The cost of ownership for corporate legal departments can be elusive. Here are 10 comparative metrics for US law departments with more than five lawyers on staff that may help shed some light on your legal spend:
1. Legal departments consume approximately 0.5% of their corporation's revenue each year including their outsourcing.
2. That benchmark for "total legal spending" does not include settlements, judgments and fines, which vary widely but are typically much less.
3. A legal department's internal expenditures are typically about 40 percent of total legal spending.
4. On the order of 75 percent of the internal departmental budget is comprised of salaries, bonuses, and benefits.
5. The next largest cost component is (or should be) for facilities, at about 5 percent.
6. Approximately 60% of total legal spend typically goes to outside law firms and service providers (90% of which goes to firms).
7. Of the external spend, roughly half is litigation-related.
8. US legal departments commonly have between three and seven lawyers per billion dollars of revenue, depending upon industry.
9. The fully-loaded cost of an internal lawyer ranges from $160 to $250 per hour.
10. To have one lawyer for every non-lawyer in a department is a normal ratio.
Having presented these 10 fundamental benchmarks for elucidating legal department spend, you may also be interested to read ten benchmarks that many general counsel wish were more available.
- Rees Morrison