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Total legal spend as a percentage of revenue, potent and pervasive

It is beyond cavil that over time, total legal spending expressed as a percentage of a company’s revenue (turnover), tells the most about comparative legal department performance (See my post of Nov. 15, 2009: poll results put ratio as most important; and Aug. 21, 2008: total legal spend as percent of revenue with 9 references and one metapost.).

The grandee of metrics – total legal spend as a percentage of revenue

Many things influence that fundamental benchmark, including especially the revenue of the company (See my post of April 16, 2010: TLS and revenue with 9 references.).

A handful of posts on this blog, published since the first metapost cited above, have considered methodological issues associated with survey data on the ratio (See my post of Aug. 28, 2008: a methodology to normalize the ratio across industries; Feb. 24, 2009: power curve may describe distribution of ratio in a sector; Feb. 23, 2010: revenue missing from privately held companies; and Sept. 26, 2009: relatively constant ratio over past 5 years.).

Other posts have picked up on ideas about how TLS compares to or is influenced by other corporate activities (See my post of Sept. 1, 2008: effect of insurance; Jan. 12, 2009 #1: R&D spend outstrips TLS 7 times; Jan. 20, 2009: TLS is four times legal resolution costs; Feb. 1, 2009: TLS and “total legal costs” defined; July 31, 2009 #2: two definitions of revenue for insurance companies; Oct. 20, 2009: most of the rise in TLS was from compensation increases; and April 14, 2010: “known total legal spend” explained.).

Sometimes the blog post was how TLS might be analyzed (See my post of April 13, 2009: differences between TLS per lawyer in US and worldwide; July 29, 2009: TLS per corporate employee; and Sept. 7, 2008: TLS per share outstanding.).

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