Articles Posted in Benchmarks

LexisNexis says its Verdict & Settlement Analyzer provides information about outcomes of previous similar cases. As described in Legal Tech. News, Oct. 2010 at 17, the software matches the characteristics of a case input to it against its database and lays out key comparisons: “how similar cases have been resolved, and the amount awarded by method of resolution for any particular jurisdiction; the range of possible outcomes” and more. Based on this sketchy description, let me venture two thoughts.

First, it seems as if a litigation manager in a law department could use Analyzer to benchmark the performance of a litigation firm retained by that department. The comparisons would justify a premium or explain a holdback; they could set performance parameters for a fixed fee; and they could clarify bonus arrangements for phases of cases.

Second, if the data available is as plentiful and robust as advertised, we have yet another example of law department performance data made available and transparent (See my post of June 16, 2010: the Decade of Data.).

A researcher wrote in 1996 that “Of the 40,000 corporations in Massachusetts with 15 or more employees, less than 1,000 (about 2%) have in-house counsel” (See my post of May 23, 2007 #1: data from Ron Fox.). Working with my norm of 2.5 lawyers on average per department, that would mean 2,000 or so in-house lawyers. In 1996, Massachusetts had approximately 6.2 million residents so this data suggests on the order of one in-house lawyer for every 3,000 residents and 150 law departments for every million residents.

The Corporate Counsel Section of the New York State Bar Association is comprised of more than 1,600 in-house attorneys. I do not know what percentage of in-house lawyers in NY State have joined that Section, but let’s guess that one-half have joined and paid the extra dues. If we assume 2.5 lawyers per department, that means 1,280 law departments. Since the population of New York State in 2010 is about 19.5 million, that means approximately one in-house lawyer for every 6,000 residents and 65 law departments for every million residents.

A group for law departments in Texas has about 325 member departments, which includes government agencies, but a manager of that group estimated there to be close to a 1,000 in the state (let’s assume 2,500 in-house lawyers). The population of Texas in 2010 is about 23.9 million people, which translates into one in-house lawyer for every 23,900 residents and 104 law departments per million residents.

The global benchmark survey of General Counsel Metrics, LLC (well, this blogger, really) burst upon the scene this year and has amassed more than 700 participants. The law department benchmark survey conducted by ALM increased its participation rate from about 65 last year to 114 this year. Then, yesterday, a press release announced that the Thomson Hildebrandt BakerRobbins survey increased its participation rate about 10 percent. No word yet from the ACC Empsight compensation survey.

What explains the surge of interest in benchmarks? Perhaps the economic downturn forced more companies to look at overhead G&A, which in turn made comparative spending and staffing metrics more compelling. Perhaps more general counsel have on their own converted to apostles for metrics? Perhaps the rising tide of publicity about the General Counsel Metrics success story has lifted all the boats?

Surf’s up, so get on board with more than 700 other law departments. Take part in the GCM benchmark study and get your no-cost report, all 65 pages, in early November.

“There are 30,000 companies in the United States that have at least 100 employees,” it says in Intellectual Prop., Fall 2010 at 48. That might be another clue as to how many law departments exist in the country, although presumably a smaller number than 30,000. The median number of US attorneys per 1,000 US employees in large law departments is 1.5 (See my post of Jan. 27, 2006: lawyers per 1,000 employees.). If that metric holds even approximately among the 140 million people over 16 employed in the United States (see the Bureau of Labor Statistics website) that would suggest something like 200,000 in-house lawyers. At 2-3 lawyers per average legal department, that would lead to 70-100000 departments, which is a very crude (and much too high) directional pointer.

Earlier posts speculated on various bases for estimating that the US has something like 20,000 corporate legal departments (See my post of Sept. 25, 2005: ACCA estimate of 71,000 non-governmental in-house lawyers; June 15, 2009: almost one out of five lawyers in a large survey had gone in-house by their seventh year of practice; March 2, 2010: presumed even distribution of number of departments across industries after adjusting for size of industry; April 30, 2010: demographics, corporate revenue, and law firm fees; May 11, 2010: GDP-based calculation; and May 12, 2010: publicly traded companies and corporate tax returns.).

