Prodigious return on investment claimed for a law department (Holcim US)

In the Mich. B.J., Jan. 2007 at 35, Susan Diehl, the general counsel of Holcim (US) Inc., one of the country’s largest cement manufacturers, contributed an article entitled “How to run your in-house legal department like a profit center.” In it she outlines a three-step program that starts with four fundamentals, continues with strategic planning, and culminates in execution. Diehl proudly claims that all the effort and initiatives have paid off for her company handsomely.

“Since 2001, when we began to track the outcomes of our initiatives, the department has contributed over $30 million in EBITDA (earnings before interest, taxes, depreciation, and amortization) and an additional $50 million in cash flow. This outcome required an internal investment of approximately $1 million for the legal department and $4 million for outside legal resources.” As she modestly concludes, her effort “in business terms equates to a solid return on the investment in the department.” Hmmmmm

Neither the article nor the Swiss company’s website suggests how many lawyers are in Diehl’s department, but there are approximately 2400 employees in the US. Given the typical number of lawyers per 1,000 employees (See my posts of April 23, 2007 -- about 1.5 in large US companies; Feb. 19, 2007 about a New Zealand figure much higher; June 7, 2006 that criticizes lawyers per 1,000 employees; and Dec. 22, 2005 that refers to 2.55 lawyers per 1,000 US employees.) and the $1 million internal spend – which I presume to be per year and not a total over the years between 2001 and 2005), her lawyers might be approximately four. If the five million total legal expense per year has resulted in $80 million of earnings and cash flow, that means a $20 million something investment reaped gains of four times as much. If true and verifiable, that’s all she needs to show!