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Operating costs of legal departments compared to those of law firms

It has interested me how the operating costs of legal departments differ from those of law firms. Some figures for law firms on that point come from Patrick McKenna’s MCK Int’l Rev., Spring 2009 at 11.

The largest expense for both departments and firms covers occupancy costs, which make up about one-third of total operating costs of law firms (excluding salaries and benefits). For law departments, the equivalent figure is on the order of ten percent of operating costs.

Professional development (CLE) accounts for about nine percent of the operating costs of a typical US law firm. I don’t know the corresponding legal department costs.

Equipment costs, which cover computers, copy-fax-scanners, shredders, binders, postage meters and other items, account for around eight percent of law-firm operating costs. That figure is probably higher than for legal departments. Depreciation of equipment is a non-cash item.

Another two percent of law firm costs comes from supplies such as pens, tape, notepads, etc.

Other law firm costs include communications, which are on the order of five percent and might have no counterpart on legal department budgets (other than costs of PDAs).

Travel and entertainment (an estimated 1.5%) as well as books and subscriptions (perhaps 2% of total operating costs) may be roughly the same.

Unlike firms, law departments absorb almost no recruiting costs because they do not run summer programs.