Large law departments increased internal expenses twice as fast as all the departments in a survey

Altman Weil published data in GC Mid-Atlantic, June 2008, at 30, that compares metrics from the firm’s 2003 benchmark survey to its 2007 survey (See my post of July 20, 2008: demographics of the surveys and some observations on methodology.).

One set of metrics covers inside law-department expenses per lawyer. For a group of survey companies with annual revenues of $5 billion and over (“large departments”), in 2003 their average was $345,685; four years later the average had risen 10 percent to $379,273. For all the companies in the surveys, the comparable figures were $314,576 in 2003, rising 5 percent to $330,133 in 2007.

The average large department in the 2007 survey spent almost 15 percent more than the average for all the companies in the group. [A query on methodology; did the analysts remove the large departments from the all-company pool before they calculated the average they describe as “all companies”? If not, the gap is actually larger, since the data from the large departments would bring up the overall average somewhat.]

Legal departments with more lawyers tend to pay higher compensation and tend to add non-lawyer support staff, expenses that together account for most of what is deemed inside expenses. Since the differential of the 2003 survey was 10 percent, the cost-per-lawyer gap between large and smaller departments has widened (See my post of Dec. 6, 2006: one reason why larger departments might attract better lawyers.). The causes of this growing differential might include leveraging more work to non-lawyers, offsetting reductions in outside counsel spending, and fewer but better (paid) lawyers.