Another piece of the puzzle came my way, courtesy of Iberian Lawyer, July/Aug. 2010 at 23. Ramon Mullerat, the former President of the Council of Bars and Law Societies of the European Union (CCBE), writes that “there are an estimated 70,000 transnational corporations with some 700,000 subsidiaries.” If the adjective “transnational” suggests companies large enough to do business in multiple countries, many of them may have an in-house legal team. For that matter, many of their subsidiaries may also.

Later in his article, Mullerat refers to “over five million lawyers around the globe,” a figure that allows me to use earlier estimates of one in-house lawyer for every 8-10 lawyers (See my post of April 13, 2006: estimates in the UK of 14.5% inside solicitors; Feb. 8, 2010: estimates based on US, UK, and French data; and June 18, 2010: number of British in-house solicitors.). That polestar would suggest something on the order of 500,000 employed lawyers, which at an average of three per law department (also a very broad presumption and probably toward the high side), results in 170,000 law departments.

As a contribution to the ongoing discussion about the scope of what paralegals can do in law departments and therefore the optimal ratios of lawyers to paralegals, I assembled some data from my global benchmarking survey. My most recent online column for InsideCounsel provides that data and discusses it. Click here for the column on lawyer/paralegal ratios.

Benchmark metrics give directional guidance for where you should pay attention and perhaps take action. They highlight your relative strengths and weaknesses in certain quantifiable areas.

Some people, however, maintain that mere presentation of the law department’s numbers, let alone benchmark comparisons or decisions, bring benefits. For example, some believe that waving compiled numbers at procurement is the garlic that will save you (See my post of April 13, 2010: show command of your figures and you will be left unmolested.). Others believe that opening the black box and sharing numbers will ward off prying executives and by that transparency alone demonstrate value to the company (See my post of July 15, 2010: open books on the black box.). A third argument in favor of disclosure of numbers, even if they are not benchmarked in comparison to other legal departments nor a reason for action, stresses the managerial prowess you display by tracking and reporting your metrics.

These three arguments all say that value comes from disclosure alone, whether or not the data is relative to peers or whether the general counsel acts on them. I have my doubts. Numbers collected without decisions thereafter have little worth.

You still have time to learn from the most comprehensive benchmark study ever done, and at no cost. If you would like to see a mini-version of the report, write me from your corporate address.

Take part in the survey and enter your three staff and two spending numbers from the end of 2009. You will shortly get the 65-page report,with 25 charts, scatter-plots, and tables of medians by 18 industries, four revenue ranges, and 20+ countries.

My friend and colleague, Bruce Heintz, who helps law firms serve their corporate clients better, teamed up with me to describe ways that firms can use benchmarks from surveys of their clients. Our article appeared in the National Law Journal a week or two ago. If you would like to test our ideas or encourage your favorite relationship partner to adopt them, you can click here for the article.

Purely coincidentally, I have proudly accumulated the largest set of benchmark data for law departments known to man or woman.

During the coming years, as benchmark surveys and their methodology improve, we will see a shift toward metrics that pertain to specific practice areas or industries (See my post of Feb. 8, 2010: industry-specific measures; and of Feb. 25, 2008: practice area benchmarks with 24 references.).

Recent examples from this blog point toward that important stride forward (See my post of May 18, 2010: IP professional per billion of revenue; June 1, 2010: patent staff per thousand employees and patent records per patent staff; June 30, 2010: number of cases handled and number of outside counsel managed per inside litigation lawyer; June 30, 2010: allowance rates per patent preparation lawyer; July 26, 2010 #3: 3,000 raw ideas to produce 150 patent applications; and Aug. 3, 2010: total litigation staff and hours.). The more tailored the metrics, the more useful the benchmarks.