Data, and thoughts, on allocation of work between inside and outside counsel

Major, Lindsey & Africa surveyed inside counsel this spring and released the results in July. One question asked “What percentage of your legal department work is handled by outside counsel?” Almost six out of ten respondents selected “0% – 40%” while two-and-a-half out of ten chose “41% – 60%.”

It is not possible to dig more deeply into these broad bands and combine them, but we might not be far off to guess that something like 80 percent of these legal departments would have chosen 30-50 percent if that band had been available.

Did those surveyed think in terms of budget dollars? If 60 percent of the typical U.S. law department’s budget goes to external counsel, but their effective hourly cost is 50 percent higher than their inside-lawyer fully loaded cost, then the aggregated hours are about the same, inside to outside. Did respondents estimate hours worked on both sides? Did they take into account in any way differences in complexity of work done inside and outside? And, do they articulate or consider any differences in chargeable hour equivalents worked inside and out? Even self-respect might bias responses, since how many law department managers would want to admit that more work is done by those retained than by those hired?

In short, what were the considerations or bases for the choice selected? Answers may boil down to an impressionistic guess “We do more legal work here in the law department than our outside counsel do” but questions of this style, as posed, don’t drive deeper to clarify the basis for that felt impression. Sonya Olds Som, a lawyer and recruiter at MLA, will be please to send you the report if you write her.

This difficulty of pinning down what is meant by work percentage handled inside has vexed me previously (See my post of Nov. 8, 2005: measuring total hours of legal advice rendered; Dec. 11, 2006: the proportion of work that departments send out; March 19, 2006: hours inside vs. outside in Canada; Feb. 12, 2008: most efficient when 55% of legal work is conducted in-house; July 11, 2008: a benchmark for the percentage of legal work handled inside; Jan. 22, 2009: quantify hours worked; May 22, 2009: total lawyer hours worked per billion dollars of revenue; and July 4, 2009: European trend upward of work done inside.).