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You have a report that gives for each industry the median number of litigation cases per law department in the industry.  Let’s say 45 cases.  A later table in the report gives medians for subsets of that total number, such as medians of employment cases (perhaps 12), of patent cases (3), and of all other cases (28).

 

What you should not do is add up the individual case-type medians (12+3+28 = 43) and expect the sum to be the same as the median number of total litigation cases (45).  The reason is that each median stands on its own and was created on its own.  The software sorts each one high to low and picks the middle value.  It would be merely a coincidence if the sorted list of total number of cases arrived at the same number.

 

One reason is that if the sorted list has an even number of items, the software averages the middle two – a figure that the other lists, if they have odd integers of items, will never produce.  A second reason is that one or more of the component lists (employment, patent and other in the example) might have some missing data, which would throw off a potential match of medians.

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An open question has been whether the time of participation in a benchmark metrics survey correlates to statistically different samples.  Put differently, do law departments that submit data early in the collection period differ materially on key benchmarks from departments that submit their data months later, in the final stages of data collection?

To research this methodological issue, I took the law departments from U.S. and Canadian companies that signed up for the General Counsel Metrics benchmark survey this year for the first time.  My reasoning was that participants in the 2010 or 2011 survey who returned had responded to different factors than newcomers.  There are 191 law departments in the newcomer set, which I divided into thirds by the date they completed the online survey.

The earliest third of the participants – very roughly the Spring participants – are about a half lawyer per billion smaller than the late participants – think of those as the Fall participants.  The Spring participants also had much lower total legal spending as a percentage of revenue than the Falls (0.35% compared to 0.55%).  In terms of size, the median number of lawyers, three, was dead even for both groups.

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An article in the Stanford Closer Look Series (at 2) addresses how government-appointed monitors should be paid.  It cites research by Equilar on the compensation of the top lawyers within large U.S. companies.  “General counsel within Fortune 1000 companies receive compensation that is 43 percent salary, 27 percent annual bonus, and 30 percent cash and equity long-term incentives.”

The compensation data available from General Counsel Metrics, provided by 194 general counsel to date, shows a markedly different distribution.  If we take the medians of their salary, bonus, and equity value, of that total amount, 80 percent is salary; 17 percent bonus, and 3 percent equity.  The Equilar data covers publicly-traded companies, and even among them, only the ones with the general counsel in the top five most highly-paid executives.  It is skewed as compared to the many more companies in the United States that are neither publicly traded nor so large nor with relatively well-paid general counsel.

If you’re interested in how your pay compares, take the quick, confidential survey.  It’s absolutely free, and you will get your report in early December with staffing and spending benchmarks from more than 1,000 companies.  Do so by clicking on this secure survey link.
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The compensation data currently in the General Counsel Metrics study includes almost 1,000 in-house lawyers, of which 404 reported the value of the equity award they received for 2011 (either zero or an amount; the others did not complete that question).  Of that group that reported on equity, 225 got no award (55%) and 179 got an award (45%) of options, restricted stock or some other equity.  The high proportion was a surprise to me, since I thought equity awards were much less common.

 

The average amount of the equity awards was $188,000, while the median was $100,000.  They ranged from very small amounts to well over a million dollars.  The ratio between cash compensation, base salary and cash bonus, and the value of equity awards ranged widely: from less than one percent to 300-400%.

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Some publications regularly trawl the annual reports of U.S. publicly traded companies and assemble those that include the general counsel in the five most highly paid executives.  The articles they publish list the reported data in tables and inevitably headline the general counsel who “made the most last year.”  It is usually someone who cashed in a significant amount from accumulated stock options and restricted stock grants.

 

What I hadn’t seen is data on the number or proportion of general counsel in publicly traded companies who make enough to find themselves one of the top five.  The Conf. Bd. Rev., Summer 2011 at 45, tells us part of the answer: It cites a Towers Perrin study that “recently revealed that CFO’s, heads of legal, and HR leaders showed up among the top five highest-paid execs 76, 38, and 5 percent of the time, respectively.”  I think that means that almost four out of ten annual reports gave the general counsel’s compensation data.  If so, that would be a reasonably representative selection of data.

 

Given that there are something like 5,000 U.S. companies with shares traded on exchanges, every year data must be reported to the SEC and shareholders on close to 2,000 general counsel.

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Other posts on this blog have reviewed the basic notions of linear regression, using correlations between total compensation and various factors that determine it.  The calculation of a regression also tells how much of total compensation is predicted by each of the factors, such as years of law practice, practice area, size of department, industry, and so forth.

In one example, data from General Counsel Metrics shows that years out of law school only predicts about 50 percent of total compensation.

Additionally, software that calculates regressions can tell us how closely the data matches the regression line.  That number is known as the correlation of determination and the higher it reaches, the more the predictor attribute tracks total compensation.

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Thomson Reuters recently surveyed more than 500 legal departments and spoke directly to over 100 legal department leaders and attorneys.  Not surprisingly, given the T-R suite of legal software offerings, one area they covered was” vendor-provided” software (at 3).  Matter and spend management tools, they found, had been adopted by 40 percent of the respondents.  A similar number reported using contract management solutions from a vendor.

 

The General Counsel Metrics benchmark survey has almost two years of data on matter management software and one year on contract management.  Matter management this year is about one-third more common than contract management, with about 90 law departments confirming use of the first and about 70 the second genre of software.

 

As to other law department technology Thomson Reuters reported legal hold software in 20 percent of their respondents; software for “Complex transactions” in 21 percent; “Compliance” in 22 percent; and “Entity management” in 28 percent.  They either did not ask or did not report on intellectual property tracking software.

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You and you law department will benefit from taking part in the 2012 General Counsel Metrics benchmark survey.  We are on our way to over 1,000 participating law departments, which gives tremendous reliability and specificity to the metrics.

Plus, GC Metrics offers compensation data – more than 1,000 lawyers and administrators are covered so far,.

Plus plus, Releases, have in their 90+ pages, information on matter management software and contract management software.

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The Wenham Law Group pays its network of experienced lawyers between $75 and $100 an hour, but bills clients a flat $150 an hour – for everything.  As described in New England In-House, July 2012 at 5, the cofounder of Wenham Law group, Inder-Jeet Gujral, expects the firm to handle work especially in the non-compete, contract, and employment areas.  Interestingly, Gujral is not a lawyer.

 

If there were a number of organizations that priced their legal services on a fixed hourly rate, law departments would over time sort out their work according to the appropriate cost structure.   Work the departments felt was worth $150 an hour or more if done competently will flow to such a provider. If this were to happen, it would put intense cost pressure on law firms that charge the same hourly billing rate regardless of the work done.

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The 2012 Real Rate Report, produced by TyMetrix and the Corporate Executive Board, includes some data on 2011 litigation rates. As explained in the ABA Journal, July 2012 at 33, the average hourly rate for associates was $357. Whether those rates are representative of other services provided by law firms the article does not explain.

If we assume that for every associate hour there is one-half of a partner hour, a leverage ratio which may be approximately correct for U.S. law firms when litigating, the overall rate – assuming partners are in the $500-$700 an hour range – would near $500 an hour.

This blog has repeatedly written how internal costs per lawyer hour for US law departments, when fully loaded, are around $200.

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