2014 edition law department metrics benchmarking survey 2014almlegalintel.com/resources/2014 ldmbs...

2014 Edition

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Law Department Metrics

Benchmarking Survey 2014

Functions | Staffing | Operations | Outside Counsel | Expenses

LAW DEPARTMENT METRICS BENCHMARKING SURVEY

2014 Edition

Conducted and Published by

-- and --

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Release Date: September 2014 All rights reserved. No part of this work may be reproduced or copied in any form or by any means, graphic, electronic or mechanical, including photocopying, recording, taping, or information and retrieval systems, without prior written permission of the publisher. For permission, contact customer service at 888.770.5647 or [email protected].

© 2014 ALM Media Properties LLC

TABLE OF CONTENTS ♦ Introduction ♦ Section I: ............. Staffing ♦ Section II: ............ Expenses ♦ Section III: ........... Outside Counsel ♦ Section IV: .......... Operations/Functions

♦ Appendix A: ........ Questionnaire

2014 Law Department Metrics Benchmarking Survey ALM Legal Intelligence

INTRODUCTION ALM Legal Intelligence has monitored the trend of in-house legal performance through 25 surveys conducted from 1972 through 2014. The Law Department Metrics Benchmarking Survey, 2014 Edition, provides benchmarks on staffing, expenses, outside counsel, operations and functional areas of interest to individuals responsible for law department management. The 2014 Law Department Metrics Benchmarking Survey, contains data collected from 49 companies from May through September 2014. Demographic information on respondents immediately follows this introduction. BACKGROUND Some of the challenges facing law department management today include implementing cost controls, defining performance improvement objectives and aligning departmental goals to corporate business strategy. Increasingly, General Counsel are called upon to provide tangible results. Benchmarking provides the necessary starting place for measuring and managing law department financial and operational goals.

Benchmarks, in and of themselves, do not give manager precise answers to the many issues associated with operating a corporate law department. Benchmarks do tell us how an organization is performing relative to comparable companies. Benchmarks allow one to identify areas that need further scrutiny, i.e., things that need to be looked at to determine why the numbers are what they are. Therefore, deviations from benchmarks tell us what questions to ask and in what areas, but they do not provide us with all we need to know. Benchmarks do not provide us with the answers – they are a starting point. However, having a starting point is essential since it focuses attention on specific areas requiring further analysis. In some cases, your benchmarks for specific areas may exceed the benchmark averages or upper quartile of comparable organizations. In this case, further analysis will provide a greater understanding of the discrepancies. In other cases, your benchmarks for specific areas may be exceptionally low relative to the benchmarks of comparable organizations. In this case, either congratulations are in order or further analysis is required to ensure that the exceptionally low


benchmarks are not hurting the performance of your organization. Finally, benchmarks should not be confused with best practices. Benchmarks are indicators of performance relative to others. A best practice is a business process with demonstrated ability to achieve excellent results. SPECIAL REPORTS The benchmarks presented in this survey offer a starting point useable to a wide variety of participants. If you are interested in exploring these benchmarks in more detail, or have any questions or comments regarding this survey, please contact ALM Legal Intelligence, at (888) 770-5647. METHODOLOGY This Survey presents analysis by revenue, number of employees served by the law department, size of law department, and industry, as appropriate, for fiscal year 2013. Expenses are presented on a per lawyer and per legal service provider basis. (A legal service provider is determined by counting each lawyer as one legal service provider, and each paralegal as one-half legal service provider.) The majority of respondents provided both detailed and total expenses, others provided only limited detail and

incomplete totals. Therefore, the number of respondents may differ from analysis to analysis. STATISTICAL TERMS USED The statistical terms used in the survey are defined below and illustrated in the example. Quartiles are used to define the middle 50% of the range. One quarter of the observations lies below the first or lower quartile (or 25th percentile). One quarter lies above the third or upper quartile (or 75th percentile). The median (or 50th percentile) is the middle or central number in a series of numbers arranged in order of value. In the following example, the median is 50. There are equal numbers of smaller and larger observations. The average (or mean) is the total value of all observations divided by the number of observations. This number may be distorted by a few outliers, as is the case in our example. Percentages may not total 100% due to rounding.


