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A possible benchmark metric: total lawyer hours worked per billion of revenue

We talk of inside lawyers per billion of revenue but it would be more insightful to convert that metric to lawyer hours worked and to add outside counsel hours, thus producing total lawyer hours per billion. (See my post of Nov. 8, 2005: measuring total hours of legal advice given.)

Inside lawyer hours are readily calculated, with a few assumptions such as 1,850 lawyering hours (See my post of May 21, 2009: chargeable hours per year by inside lawyers with 12 references.)

Outside counsel hours can be estimated based on effective billing rates per firm divided into totals billed during a year or the exact number of hours can be toted up from a matter management or e-billing system. Either way, translate dollars worked to hours, as you should do with an RFP (See my post of Dec. 5, 2005: translate dollars billed to lawyer hours worked.).

The common ratio of 60/40 – sixty percent of total legal spend going to external vendors and 40 percent to the legal department, boils down to the per-hour gap between internal lawyers and external lawyers. That gap is approximately 50 percent between inside and outside spending, which is roughly the per-hour differential between inside and outside lawyers. Therefore, total lawyer hours worked appear to be roughly split evenly between inside and outside lawyers (See my post of March 29, 2009: 40/60 ratio of inside-to-outside spend with 18 references.).

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