More attacks on the median cost per hour of inside attorneys (~$200)

According to a recent survey that collected 2007 data from several hundred law departments, their median fully-loaded in-house cost was slightly over $200 an hour. The report explains that it calculated this figure by dividing total inside spending per attorney for each company by the average annual chargeable hours per attorney for the company.

Since most law departments do not force their lawyers to record hours, the survey used the median figure for annual chargeable hours submitted by respondents that do track their attorney’s time. As with most surveys, less than 20 percent of the law departments in this one track their time. It cannot be determined from the report whether the submitted annual chargeable hours are goals, estimates, or actual.

Nor can we be sure that reported chargeable hours are not higher in those law departments that track their time than hours would be in law departments that do not track time, if we could measure them unobtrusively. If you measure it, people manage to it, and hours may be padded internally (See my post of Feb. 17, 2008: chargeable hours might be more like 1600 a year than 1,850.).

Aside from looseness in chargeable hours, the $200 an hour figure derives from almost certainly understated total costs to a company to support a lawyer. As just one example of many costs not reflected in the general counsel’s budget, some in-house lawyers have their secretarial support provided to them by their business unit and that cost does not show up on the law department’s budget (See my post of April 23, 2006: hidden costs of secretaries; and Jan. 15, 2009: business units sometimes provide support staff.).

Third, no market discipline exists whereby clients can refuse to pay for some or all of reported chargeable hours worked on their behalf. At least with a law firm, they collect money and have realization rates. In-house lawyers do not face those stark realities so their hours, at least when there is no direct billing and intra-company transfer, are to that degree untested.