Readers may note large variations in some statistics, such as the number of lawyers employed and outside counsel expenditures. The averages may be substantially higher than medians or even upper quartiles. These are not errors, but a reflection of the fact that a minority of respondents are much greater users of legal services than most others. All data are computed using the unweighted method. Weighted data are analogous to the House of Representatives (i.e., states have more or less representation based on their size); unweighted data are like the Senate (i.e., each state has the same representation).

Unweighted data uses one figure for each company as part of the calculation. For example, in calculating unweighted data for total expenses per lawyer, all total expenses per lawyer are summed then divided by the number of companies that provided data. By reporting analysis in this fashion we are able to provide an interquartile range of performance. It is most appropriate to compare your department using the stratification levels previously identified.

EXAMPLE Item No. Amount

1 400 (Outlier) 2 90 3 80 – 75th percentile or upper quartile 4 70 5 60 6 50 – median or 50th percentile 7 45 8 40 9 30 – 25th percentile or lower quartile 10 20 11 10

Average is 82 Middle range is 30 to 80


26 or More Lawyers

11 to 25 Lawyers

4 to 10 Lawyers2 to 3 LawyersSingle Lawyer

All CompaniesDepartment Size

New England

Middle Atlantic

South Atlantic

East South Central

West South Central

East North Central

West North Central

Mountain

Pacific

All Companies

Region

49101312104

710312

402110

200200

1032320

833020

101000

802141

511201

422000

DISTRIBUTION OF COMPANIES BY LOCATION AND DEPARTMENT SIZE

26 or More Lawyers

11 to 25 Lawyers



Under $100 Million

$100 to $999 Million

$1 to $4.9 Billion

$5 Billion and Over

All Companies

Annual Revenue

49101312104

1685210

1728520

1000433

600141

DISTRIBUTION OF COMPANIES BY ANNUAL REVENUE AND DEPARTMENT SIZE


26 or More Lawyers

11 to 25 Lawyers



Less than 1,000 Employees

1,000 to 4,999 Employees


10,000 Employees or More

All Companies

Number of Employees Served by Law Department

49101312104

2059510

622200

1132330

1200264

DISTRIBUTION OF COMPANIES BY EMPLOYEES SERVED AND DEPARTMENT SIZE

26 or More Lawyers

11 to 25 Lawyers



Chemical Manufacturing

Metal/Machinery Manufacturing

Computer/Electrical Manufacturing

Other Manufacturing

Wholesale/Retail Trade

Insurance

Professional / Scientific / Tech. Services

Health Care Services

Other Services

Other Industries

All Companies

Type of Industry

49101312104

730040

402200

613110

711320

631200

500311

502012

311001

311010

302100

DISTRIBUTION OF COMPANIES BY INDUSTRY AND DEPARTMENT SIZE


26 or More Lawyers

11 to 25 Lawyers



Public

Private

Subsidiary/Division/Joint Venture

Not-For-Profit/Government

Other

All Companies

Type of Ownership

49101312104

100010

611130

602310

1402642

2298212

DISTRIBUTION OF COMPANIES BY OWNERSHIP AND DEPARTMENT SIZE


STAFFING - TABLE OF CONTENTS Number of Lawyers and Staff Per $1 Billion in Revenue .................................................................. 16 Number of Lawyers in Law Department ........................................................................................... 20 Number of Management Lawyers in Law Department ..................................................................... 25 Number of General Lawyers in Law Department ............................................................................. 30 Number of Paralegals in Law Department ....................................................................................... 35 Number of Administrative Staff in Law Department .......................................................................... 40 Number of Legal Staff in Law Department ....................................................................................... 45 Ratio of Paralegals to Lawyers ......................................................................................................... 50 Ratio of Administrative Employees to Lawyers ................................................................................ 51 Ratio of Administrative Employees to Legal Service Providers ........................................................ 52 Size of Law Department Reduced in Past 12 Months ...................................................................... 53 Number of Positions Eliminated ....................................................................................................... 55 Workloads of Staff Increased in Past Year ....................................................................................... 56 Extent of Workload Increase ............................................................................................................ 58 Top Legal Officer Position Include Additional Title/Responsibilities of Corporate Secretary ............ 61 Diversity Policy ................................................................................................................................. 63 Diversity Activities ............................................................................................................................ 65 Percent of In-house Lawyers by Practice Area ................................................................................ 68 Number of Lawyers by Year Admitted to the Bar ............................................................................. 90 Number of Lawyers by Years of Experience within Law Department .............................................100 Number of New Lawyers Hired in 2013 .......................................................................................... 110 Recruiting Expense in 2013 per Lawyer Hired ............................................................................... 112 Minimum Years of Experience Required in Your Law Department ................................................ 114 Documented Retention Strategies ................................................................................................. 117 Track Employee Job Satisfaction ................................................................................................... 119

