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Cost per hour of inside counsel interacts with lawyers as a percentage of all legal staff

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For a given internal budget, law departments vary significantly in their calculated cost per lawyer hour depending on the number of lawyers they have. If 1,800 chargeable hours per attorney is assumed, then an internal budget of $4,500,000 means $312 per hour if there are only 8 lawyers, $250 per hour if 10 lawyers, and $208 if 12. Cost per lawyer hour, spend held constant, varies by the number of lawyers.

Now consider leverage for a given total legal staff. If the department with the least lawyers (8) has 12 paralegals, admins, and others, its ratio of lawyers to all legal staff (ALS) is 40 percent. The ten-lawyer department with 10 staff has 50 percent lawyers, while the 12-lawyer group, with 8 staff, has 60 percent lawyers of its total staff. The more staff per lawyer, total staff held constant, the higher the cost per lawyer hour.

These interacting components, structure and cost, present a difficult area in which to recommend best practices. You can vary the number of lawyers and the number of non-lawyers in a huge number of combinations. The optimal mix will be better understood when there is a benchmark database large enough to show how the various combinations correlate to total legal spending as a percentage of revenue within an industry.

Help learn the optimal mix and also find out how your legal department stands. Take part in the largest benchmarking database ever assembled! Get your full report in April by clicking here to take the six-minute, confidential online survey based on your fundamental 2009 metrics. More than 200 departments have responded since late January.

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2 responses to “Cost per hour of inside counsel interacts with lawyers as a percentage of all legal staff”

  1. Dan says:
    February 17, 2010 at 11:57 pm

    A couple of layers to your comments. The overall internal budget probably contains fixed costs that won’t change with the number of staff, so a lot of times the costs of adding staff are incremental when looking at the variable costs alone (e.g., salary, benefits, etc.). And, those incremental costs can then be analyzed by type of staff (e.g., lawyer, paralegal), and then be compared directly to outside counsel expense.
    Also, I’d be curious to hear if others think they work on 1800 hours of billable work. I find that a good 1/3 of my time is on non-billable work, so I don’t think I come close to 1800 billable hours.

  2. Amy Lechner says:
    February 18, 2010 at 2:09 am

    I clicked to contribute to your metric/analysis (please do send me the report), but didn’t immediately identify where I fit in on your list of professions. I am the litigation specialist supporting (as the only practicing paralegal) the in-house legal department of a global, Fortune 500 company. Did you mean “other” to include litigation support specialists?