averages about 11 lawyers per location; the beer company averages a bit more than half as many. The difference may reflect the gap in legal complexity between the two companies.

The latest issue of Of Counsel, March 2011 at 11, describes my innovative approach to law department benchmarks. (To take part, click on the icon upper right.) It also explains the three most important benchmarks, and how law firms can benefit from familiarity with corporate benchmarks. If you would like to read it, click here for the PDF of my Of Counsel article.