2014 Law Department Metrics Benchmarking Survey Page 15 ALM Legal Intelligence

Total DepartmentAdministrative Staff

ParalegalsTotal LawyersGeneral LawyersManagement Lawyers

Ave

rage

FTE

8.0

6.0

4.0

2.0

0.0

8.0

1.91.2

4.9

3.3

1.6

LAWYERS AND STAFF PER $1 BILLION IN REVENUE


Annual Revenue$5 Billion and Over$1 to $4.9 Billion$100 to $999 MillionUnder $100 Million

Ave

rage

FTE

50.00

40.00

30.00

20.00

10.00

0.00

40.7

15.5

4.32.6

NUMBER OF LAWYERS IN LAW DEPARTMENT

BY ANNUAL REVENUE


Ave

rage

FTE

40.00

30.00

20.00

10.00

0.00

30.926.9

14.2

2.8


10,000 Employees or

More



Less than 1,000 Employees

NUMBER OF LAWYERS IN LAW DEPARTMENT

BY COMPANY EMPLOYEES


Other P

ractice Area

Tax

Securities/Financial

Risk M

anagement

Real E

state

Regulatory

Public R

elations

Products Liablity/C

lass Actions

Personal Injury

Mergers and A

cquisitions

Litigation

Labor/Em

ployment

International

Intellectual Property

Insurance

Imm

igration

Healthcare

Governm

ent Relations

Environm

ental, Health &

Safety

Corporate S

ecurity

Corporate G

overnance

Com

pliance/Ethics

Com

merical/C

ontracts

Benefits/E

RIS

A

Bankruptcy

Banking/R

egulatory

Anti-trust

Ave

rage

Per

cent

age

20.00

15.00

10.00

5.00

0.00

12.0

0.7

2.4

0.8

4.25.3

0.20.9

0.0

4.6

7.98.1

3.3

9.1

2.7

0.2

3.9

1.72.3

0.2

5.14.1

16.2

1.9

0.50.41.2

PERCENT OF IN-HOUSE LAWYERS BY PRACTICE AREA



89.8%

10.2%

HAS THE SIZE OF YOUR LAW DEPARTMENT BEEN REDUCED IN THE PAST 12 MONTHS?

NoYes

Have you reduced the size of your law department in the past 12 months?


25.5%

74.5%

HAVE THE WORKLOADS OF IN-HOUSE STAFF INCREASED THIS PAST YEAR?

NoYes

Have the workloads of your in-house staff increased in the past

12 months?

EXPENSES - TABLE OF CONTENTS

Law Department Budget Cuts in 2014 ........................................................................................... 122 Percentage of 2014 Budget Reduction .......................................................................................... 124 Total Law Department Fees/Expenses as a Percent of Revenues ................................................ 125 Total Law Department Fees/Expenses Per Lawyer ....................................................................... 130 Inside Expenses as a Percent of Total Law Department Fees/Expenses ...................................... 135 Inside Expenses as a Percent of Revenue .................................................................................... 140 Inside Expenses Per Lawyer .......................................................................................................... 145 Compensation and Benefits Expenses Per Lawyer ....................................................................... 150Contract Attorney Expenses Per Lawyer ....................................................................................... 151 Occupancy Expenses Per Lawyer ................................................................................................. 152 Computer Technology Expenses Per Lawyer ................................................................................ 153 Other Inside Operating Expenses Per Lawyer ............................................................................... 154 Outside Fees/Expenses as a Percent of Total Law Department Fees/Expenses .......................... 155 Outside Fees/Expenses as a Percent of Revenue ......................................................................... 160 Outside Fees/Expenses Per Lawyer .............................................................................................. 165 Outside Counsel Fees for Law Department Per Lawyer ................................................................ 170 Other Outside Expenses for Law Department Per Lawyer ............................................................. 171 Outside Counsel Fees/Expenses for Other Business Units Per Lawyer ........................................ 172 Total Law Department Fees/Expenses Per Legal Service Provider ............................................... 173 Inside Expenses Per Legal Service Provider ................................................................................. 178 Compensation and Benefits Expenses Per Legal Service Provider ............................................... 183 Contract Attorney Expenses Per Legal Service Provider ............................................................... 184 Occupancy Expenses Per Legal Service Provider ......................................................................... 185 Computer Technology Expenses Per Legal Service Provider ........................................................ 186 Other Inside Operating Expenses Per Legal Service Provider ....................................................... 187 Outside Fees/Expenses Per Legal Service Provider ...................................................................... 188 Outside Counsel Fees for Law Department Per Legal Service Provider ........................................ 193 Other Outside Expenses for Law Department Per Legal Service Provider .................................... 194 Outside Counsel Fees/Expenses for Other Business Units Per Legal Service Provider ................ 195


