That term has allure. It means “How many choices does a law department have to solve a given problem.” I ran across it in a fine article in Cal. Mgt. Rev., Vol. 50, Fall 2007 at 178, and mused over how it might apply to general counsel and their decisions (See my post of Dec. 20, 2005 on real options.).
With outside counsel, degrees of freedom come from having several firms that can perform substantially similarly, from having an offshore provider who can supplement those services or even perform some of them, from being able to recruit internally to meet the need, and from having crafted form documents and other tools to enable clients and the law department to accomplish the work. Competitive bids, done well, also increase a law department’s degrees of freedom.
The more choices you have as an in-house manager, the more degrees of freedom you enjoy.