In this column, I share some findings about how much law departments vary on key metrics from one year to the next. To start, I looked at data from 60 law departments that participated in the General Counsel Metrics survey last year (providing their 2009 staffing and spending data) and have done so again already this year (with 2010 data). Of those 60 companies, 40 of them are US-based. In total, their 2,500 lawyers supported 2010 revenue of $588 billion.
First I looked at the percentage change from one year to the next in lawyers per billion dollars of revenue. The average difference between the two figures was less than a percent, meaning the average ratio for the group as a whole barely moved. Of the 60 departments, 27 of them showed a difference for the 2010 ratio at 90 percent of the 2009 number– they were within ten percent or less lower on lawyers per billion– and 110 percent– they were ten percent or less higher. The median differential was slightly smaller, at 97.4 percent, so as a group the lawyers-per-revenue median benchmark shrank ever so slightly. A three percent decline might not even be statistically meaningful.
For my second finding I looked at total legal spending as a percentage of corporate revenue. For the same group, the inside budget and the external expense together showed an average increase of 19 percent from the previous year; the median, however, came in about five percent less than the previous year’s figures. Putting more reliance on the median, if this result holds more broadly across law departments, it is impressive that general counsel have brought their budgets in below changes in corporate revenue.
The dispersion of change was much greater for total legal spending per revenue than for lawyers per revenue. For the former, only 16 law departments fell in the 90 percent to 110 percent range. Spending can vary more than staffing.
This data set and these analyses suggest that, for the most part, law departments in the aggregate remain relatively stable during a two-year period, at least as to these two fundamental benchmark metrics. The economic plummet and rise during this period appears to have made little difference in these normalized metrics. Notwithstanding the overall figures, as evidenced by the averages and medians for the group on the two metrics, within the companies the changes can be as extreme as 50 percent down and 150percent up.
Since these two benchmark metrics are ratios, such as the number of lawyers divided by the revenue expressed in billions, either side of that fraction can fluctuate, which increases the possibility of variation. As might be expected, the revenue of a company can swing up or down more than the headcount of the law department. It is also apparent from the date that the larger the company, the more stable the year-over-year comparisons become. Finally, metrics regarding paralegals and all other legal staff would probably show more volatility because general counsel focus more on their lawyer positions than on the other two categories.