80.9%

19.1%

LAW DEPARTMENT BUDGET CUTS IN 2014?

NoYes

Is your law department

implementing budget cuts in 2014?


Annual Revenue$5 Billion and Over$1 to $4.9 Billion$100 to $999 MillionUnder $100 Million

Med

ian

%

1.20

1.00

0.80

0.60

0.40

0.20

0.00

0.290.310.20

1.08

TOTAL LAW DEPARTMENT FEES/EXPENSES AS A PERCENT OF REVENUES

BY ANNUAL REVENUE



10,000 Employees or More

5,000 to 9,999 Employees1,000 to 4,999 EmployeesLess than 1,000 Employees

Med

ian

%

0.50

0.40

0.30

0.20

0.10

0.00

0.320.29

0.44

0.39


BY COMPANY EMPLOYEES


Department Size26 or More Lawyers11 to 25 Lawyers4 to 10 Lawyers2 to 3 LawyersSingle Lawyer

Med

ian

%

0.40

0.30

0.20

0.10

0.00

0.360.33

0.29

0.21

0.27


BY DEPARTMENT SIZE


OUTSIDE COUNSEL - TABLE OF CONTENTS

Percentage of Non-litigation and Litigation Outside Counsel Fees by Practice Area ..................... 198 Two-year Trends, Number of Law Firms Employed ....................................................................... 199 Number of Law Firms Employed by Law Department in 2013 ....................................................... 202 Number of Law Firms Employed by Practice Area ......................................................................... 204 Percent of Fees Paid to Top Four Law Firms ................................................................................. 205Years Using Top Four Law Firms ................................................................................................... 206Size of Top Four Law Firms ........................................................................................................... 209 Criteria in Selecting Outside Counsel ............................................................................................. 210 Dollar Cost Incurred Annually in Outside Counsel Selection .......................................................... 211 Time Costs Incurred Annually in Outside Counsel Selection Process ........................................... 211 Percent of GC Compensation Tied to Minimizing Risk in Outside Counsel Selection Process ...... 212 Alternative Fee Arrangements ........................................................................................................ 212 Percentage of Billing at Standard Hourly Rates in 2013 vs. 2012 .................................................. 215 Movement Toward Value-based Arrangements ............................................................................. 218 Internal Obstacles to Fully Implement Alternative Pricing Strategies ............................................. 221 Practice Areas with Most Frequent AFA Billing .............................................................................. 222Future of AFAs ............................................................................................................................... 222 Evaluate Outside Counsel .............................................................................................................. 225 Frequency of Outside Counsel Evaluation ..................................................................................... 226 Importance of the Following Criteria in Evaluating Outside Counsel .............................................. 228 Outside Counsel Reports Diversity Information .............................................................................. 229 Customer Satisfaction Surveys ...................................................................................................... 231 Ranking Serious Relationship Mistakes of Outside Counsel .......................................................... 235


