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John Lukacs, The Future of History (Yale 2011) at 43-44, disparages what he calls “quanto-history,” the effort to gather data and apply statistical tools in the service of historical knowledge. What others have called “Cliometrics” – Clio being the goddess of history – lack reliable data and, worse, focus on quantities not qualities, according to Lukacs. Clearly, not a numbers guy!

Econometrics, to shift fields but bring in a parallel discipline, applies statistics and mathematical analysis to the study of economic topics (See my post of July 4, 2006: econometrics.). Benchmark studies for law departments, we might analogize, attempt to quantify management topics in part of the legal industry. One day we might learn from the field of Themismetrics about quantification of legal management.

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Ten posts from June 2011 that struck me as the most interesting

Internal and external billing rates, combined with the ratio of internal to external spend, suggests one-to-one lawyer hours (June 2, 2011)

Some billing rate and spend calculations suggest one outside counsel hour for every in-house lawyer hour.

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We make the estimate by multiplying lawyers per billion dollars of market value against the world-wide total of market capitalization and then dividing by the average number of lawyers in law departments. Perhaps the result is directionally correct.

From four posts on this blog, let’s loosely estimate lawyers per billion dollars of market capitalization to be three (See my post of June 4, 2007: Rio Tinto and 1.6 lawyers per billion in market cap; July 2, 2007: about 2.1 lawyers per billion of market capitalization among 35 large US companies in 2005; Nov. 19, 2010: among US manufacturers, about 3 lawyers per billion of market cap; and Feb. 15, 2011: using General Counsel Metrics data, about 4 lawyers per billion.).

The NY Times, Aug. 6, 2011 at BU3, informs us that total world market capitalization as of Dec. 31, 2010 was $35.5 trillion: US ($14.3 trillion), Europe ($8.6), East Asia ($6.4) and Other ($6.2). If the US ratio of three in-house attorneys per billion of market value holds everywhere, the 35,500 billion in market cap suggests 106,500 attorneys – in the publicly traded companies only. Dividing by an average of three lawyers per department, that means 35,500 law departments in floated companies. The next step needs a ratio of publicly traded companies with law departments, which I assume to be close to 100 percent, and the ratio of privately held companies with law departments to publicly traded companies with law departments. Then we tack on government law departments!

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Many times on this blog I have compiled lists but I have never sat back and thought about lists. For this post, a list doesn’t simply note elements, such as “the ten articles I wrote in 2010.” Here, I mean the result of someone thinking about a situation and coming up with multiple reasons or candidates or points – a cerebral and creative act, not merely a catalogue of facts. Sometimes a hybrid list involves finding facts and making decisions about them, e.g., “six best apps that help you keep track of your work”).

In the spirit, here are my thoughts on the advantages of lists. Lists:

Push you to think about a topic and explore its contours;

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In The Future of History (Yale 2011), John Lukacs traces the shift in historical scholarship over the past 250 years from aristocratic history – great men fighting great battles for great politics – to social history – a profoundly more democratic study of people of all walks and circumstances of life.

What gets written about law departments still concentrates narrowly on the top legal officer (the Kings and Queens) and their struggles with foes like costs and workload and technology (battles) amidst grand issues of scope and expectations and roles (politics). Rarely do we read anything but passing references to paralegals in-house, let alone secretaries. The foot soldiers of legal departments, the serfs and peasants it would seem to some that constitute half the population and keep the files tended and the documents supplied, figure not at all. We accept the aristocratic slit, uninterested in the wider window to the rest.

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This idée fixe of mine has roots far back in this blog. A sample of the reasons why I doubt the existence of “best practices” gives me an opportunity to rehearse some of my arguments.

A pattern of more and more law departments doing something hardly proves that the something is optimal (See my post of March 16, 2009: a best practice is not necessarily a trend.).

The circumstances of each law department differ, significantly, so force-fitting something that flourished at a different department may fail (See my post of Nov. 25, 2009: path dependency limits successful imitation of a practice.).

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Among the arguments in a solid book that disagrees with the current worries about America losing its competitive edge, Amar Bhidé, The Venturesome Economy: how innovation sustains prosperity in a more connected world (Princeton Univ. 2008) at 162-179, puts forth seven concerns with off-shoring. Each of them resonates with some general counsel.

  1. Communications problems that are very hard to overcome at long distance. Nothing beats sitting at a table to cut through explanations and promote shared thinking.
  2. Partitioning problems,” by which Bhidé means whether a project’s tasks can be divided up and parts done somewhere else, then integrated together successfully.
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The mantra for managers: if work can be delegated to a lower-cost, capable person, strive to do so. While that sounds good, still I mused about the $200 an hour Associate General Counsel (using a fully-loaded cost per hour that shouldn’t take anyone back) who delegates a task to a $50 an hour paralegal. Let’s take for granted that the paralegal can do the task as well as it needs to be done.

Here’s the rub. If it takes the paralegal five hours ($250 cost to the company) but saves one hour of AGC time ($200 cost to the company), do we still approve the delegation? Yes, if the AGC can thereby generate more value during the saved hour, such as to concentrate and make progress on a tough legal problem.

Jobs that an experienced and more expensive lawyer can’t do any faster, such as Bates stamping, photocopying and indexing, are automatic candidates for delegation. Jobs that on a pure economics basis might be reserved from delegation should in theory still be sent down if the time saved above has a higher value than the hourly cost differential.

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An earlier foray into erroneous thinking about one kind of software left a lot of flawed thinking to cover (See my post of Sept. 5, 2005: myths of matter management systems.). Here I have generalized common technology-related mis-perceptions.

  1. The hard part is selection. Wrong: the tough sledding comes when getting the software onto users’ desktops and used effectively.
  2. You can bank on the vendor’s ROI calculations. Wishful thinking: in fact, most of those calculations rest on crucial assumptions and very forgiving methodology. A good discipline, but hard to hold out as airtight.
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Larger law departments, those with say fifteen or more lawyers, tend to be in companies with equivalently more revenue. Since economies of scale in legal spending benefit those larger departments, surveys whose participants are skewed toward large companies will produce distorted, lower benchmarks (See my post of Dec. 16, 2010: data from $10 and $20 billion companies.).

Total legal spending as a percentage of revenue suffers the most, since it declines with company size in a fairly constant and predictable trend. Other than lawyers per billion of revenue, which also declines, although less regularly than total spending, most metrics hold fairly constant. General counsel in smaller departments should take account of the their size relative to the median size of the population, unless they can obtain metrics for their own size category.