2016 Law Department Benchmarking Performance Series...Consilio’s 2016 Law Department Benchmarking...

2016 Law Department Benchmarking Performance Series

report

Survey One: Foundational Metrics

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Consilio is a global leader in eDiscovery, document review and legal consulting services. Consilio supports multinational law firms and corporations using innovative software, cost-effective managed services and deep legal and regulatory industry expertise. The company has extensive experience in litigation, HSR second requests, internal and regulatory investigations, eDiscovery, information governance and compliance, law department management, document review, contract management and legal analytics. ISO 27001 certified, the company operates offices and data centers across Europe, Asia and the Americas. For more information, please visit www.consilio.com.

The Texas General Counsel Forum has been serving in-house leaders since 1998. The Forum is a community of 700 general counsel and senior managing counsel representing more than 450 companies and organizations.

The Texas General Counsel Forum is a legal community that strives to improve the professional lives of general counsel and managing counsel. The Forum endeavors to be the association of choice serving legal department leaders through meaningful opportunities for peer group interaction and knowledge exchange, mentoring through professional development in best practices, ethics, governance and compliance. To learn more about the Forum, please visit www.tgcf.org.

SURVEY ONE: FOUNDATIONAL METRICSCONSILIO 2016 LAW DEPARTMENT BENCHMARKING PERFORMANCE SERIES

I. Executive Summary 4

II. Introduction 5

Consilio Best Practice – Use of Benchmarks 5

III. Participant Profile 6

IV. Trends in Corporate Law Department Spend 7

V. Legal Spend 8

A. Key Legal Spend Benchmarks 8

B. Industry and Revenue Segment Legal Spend Benchmarks 9

VI. Law Department Staffing 10

A. Department Headcount 10

B. Attorney Staffing 12

C. Support Staff 13

D. Other Non-Lawyer Professional Staffing 13

VII. Number of Law Firms 14

VIII. Methodology and Data Integrity 15

Appendix: Survey One: Foundational Metrics Questionnaire from the2016 Law Department Benchmarking Performance Series 16

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Contents


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Consilio’s 2016 Law Department Benchmarking Performance Series – Survey No. 1: Foundational Metrics, the seventh conducted in alliance with the Texas General Counsel Forum, aims to assist law departments in leveraging people, processes, and technology to find beneficial solutions, and fine-tune internal operations. Although the occurrence of particular industry segments and revenue sectors changes year to year with the survey participants – the trends demonstrated and the challenges faced by law departments appear to remain universal. In light of past Benchmarking Survey Reports, many best practices have been widely adopted, such as dedicated law department operations managers, e-billing and matter management systems, matter-level budgeting, and preferred provider programs. Now law departments are embarking on new initiatives that target specific issues, enabling them to meet the demands of a fast-changing legal environment.

Slight Increase in Legal Spend On average, law departments increased their spend, but at a lower rate than previous years. The average change in legal spend from 2015 to 2016 was 0.4%, as compared to an increase of 1.7% from 2014 to 2015. While the majority of respondents reported an increase, 42% reported a decrease in legal spend. More notably, for the first time ever, respondents are expecting a slight decrease in legal spend in the coming year.

Law Department Headcount Growth & Variations Law departments continue to grow in size, with an increase in the median number of attorneys per billion dollars in revenue. The number of attorneys in a law department, how they are organized, and their reporting structures vary with company size.

As law departments grow, they may be able to focus on matters with less assistance from outside counsel. The median number of law firms used decreased from 55 to 51 firms in the last year. Decreasing use of outside counsel presents the opportunity to spend more on internal growth or to focus spend on specialized third party provders. However, nearly all survey respondents reported that the vast majority of external legal spend was still paid to outside legal counsel. Externally, law departments still have the opportunity to improve how they fine tune the delivery model and systematically measure value.

I. Executive Summary


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This report summarizes the results of Survey One: Foundational Metrics from Consilio’s 2016 Law Department Benchmarking Performance Series. This series of short, simple performance surveys is designed to provide in-house professionals insight into metrics and trends driving law department operations.