UpperQuartile

%Median

%Lower

Quartile%

Average%

Number of Companies

Anti-trust

Banking/Regulatory

Bankruptcy

Benefits/ERISA

Commerical/Contracts

Compliance/Ethics

Corporate Governance

Coporate Security

Enivironmental, Health & Safety

Government Relations

Healthcare

Immigration

Insurance

Intellectual Property

International

Labor/Employment

Litigation

Mergers and Acquisitions

Personal Injury

Products Liablity/Class Actions

Public Relations

Regulatory

Real Estate

Risk Management

Securities/Financial

Tax

Other Practice Area 53.5010.505.0028.176

8.251.601.005.4213

10.505.002.758.4014

.6.002.006.002

6.504.001.706.5813

15.0010.002.2512.0716

4.004.004.004.001

17.5013.008.7513.176

.3.503.003.502

22.509.504.1613.6818

41.0025.0010.0029.6727

12.905.003.0010.9924

12.504.001.656.069

30.2519.009.9824.8322

10.005.002.259.9312

5.002.001.173.179

15.256.502.258.004

8.752.501.254.258

7.282.001.183.5911

2.002.002.002.001

5.914.001.754.6518

5.252.001.134.4210

10.006.002.7511.1218

5.003.002.004.8719

4.001.00.762.506

.9.504.009.502

10.005.005.005.867

Breakout of DataBreakout of Data

PERCENTAGE OF NON-LITIGATION AND LITIGATION OUTSIDE COUNSEL FEES AND EXPENSES BY PRACTICE AREA

ALL COMPANIES

Percentage based on total of all non-litigation and litigation outside counsel fees and expenses.


Annual Revenue

$5 Billion and Over$1 to $4.9 Billion$100 to $999 Million

Under $100 Million

Ave

rage

150.0

100.0

50.0

0.0

147.3

60.5

9.6255.6

137.3

61.92

10.144.8

TWO YEAR TREND

AVERAGE NUMBER OF LAW FIRMS EMPLOYEDBY ANNUAL REVENUE

20132012


Department Size

26 or More Lawyers

11 to 25 Lawyers4 to 10 Lawyers2 to 3 LawyersSingle Lawyer

Ave

rage

200.0

150.0

100.0

50.0

0.0

192.9

84.71

34.64

11.511.67

179.3

95.71

32.45

10.5711.33

TWO YEAR TREND

AVERAGE NUMBER OF LAW FIRMS EMPLOYEDBY DEPARTMENT SIZE

20132012


Percentage of AFA Fees41 to 60%21 to 40%1 to 20%None

% C

ompa

nies

Rev

enue

60.0%

50.0%

40.0%

30.0%

20.0%

10.0%

0.0%

15.2%

3.0%

54.5%

27.3%

PERCENT OF FEES PAID TO OUTSIDE COUNSEL IN ALTERNATIVE FEE ARRANGEMENTS


OPERATIONS/FUNCTIONS - TABLE OF CONTENTS

Percent of Law Departments Tracking Attorney and Paralegal Time ............................................. 239 Method of Tracking Time................................................................................................................ 241 Percent of Law Departments Charging Back Outside Counsel Costs to Operating Units .............. 242 Percent of Outside Counsel Costs Charged Back to Operating Units ............................................ 245 Use of Legal Service Providers during Last Fiscal Year ................................................................ 248 Contracting with Offshore Legal Service Providers ........................................................................ 250 Areas in which Company Uses LSP ............................................................................................... 251 Expected future outsourcing of legal function ................................................................................. 251 Legal Department Aligned with Company Business Strategy ........................................................ 252 Electronic Billing Systems .............................................................................................................. 254 Reporting Relationship of Corporate Functions .............................................................................. 258Responsibility for Lawyers Outside U.S. ........................................................................................ 260Reporting Relationship of Chief Legal Officer/General Counsel ..................................................... 262What is the One Legal Management Issue that Keeps you Up at Night ......................................... 263


Number of CompaniesPercent

We are completely integrated with the business strategy.

On particular projects or transactions, our performance metrics are tied to the business strategy.

The legal department mostly functions as a separate operating group.

All Companies

To what extent does your legal department align its priorities/day to day work with the overall business strategy?

39100.0%

410.3%

512.8%

3076.9%

Breakout of DataBreakout of Data

EXTENT LEGAL DEPARTMENT ALIGNED WITH BUSINESS STRATEGYALL COMPANIES

Number of CompaniesPercent

We embed a lawyer in each business unit.

Our compensation is tied to meeting corporate/business goals.

Existence of written objectives that tie into the corporate goals and objectives.

We have regular meetings with the CEO.

We have regular meetings with the Board.

We have regular meetings with the Business Unit Heads.

We have regular meetings with Other.

All Companies

Deparment critical factors

37100.0

821.6

2978.4

1335.1

2259.5

2773.0

2362.2

718.9

TO THE EXTENT THE DEPARTMENT OPERATES MORE CLOSELY WITH THE BUSINESS UNITS, WHAT CRITICAL FACTORS ENSURE THAT THE TWO

STRATEGIES STAY ALIGNED?ALL COMPANIES

**Multiple response question, does not total 100%


2014 edition law department metrics benchmarking survey 2014almlegalintel.com/resources/2014 ldmbs...

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