Articles Posted in Benchmarks

In the Asian Lawyer, Summer 2012, two lawyers from a Korean firm state that “the size of the Korean legal market is around USD 3 to 3.5 billion.  Excluding litigation, the market size of the transaction market may be about USD 1 billion.”   Elsewhere I have offered some data on law departments in Korea (See my post of Jan 14, 2011: around 16 listed companies per million population.). On the next page, a partner in another firm mentions that “previously there have been around 1000 lawyers admitted to the bar every year, but this is the first year that we will be seeing 2500 new lawyers.”   Graduation from law school is one thing, passing the bar is another in Korea (See my post of May 18, 2010: bar passage rate in Korea at less than 5 %.).

US law schools graduate around 40 times as many lawyers each year. If we multiply the Korean legal market by 40, it suggests approximately a $120 billion US legal market. Others have found roughly similar figures (See my post of March 27, 2011: perhaps $70 billion by the Fortune 500 and $60 billion to US law firms; Oct. 25, 2011 #2: $60 billion global and $200 billion U.S. litigation figures; Oct. 28, 2011: $100 billion U.S. corporate legal market as 20% of global market; and Nov. 21, 2011 #3: “American legal market” generated around $255 billion.).

New South Wales is Australia’s largest state, population 7.25 million out of 22.4 million in the country, and home to the country’s capital, Sydney.  Of the 23,760 solicitors who held current NSW Practising Certificates in 2010, 11.6 % worked in government while 18.2 % worked in corporations.

The “2010 Profile of the Solicitors of New South Wales” (page 29) tells us further that as of October 2010 there were 4,327 solicitors working in 1,268 corporate organisations. Of them, 639 listed themselves as “overseas.”  That is 3.4 lawyers per company, which I assume to be per law department.  It is also 175 corporate law departments for every million residents (See my post of July 24, 2011: estimates 84 law departments per million residents of New Jersey.).  NSW might support a higher ratio of legal departments per resident than the other states of Australia, so if we reduce the ratio by a quarter, that suggests approximately 3,000 corporate legal departments in Australia.

At the same time there were 2,760 government solicitors in NSW working across 161 government agencies (page 27).  Those agencies averaged 17 lawyers each, five time larger than their private organization counterparts.  It also means 21 government law departments per million residents.  For Australia as a whole, the last ratio is probably not likely since they don’t have Federal agencies as much.  If we reduce the ratio by, say, one-third, that leaves 317 government legal departments in Australia.

An article in the J. Empirical Legal Studies, June 2012 at 233, relies on box-and-whisker plots to describe large amounts of its data.  Since the whiskers show the minimum and maximum values for a given variable, the authors chose a convention for how to handle “outside values.”  “An outside value is defined as a value that is larger than the upper quartile plus 1.5 times the interquartile range, or smaller than the lower quartile minus 1.5 times the interquartile range.”  That is a convention that makes sense to define and depict extreme and odd values. They displayed outside values as separate points.

For example, a box-and-whisker chart would nicely convey much about the revenue of an industry in a benchmark report.  It would, however, have some companies who reported outside values.  Someone might have entered too many zeros or used a currency other than dollars but did not indicate that or was simply wrong.  The convention gives a way to collar outliers.

This blog has explained box-and-whisker plots (See my post of May 3, 2008: sometimes called Tukey boxes; and Jan. 15, 2009: box-and-whisker plots to display data.).  It has also explained inter-quartile ranges (See my post of Nov. 30, 2005: the average of the middle; June 30, 2006: inter-quartile mean; and Dec. 22, 2010: inter-quartile differences.).  As to how to handle outliers, even that topic has appeared in these pages (See my post of April 27, 2010: information theory, power laws, and odd data; July 1, 2010: standardized scores highlight outliers; and Nov. 28, 2011: Winsorize data.).

Release 2.0 of the General Counsel Metrics global benchmark survey will go out in early August.  It looks set to have more than 500 participating companies, on the way to a thousand this year.

A benefit to be introduced with this Release is a collection of 110 of my blog posts on statistics for legal department managers.  It will include more than 48 pages of them, including a Table of Contents, index, and back references.  The posts are organized by topics and listed in chronological order.  For recipients of the Release, meaning all participants year to day, this will be a useful resource on a topic that is vitally important for benchmarks.

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During the Iraqi “surge,” the “Army had one lawyer or paralegal for every 240 combatants, and these legal professionals have ever more say over battlefield decisions. That is leaving aside the judge advocates general (or JAGs), who offer guidance on the laws of war.” This amazing quote comes from the NY Times Book Rev., June 10, 2012 at 22.

Lawyers per thousand employees has some credibility as a benchmark metric, although it does not rank very high in usefulness. Lawyers per soldier stands unique.

