In-House Counsel

Compare benchmarks of legal departments across industries by standard deviations

By Rees Morrison

Is there a way to compare whether Company A in telecommunications is better than Company B in energy on lawyers per billion of revenue? A reports a benchmark figure of 8.2 while B reports 5.6, but the industries have very different profiles of lawyers per billion (See my post of Feb. 25, 2009: lawyers per billion with 22 references and one metapost.).

Yes, there is a way to compare then when you state their benchmark metrics in terms of standard deviations within their respective industries.

Let me explain. Assume you have benchmark data on lawyers per billion of revenue from a goodly number of law departments in telecommunications and in energy. If those industry metrics distribute themselves normally ? think bell curve ? standard deviations can describe how far Company A and Company B are from their respective industry norms. The norm is typically either the median or the mean of the data set (See my post of June 30, 2006: descriptions of dispersion of data.). In a normal distribution bell curve, approximately 66 percent of the data points fall within one standard deviation on either side of the norm. Approximately another 30 percent fall within two standard deviations.

Thus, if Company A?s figure for lawyers per billion is two standard deviations to the right (higher) than the median for the telecoms industry and if Company B?s figure is 1.8 standard deviations higher than the median for energy, Company A is staffed more heavily than Company B (See my post of May 31, 2005: normalizing data allows comparisons despite size differences.).

Even if a set of benchmark metrics do not fall into a normal bell curve distribution, there are other techniques akin to the one described to make comparisons across different clusters (See my post of Nov. 13, 2005: fractals, power laws and bell curves; Oct. 24, 2005: usefulness of bell curves; April 5, 2005: bell curves of innovations in law departments, by size; July 25, 2005: compared to power laws; May 26, 2007: rank on a bell curve various management initiatives; July 3, 2007: over-consolidation of law firms; and April 27, 2006: forced rankings of staff.).

Full post as published by Law Department Management on March 12, 2009 (boomark / email).