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Organic growth, mostly, by US law departments not surprising

InsideCounsel, March 2007 at 58, reports that “almost 40 percent of law departments added attorneys in 2006.” The quote presumably refers to net additions, not replacements. The data comes from 614 in-house respondents. Roughly speaking, large US companies have about five lawyers for every billion dollars of revenue. Stated differently, for every $200 million in additional revenue, a typical company adds the equivalent of a full-time lawyer.

The median number of lawyers in the law departments of the group is eight. Hence, the median respondent was at a company with revenue of one-to-two billion dollars. If the median company enjoys revenue growth of 10 percent it grows by $100-200 million, which according to the benchmark justifies adding another lawyer.

On this reasoning, it is surprising that less than 40 percent of these law departments added a lawyer, because increased revenue alone would likely account for an additional hire. Indeed, the reason given for adding attorneys was principally “business expansion,” which 46 percent of the departments that hired another lawyer gave as the explanation for the headcount increase, and gave three times more commonly than the next most selected reason, “bringing more work in house” (15%).