7% increase each year typical in inside law department costs?

Corporate Legal Times (Nov. 2003 at 37) quoted Jon Bellis, then of PricewaterhouseCoopers: “All things being equal, a stable legal organization will see inside costs increase by about 7 percent every year…”

Why should inside costs increase faster than the Consumer Price Index? Around three quarters of inside spend goes to compensation – salary, bonus, and incentive stock – and compensation is not rising at anything like 7 percent a year. Nor should other internal costs, such as travel, entertainment, facilities, subscriptions, phones, and CLE.

If corporate revenue increases by 7 percent or more a year, then one could accept the law department’s internal costs matching that pace, but for many companies that would be a champagne year. To the point: I question the validity of the 7 percent solution

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