The results of Survey One: Foundational Metrics provide participants a comparison of key benchmarks by industry and revenue for metrics such as:

• legal spend as a percent of revenue

• budget allocation for personnel and technology

• department geographic distribution

• attorney headcount and support-staff ratios

• anticipated changes in spending

Consilio Best Practice – Use of Benchmarks

Benchmarks such as these are valuable metrics and critical starting points for law departments to evaluate their legal spend because they indicate a department’s performance in comparison to its peers. However, peer benchmarks are not the end point of that evaluation: they should be considered directional, not absolute.

A department with higher than average spending might, for example, be satisfied if there are supporting reasons, such as specific events triggering increased spending or a conscious decision for attorneys to be more deeply involved in the business. Similarly, a department with additional functions such as corporate governance might spend more. An organization that spends less than comparable benchmarks might nevertheless not be performing optimally if its internal clients have expressed concern about level of service or that the department is not proactive in providing business solutions.

It is important for law departments to assess their spending holistically and in the context of their organizations’ strategic priorities and the departments’ goals. Within that context, law departments should delve into the underlying components and drivers of their legal spend.

II. Introduction


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This report encompasses survey data collected from 70 companies of varying size and industry. The revenue and industry segments used throughout the report are detailed below.

III. Participant Profile


PARTICIPANT ATTRIBUTES

70TOTAL NUMBER OF PARTICIPANTS

$1.12TTOTAL REVENUE

$1M to $190BINDIVIDUAL COMPANY REVENUE RANGE

$892,000 to $340M

$2.95BTOTAL LEGAL SPEND

INDIVIDUAL COMPANY LEGAL SPEND RANGE

REVENUE SEGMENT

50%41%

25%34%

100%

$0 to <$2B $2B to <$10B $10B+

INDUSTRY SECTOR

Consumer Goods & Services - 24%

Industrial Goods & Services - 23%

Energy & Utilities - 15%

Healthcare - 13%

Technology & Pharma - 11%

Financial Services & Insurance - 11%

Education & Non-Profit - 3%

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Total legal spend increased from 2014 to 2015 by 0.4%. The majority of respondents saw small changes equal to a plus or minus 5% change in spend.

On average, participants expected a slight decrease in spend between 2015 and 2016. Twenty percent of companies did not anticipate a change in legal spend from 2015 to 2016, and 40% expected an increase.

IV. Trends in Corporate Law Department Spend


AVERAGE CHANGE IN TOTAL LEGAL SPEND

0.4%ACTUAL CHANGE 2014 to 2015 (MEDIAN)

-1.0%ANTICIPATED CHANGE 2015 to 2016 (MEDIAN)

DEGREE OF CHANGE IN TOTAL LEGAL SPEND

Degree of Change in Total

Legal Spend

Percent Reporting Change

2014-2015

Percent Anticipating

Change 2015-2016

20% or Greater Decrease 13% 4%

16% to 20% Decrease 1% 6%

11% to 15% Decrease 0% 10%



No Change 11% 20%

1% to 5% Increase 20% 19%




20% or Greater Increase 7% 4%

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A. Key Legal Spend Benchmarks

Across all respondents, total legal spend represented a median of 0.4% of company revenue. Of that total legal spend, 53% was external.

The majority of respondents reported 94% of external legal spend was paid to outside counsel, while an average of 6% went directly to non-law firm entities.

The majority of respondents reported 88% of internal legal spend was related to personnel and compensation costs, while an average of 12% was accounted for by a technology and licensing budget or other internal spend.

V. Legal Spend


KEY LEGAL SPEND BENCHMARKS

0.40%MEDIAN TOTAL LEGAL SPEND AS % OF REVENUE

0.19%MEDIAN EXTERNAL LEGAL SPEND AS % OF REVENUE

0.18%MEDIAN INTERNAL LEGAL SPEND AS % OF REVENUE

INTERNAL VS. EXTERNAL LEGAL SPEND

MEDIAN INTERNAL

LEGAL SPEND AS % OF

TOTAL LEGAL SPEND

MEDIAN EXTERNAL

LEGAL SPEND AS % OF

TOTAL LEGAL SPEND

AVERAGE BREAKDOWN OF EXTERNAL LEGAL SPEND

OUTSIDE COUNSEL

DISCOVERY VENDOR

AVERAGE BREAKDOWN OF INTERNAL LEGAL SPEND

PERSONNEL & COMPENSATION

TECHNOLOGY & LICENSING

OTHERVENDOR

OTHER INTERNAL

2%

4%4%

8%

47%53%

94% 88%

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B. Industry and Revenue Segment Legal Spend Benchmarks

On average, companies in the larger revenue segments reported lower total legal spend as a percent of revenue than the smaller participating companies. This trend was more pronounced for external legal spend as a percentage of revenue as compared to internal legal spend as a percentage of revenue.