The Association of Corporate counsel (ACC) collected data in the spring of 2011 and recently made it available in its 2011 Census Report. Based only on promotional material available on ACC’s website, here are my initial thoughts. http://www.acc.com/legalresources/resource.cfm?show=1306363

The ACC collected date during April and May of 2011. The Report issued in March, so it took almost one year to massage and prepare the data.

Of the 4,161 companies represented in the Report, 3,652 were in the United States and 267 were in Canada. That 13-to-1 proportion is near the 10:1 last year in the world’s largest law department benchmark survey, that of General Counsel Metrics. Maybe that ratio matches GDP and population figures for the two countries.

Tom Kilroy, the General Counsel of a UK company has another role: “For the past three months, I’ve occupied a line management rather than a legal role, as acting Chief Executive Officer of a publicly listed company with 4,200 employees, operating in over 100 countries and making hundreds of millions of dollars in annual sales.” He wrote a long piece on his blog, GC’s Eye View, May 20, 2012, about metrics. I have quoted it extensively below but also omitted large portions and interpolated a few responsive thoughts.

“After discussing metrics with a large number of senior legal colleagues over the past year, I’ve concluded that metrics are widely distrusted by the legal profession. The topic certainly polarizes opinions. The most common charge made against metrics is that they provide a reductivist view of an activity which involves complex interactions that aren’t really capable of or susceptible to numerical measurement, such as the giving of legal advice.” [two paragraphs omitted]

[Rees Morrison: To state a person’s weight could be “reductivist” but it is more a description of one aspect that says what it says, and doesn’t claim to encompass the whole of the person’s being.]

A Google search for “list of US publicly traded companies” turned up a link that referred to a Bloomberg directory with “over 33,000 companies.” The web site of Credit Risk Monitors claims to identify 20,899 public companies in the United States.

Credit Risk Monitors also lists about 56,000 non-US companies that are publicly traded and breaks them into broad sectors, within which are industries. Credit Risk claims the total worldwide group of publicly traded firms (U.S. and other countries) generated a total of $49 trillion of revenue. At five in-house lawyers for every billion dollars, a middle-of-the road metric for U.S. companies, those 49,000 billions project to 245,000 in-house counsel. If the U.S. median of three lawyers per law department even approximately holds, the quarter million lawyers means 80,000 law departments in publicly traded companies.

I don’t know the ratio, but for every public company with a law department, one can imagine several privately held companies with more than $100 million of revenue and at least one in-house attorney. If 80,000 global public companies with legal departments is approximately right, then is it plausible to add on two, three or four times as many for the privately held departments? Now, about government agencies, not-for-profits, partnerships…

Many of the largest companies in the world are owned in whole or part by a government. In Italy, for example, the government owns substantial stakes in Sace, an insurance group; Simest, a financial institution; Fintecna, a service provider; Eni, an oil company; Enel, a power utility, and Finmeccanica, a military conglomerate. When I read about these state-owned entities (SOE) in the NY Times, June 16, 2012, at B6, I thought also of China’s many SOE’s and the myriad others around the world.

The competitive tension and cost-consciousness of private companies (whether publicly traded or not) and their consequent decisions on legal staffing and spending inevitably result in lower benchmarks than those of SOEs. When a government runs a business, political and social forces push toward different decisions regarding employment and budgets. Leading candidates that reflect the difference would include lawyers per unit of revenue and legal spending in proportion to revenue, all of which would likely be seriously warped by the inclusion of inefficient SOEs in a benchmark study.

Having a big dog in the fight, as a compiler of law department benchmarks on staffing and spending, it’s gratifying to find others who struggle against the darkness that devalues management metrics. As more data about processes and outcomes in corporate law departments become available, it will become clear that evidence-supplemented management surpasses instinct, anecdote, fingers crossed, and selective memory. Hence, it was exciting to read in Law Tech. News, June 2012 at 54, about some instances of quantitative legal prediction in the law.

LTN quotes Daniel Katz, an assistant professor at Michigan State University College of Law, who has done research on statistics and legal data. katzd@law.msu.edu The article also dwells on the Real Rate Report of CT TyMetrix and possible extensions of that company’s initiative (See my post of June 2, 2010: hourly rates of US partners from the Report; June 3, 2010: “standard billing rate” is illusory; Jan. 19, 2012: U.S. litigation firms charged a blended rate of $385 an hour; Jan. 23, 2012: clear data on the rising rates of law firms as they grow larger; and Jan. 19, 2012: gaps between average billing rates of U.S. litigation associates and partners.).

The article then moves to the Harlan Institute which analyzes Supreme Court decisions and allows crowd-sourcing predictions about upcoming decisions (See my post of March 22, 2011: crowd-sourcing game to review invoices.). Lex Machina, a spin-off from the Stanford University IP Litigation Clearinghouse, gets some coverage as it has organized and scrubbed data from 128,000 IP cases, 134,000 attorney records, 1,399 judges and other data from the past decade. Joshua Walker, the co-founder of Lex Machina, explains that the database is available for public interest research and for a fee.