The tenure of the general counsel does not relate to cost control: years in the position shows no association with total legal spending

I thought that the longer a general counsel has served a company, the lower total legal spending would drop as a percentage of revenue. A veteran general counsel would know the company better, understand its key personnel, be close to the company’s strategy and legal risks, and have shaped the law department to cope with all that. Don’t we get better the longer we do something?

Apparently not. Assisted greatly by Aspen Law & Business’ Directory of Corporate Counsel 2010 (more information write here), I combined legal spending data from 29 US manufacturing companies in my benchmark survey with the Directory’s excellent demographic data about their general counsel. The Aspen demographics and the General Counsel Metrics data let us test my hypothesis: tenure correlates negatively with legal spend adjusted for revenue, i.e., the longer in office, the lower the legal spend.

Unfortunately, based on this set of data, the expected correlation between years as the chief legal officer and total legal spend does not show up. To my disappointment it is slight although negative. It does not appear, therefore, that tenure contributes in any material way to managerial efficacy as judged by spending efficiency.

Richard Russeth says:

February 17, 2011 at 11:19 am

I can understand your disappointment but…the law being what it is, the situations being what they are, are you sure you have controled enough variables, of which there are many to reach this conclusion with any certainty. And which is more important at the end of the day in any case driving down legal costs or excellent legal outcomes for the company which can save quite a bit of money that simply doesn’t appear anywhere in the budget or balance sheet.

Jeff Hodge says:

February 17, 2011 at 1:11 pm

Rees,
I have to agree with Richard….you just haven’t considered all of the variables and I think it would be a task too far. In addition to Richard’s comments I’d add that as a company grows and expands its footprint we should expect legal costs to rise. M&A will have a large impact as well, and so will too many factors to consider.

Steven B. Levy, Author of Legal Project Management says:

February 17, 2011 at 1:28 pm

If there’s blame here — and it’s not clear there is, given the increasing complexity and number of problems most law departments are wrestling with — that blame must be shared by the GC, the COO, the CEO, and most of all the CFO. The GC can only ask for a given budget; it’s up the the CFO (plus COO and CEO) to grant it.