Companies within the technology (including pharmaceutical) and financial services industries had the highest total legal spend as a percent of revenue.

TOTAL LEGAL SPEND AS A PERCENTAGE OF REVENUEBy Revenue Segment

$0 to <$2B 0.30%

25th Percentile

75th PercentileMedian

0.00% 0.35% 0.70% 1.05% 1.40%

$2B to <$10B

All Respondents

$10B+

1.06%0.56%

0.36%0.40%

0.64%

0.09% 0.31%0.54%

TOTAL LEGAL SPEND AS A PERCENTAGE OF REVENUEBy Industry

Consumer Goods & Services

0.32%

25th Percentile


0.00% 0.35% 0.70% 1.05% 1.40%

Energy & Utilities

Financial Services & Insurance

Healthcare

Technology & Pharma

Industrial Goods & Services

0.53%0.40%

0.31%0.54%

0.84%

0.52%0.84%

0.91%

0.19%0.23%

0.25%

0.18%0.34%

0.48%

0.49%

1.01%1.11%0.25%

0.40%0.91%

EXTERNAL LEGAL SPEND AS A PERCENTAGE OF REVENUEBy Revenue Segment

$0 to <$2B0.15%

25th Percentile


0.00% 0.35% 0.70% 1.05% 1.40%

$2B to <$10B

All Respondents

$10B+

0.56%0.33%

0.17%0.25%

0.49%

0.05% 0.12%

0.19%

EXTERNAL LEGAL SPEND AS A PERCENTAGE OF REVENUEBy Industry


0.13%

25th Percentile


0.00% 0.35% 0.70% 1.05% 1.40%

Energy & Utilities


Healthcare

Technology & Pharma


0.32%0.17%

0.13% 0.32%0.62%

0.20%0.35%

0.39%

0.10% 0.14%0.24%

0.08% 0.19%0.27%

0.15% 0.41%0.72%

0.12% 0.19%0.48%

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A. Department HeadcountOn average, companies in the smaller revenue segments reported higher department headcount per billion in revenue than the larger participating companies. By industry, companies in the technology (including pharmaceutical) and finan-cial services industries have the largest department headcount per billion in revenue.

VI. Law Department Staffing


INTERNAL LEGAL SPEND AS A PERCENTAGE OF REVENUEBy Revenue Segment

$0 to <$2B0.15%

25th Percentile


0.00% 0.35% 0.70% 1.05% 1.40%

$2B to <$10B

All Respondents

$10B+

0.50%0.25%

0.10% 0.18%0.22%

0.05% 0.16%0.26%

INTERNAL LEGAL SPEND AS A PERCENTAGE OF REVENUEBy Industry


0.05%

25th Percentile


0.00% 0.35% 0.70% 1.05% 1.40%

Energy & Utilities


Healthcare

Technology & Pharma


0.20%0.14%

0.13% 0.27%0.50%

0.10% 0.13%0.17%

0.12% 0.25%0.38%

0.10% 0.18%0.32%

0.08%0.20%

0.17%

0.04%0.13%0.07%

DEPARTMENT HEADCOUNT PER BILLION IN REVENUEBy Revenue Segment

$0 to <$2B 7.14

25th Percentile


0 10 20 30 40

$2B to <$10B

All Respondents

$10B+

22.8611.88

5.698.42

12.07

2.91 5.8611.31

DEPARTMENT HEADCOUNT PER BILLION IN REVENUEBy Industry


6.44

25th Percentile


0 10 20 30 40

Energy & Utilities


Healthcare

Technology & Pharma


12.377.49

12.0415.18

30.95

2.86 4.839.73

11.5911.94

24.945.428.46

13.42

5.24 12.957.85

4.04 10.186.66

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On average, 54% of law department staff is comprised of attorneys, and 25% is traditional law department support resources (e.g., paralegals and administrative assistants). The remaining department staff is comprised of non-attorney professionals in specialty areas such as claims, contracts, discovery and operations.

