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Metrics plus further thoughts on the substitution of an in-house lawyer for outside counsel

A column by Richard Stock for the Canadian Corporate Counsel Association’s quarterly, Leading Corporate Counsel, Fall 2010, provides a rule-of-thumb for when to consider in-sourcing legal work. Stock writes that “a minimum of 600 external hours must be in-sourced to cost justify a new position in the legal department.” What he means, I believe, is that if external counsel bill at, say, an average effective rate of $400 an hour, you need the new hire to take over 600 of their hours ($240,000) to make the additional head pay off.

Even if that suggested threshold is a bit skinny, reduction of outside counsel spend that is projected over a few years certainly justifies to a large degree a new hire, it is not the only reason. With an additional lawyer, the department benefits from more backup and from succession planning – a deeper bench, in short – and probably from higher client satisfaction.