Articles Posted in Benchmarks

Drawing on data from 109 legal departments in France, consultant Helene Trink of Profit & Law reports that lawyers as a percentage of total legal staff is much higher than in American law departments. Her median figure: 77% of the total legal staff are lawyers (1st quartile 63% and third quartile 86%).

As compared to three-quarters of the French law departments being lawyers, the figure is close to a one-half in United States departments. The final report of General Counsel Metrics for 2010 data, with 510 U.S. law departments, was 53%.

Why the large difference? Paralegal positions are much less common among the French departments, which may explain some of that very large gap. Another explanation may be that the French handle more legal work in-house, so they staff a higher proportion of lawyers (See my post of March 7, 2012: about 1.5 lawyers per billion more in French departments.). Third, it is possible that the all-in costs of lawyers to their French employers is relatively less than to U.S. companies, so the French splurge with more lawyers.

In her most recent benchmark report, Helene Trink, head of the French consultancy Profit & Law, published 2010 data on 75 law departments in France and their lawyer headcount. At the median, the number of lawyers per billion Euros of revenue was 8.5. If we take the Euro exchange rate as $1.75 dollars per Euro, that works out to be 6.4 lawyers per billion U.S. dollars. The final report of General Counsel Metrics has 2010 data for 510 U.S. law departments. The comparable figure was 4.8 lawyers per billion. A difference of a lawyer and half per billion deserves some explanation.

The first quartile legal department had 3.6 per billion Euros (2.7per billion dollars) while the fourth quartile had 16.9 (12.7 per billion dollars). The French departments have insourced more work than their U.S. counterparts, which in part explains their lower total legal spending as a share of revenue (See my post of March 6, 2012: French data on legal-to-revenue ratios.).

This shift appears even more clearly because the percentage of internal legal spend to total legal spend is at the median 50%. For U.S. departments, a ratio of 40/60 with the tilt to external spending is more common.

Profit & Law, Helene Trink’s consultancy in France, recently published its survey report of 119 heads of legal (directeurs juridiques) in France. Of that group, 62 provided enough data to permit Trink to calculate their total legal budget, covering both internal and external costs, as a percentage of their 2010 corporate revenue.

At the median, the figure was 0.17%, which is half or less of the comparable figure from U.S. participants in the General Counsel Metrics survey. At the first quartile, the figure was 0.07% whereas at the third quartile, 0.44%. We should note that Trink’s data is in Euros, but the normalization of the figures, legal spend divided by revenue, renders that irrelevant when the resulting metric is compared to US dollars or any other currency.

It is likely that relatively more litigation, intellectual property costs, and government investigations drive up the U.S. spend. Also, some of Trink’s respondents cover only France. The median for departments reporting worldwide figures (at page 14, for 31 companies) was 0.32%. That figure comes closer to the prevailing U.S. standard, probably because it includes spend in the costlier U.S.

One of your law firms might volunteer to analyze the bills you have paid and bring to bear more talent than you have available. KMWorld, Feb. 2012, at 11, brought the possibility to mind as it describes how Byran Cave has a Practice Economics Group. The firm created the Group “to develop tools and techniques to improve the firm’s ability to price projects accurately and competitively and to manage those projects to completion on budget and on schedule.” The capabilities of the Group, and similar staff in other large firms, could extend to poring over your matter management system’s data and presenting the results. Even better, if a firm could combine your data, anonymized and secured of course, with data from other clients and from their own matters handled, the empirical insights would improve even more.

An innovative law firm with reach in a defined area of representation could amass data, hone analytic and presentation skills, and develop an offering for the market with formidable competitive advantages. Meanwhile, law departments who make their information available will approach alternative fee arrangements and budgets more confidently.

The more ideas and possible mixes and matches a law department manager has available to choose from, the more …

We know intuitively that as the number of choices increase, the number of possible combinations of those choices increases even faster. The mathematics that makes explicit how those combinations increase falls into the field of permutations and combinatorial functions. My latest column for InsideCounsel, published February 13, 2012, gives examples of combinatorics for legal departments.

This year’s survey is officially OPEN! Click on this precious link to complete your response. You will relish the streamlined questionnaire, 26+ industries, five releases, medians for 25 key metrics, and the zero cost.

For your industry to be well represented, please forward this post by e-mail to your colleagues and peers. Make some noise, fans, and help GCM get 1,000 participants!

Not many law departments calculate rolling averages, such as for what they spend per month on outside counsel, but it is a useful tool to show up-to-the-month patterns in time-interval data. Rolling averages can show your progress since they convey recent trends rather than overall averages. I write about rolling averages and how to calculate and display them in my Morrison on Metrics column, published Jan. 30, 2012, with InsideCounsel.com. The full column about rolling averages is available online.

A few days ago my online column appeared at InsideCounsel.com. It offers thoughts on scatter-plots (aka scatter-grams). They and their usual sidekick, trend lines, provide a compelling way to present a lot of data so that some message from the pattern comes across immediately. If you want to read the full column, published on January 16, 2011, click on this scatter-gram link.

If general counsel understate the cost of an in-house attorney hour, perhaps by assuming a high number of chargeable hours a year or only including base salaries, they are mistaken. In the ABA J., Jan. 2012 at 26, for example, a general counsel of a huge real estate management firm “notes the average cost to employ an experienced in-house lawyer is $125 an hour, a bargain compared to many firm rates.”

Actually, for U.S. law departments, according to 478 who are in the final release of the General Counsel metrics benchmark survey, the fully-loaded figure is $193 (assuming 1,800 chargeable hours per year). Thus, the quoted general counsel operates on an assumption approximately 50 percent too low. Even more, he mentions “experienced” in-house lawyers, who probably turn over the meter even faster.

The Fifth Release of the GC Metrics global benchmark survey will go this week to 829 participating law departments. That is a record increase of 24 from last year. There are now 27 industries detailed, with the addition of special analyses for airlines, automotive suppliers, medical devices, national labs, semiconductors, certain manufacturers, and others. Thirty-four countries are represented among the group, with the United States (510 departments), France (112), and Canada (53) leading the way.

You can still get the Release if you submit your company’s data online between now and February 15th when the 2012 survey – asking for 2011 data – will open. Here is the survey link and all you need do is answer the six data questions:

• the number of your lawyers, paralegals, and other staff as of Dec. 31, 2010;