“Don’t benchmark competitors” (?)

That is the headline of one of the six “don’ts” of working-capital management, as laid out in the Harv. Bus. Rev., Vol. 86, May 2009 at 67. Working capital is not the same as legal spending and staffing, I agree, but the point that follows the quote may still apply to general counsel: “Managers become complacent when their working-capital metrics are in line with industry norms.” The example given is Michael Dell, therefore, looking not at computer industry companies but at retailers.

I think this contention fails. The best benchmarks for legal departments try to match comparable companies by size and industry. Complacency may afflict some general counsel who look fine by the metrics, but others in the company – the CFO, procurement, HR – may take a different view. Besides, a general counsel who decides to take part in a benchmark study most likely cares about the data that comes back.

As for the sometimes-expressed pursuit of data from a “best-in-class” law department, such unicorns are hard to find, and if tagged, will rarely want to spend time with companies that are not similar to them (See my post of May 16, 2007: misguided goals embedded in “world class”; and Aug. 22, 2006: the common overuse of “world class”.).

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