On average, participants reported 78% of law department staff was located in the U.S. This is in part reflective of the participant pool consisting of mostly U.S.-based companies.


AVERAGE PERCENT OF DEPARTMENT STAFFBy Resource Type

AVERAGE PERCENT OF DEPARTMENT STAFFBy Geography

Attorneys - 53.9%

Paralegals - 13.4%

Adminstrative Assistants - 11.6%

Claims Professionals - 3.1%

Contracts Professionals - 6.4%

Discovery Professionals - 0.4%

Operations Professionals - 2.7%

Other Non-Attorney Professionals - 8.6%

Asia - 4.1%

Europe - 7.3%

Latin America - 2.5%

Middle East - 1.4%

United States - 78.4%

United Kingdom - 2.2%

Other - 3.8%

Typically, law departments reported having three layers of managing attorneys (including the general counsel) and two layers of non-managing attorneys.


NUMBER OF MANAGING & NON-MANAGING ATTORNEY ORGANIZATIONAL LAYERS

25th Percentile


Managing Attorney Layers

Non-Managing Attorney Layers

4

3

1 1

2

4

ATTORNEYS PER BILLION IN REVENUEBy Revenue Segment

$0 to <$2B 3.58

25th Percentile


0 5 10 15 20

$2B to <$10B

All Respondents

$10B+

11.54

3.144.29

5.42

1.47 3.596.55

ATTORNEYS PER BILLION IN REVENUEBy Industry


2.95

25th Percentile


0 5 10 15 20

Energy & Utilities


Healthcare

Technology & Pharma


7.143.96

4.98 7.30

17.29

1.46 3.125.71

6.406.69

15.302.654.29

7.61

2.95 8.763.79

1.98 5.393.95

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6.75

B. Attorney StaffingSimilar to overall department headcount benchmarks, companies in the larger revenue segments on average reported higher attorneys per billion in revenue than the smaller participating companies.

By industry, companies in the technology (including pharmaceutical) and financial services industries also have the largest attorney headcount per billion in revenue.

D. Other Non-Lawyer Professional Staffing

Operations professionals were the most common type of non-attorney professional in use by law departments. On average, 48% of all participants had dedicated operations staff. Seventy-one percent of companies with greater than $10 billion in revenue reported having an operations staff of three or more FTEs.

The second most common non-attorney professionals was contracts staff. On average, 27% of reporting departments had dedicated contracts staff, and companies with $2 billion to $10 billion in revenue had the largest percentage of dedicated contracts staff.


NUMBER OF CLAIMS PROFESSIONALSBy Revenue Segment

NUMBER OF CONTRACTS PROFESSIONALSBy Revenue Segment

Revenue

Segment

Percent of

Companies

with Dedicated

Resources

Median

Number of

Staff

$0 - <$2B 10% 1.0

$2B - <$10B 24% 9.5

$10B+ 29% 5.0

All

Respondents20% 4.0

Revenue

Segment

Percent of

Companies

with Dedicated

Resources

Median

Number of

Staff

$0 - <$2B 23% 2.0

$2B - <$10B 35% 2.5

$10B+ 25% 2.5

All

Respondents27% 2.0

C. Support StaffThe number of support staff varied depending on size of company. The ratio of attorneys to administrative assistants and to paralegals was highest for companies with more than $10 billion in revenue.

