In-House Counsel

Legal metrics haven?t been correlated to indicators of corporate financial performance

By Rees Morrison

As explained in strategy + bus., Iss. 53, Winter 2008 at 52, more global dispersal of a company?s research and development spending correlates to better financial performance. The performance indicators include operating margin, total shareholder return, market cap growth, and return on assets.

Benchmark surveys of law departments ought to correlate the usual metrics ? total legal spending as a percentage of revenue, lawyers per billion of revenue, outside counsel spend per total legal staff, and others ? to the financial indicators that matter to executives. Unfortunately, legal spend is not disclosed so completely and with such standards as R&D spend. Still, surveys of general counsel come out all the time, and yet tests with statistics to find out whether particular benchmark profiles tends to correspond or not to better company performance. For instance, is there any statistical relationship between inside-outside spend ratios and earnings per share?

Full post as published by Law Department Management on January 07, 2009 (boomark / email).