ATTORNEYS PER SUPPORT STAFF

3.96MEDIAN RATIO OF ATTORNEYS PER PARALEGAL

4.02MEDIAN RATIO OF ATTORNEYS PER ADMINISTRATIVE ASSISTANT

ATTORNEYS PER SUPPORT STAFFBy Revenue Segment

$0 - <$2B $10B+$2B - <$10B

Median Ratio of Attorneys Per Paralegal

Median Ratio of Attorneys Per Administrative Assistant

4.39

3.483.40 3.40

4.17 4.38

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NUMBER OF DISCOVERY PROFESSIONALSBy Revenue Segment

NUMBER OF OPERATIONS PROFESSIONALSBy Revenue Segment

Revenue

Segment

Percent of

Companies

with Dedicated

Resources

Median

Number of

Staff

$0 - <$2B 0% -

$2B - <$10B 29% 1.0

$10B+ 33% 1.0

All

Respondents18% 1.0

Revenue

Segment

Percent of

Companies

with Dedicated

Resources

Median

Number of

Staff

$0 - <$2B 27% 1.0

$2B - <$10B 53% 2.0

$10B+ 71% 3.0

All

Respondents48% 2.0

The number of law firms varied significantly by company size. Companies with $10 billion or greater in revenue reported on average using between 96 to 286 law firms globally.

VII. Number of Law Firms

NUMBER OF LAW FIRMSBy Revenue Segment

Revenue

Segment25th Percentile Median 75th Percentile

$0 - <$2B 10 17 25

$2B - <$10B 26 90 104

$10B+ 96 187 286

All

Respondents15 51 154

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Survey data was collected between May and August 2016. Unless otherwise noted, all quantitative questions pertain to fiscal year 2015 data.

All monetary values have been converted to U.S. dollars. Unless otherwise noted, all metrics are based on the median value to limit the effect of potential outliers.

Since not all respondents provided information for all questions, the benchmark data and analysis presented in this document are based, in each case, only on the population of law departments that responded to each relevant question.

The response rate for this survey exceeded 75% for all questions.

To provide more targeted data for comparison, participants have been grouped by revenue and industry segment.

Totals or percentages for individual responses may not add to 100% because of rounding or because multiple answers were allowed for each respondent.

The sum of median external and internal legal spend metrics may not total the median total legal spend metric in certain circumstances due to some individuals reporting total amounts without more granular breakouts.

VIII. Methodology and Data Integrity


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Questions:1. Please provide the following information:

• Organization Name• Organization Industry• Currency of Reported Spending• Title• Name• Phone Number• Email Address• Business Address

2. Please provide the following revenue, legal spending, and number of firms for your organization for fiscal year 2015:

• Organization Revenue• Total Legal Spending• External Legal Spending• Internal Legal Spending• Number of Law Firms Used

3. Please provide the breakout of total external legal spending (noted above) for fiscal year 2015:

(Note: External legal spending includes all legal related payments to outside counsel, discovery vendors, experts, etc. made by the organization. Please exclude settlement or judgement amounts.)

• Outside Counsel• Discovery Vendor• Other External Spending (please describe)

4. Please provide the metric breakout of total internal legal spending (noted above) for fiscal year 2015:

(Note: Internal legal spending includes compensation/benefits, technology, administrative overhead, training, travel costs, etc. incurred for all in-house attorneys and other staff in the law department.)

• Personnel Compensation and Benefits• Technology and Licensing• Other Internal Spending (please describe)

5. Please provide the full-time equivalent breakout of total department staff by title for fiscal year 2015:

• Attorneys• Paralegals• Administrative Assistants• Non-Attorney Professionals• Claims• Contracts• Discovery• Operations• Other (please describe)

6. Please indicate the number of organizational layers of attorneys in the department for the following:

(Note: Managing attorneys include those who have primary responsibility for department-wide/practice area management or supervision of attorneys, including the General Counsel as a single level.)

• Managing Attorneys• Non-Managing Attorneys

7. Please provide the full-time equivalent breakout of total law department staff by geography for fiscal year 2015:

• Africa• Asia Pacific• Europe• Latin America• Middle East• United Kingdom• United States• Other (please describe)

8. Please provide your organization’s year over year percent change in total legal spending:

• Actual Percent Change 2014 to 2015• Anticipated Percent Change 2015 to 2016

Appendix: Survey One: Foundational Metrics Questionnaire from the 2016 Law Department Benchmarking Performance Series


2016 Law Department Benchmarking Performance Series...Consilio’s 2016 Law Department Benchmarking...

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