LEGAL CENTS: Now’s the time to start benchmarking

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Unless you’re very new in-house, you’ve likely heard of benchmarking.

It’s the use of statistics or metrics, gathered from other corporate legal departments to measure costs, efficiency, etc.

Now, more than ever, it’s time to start benchmarking, say a pair of consultants to law departments of all sizes.

“For a long time, law departments in corporations weren’t really held to any spending discipline. They just spent what needed to be spent,” Princeton, N.J., attorney Rees Morrison said. “But with cost pressures increasing over the last decade or so, CFOs and CEOs have wanted to know, ‘We’re spending money on a law department – what are we getting for it?’”

Moreover, in these tough economic times, the savings that can be realized are enormous, according to Jason Winmill of Boston-based Argopoint. His benchmarking reports typically identify $1 million to $4 million in savings opportunities, at a minimum, he said. It’s savings he claims surpass the cost of the consulting, 10 to 20 times over.

Now there’s an easy way to give benchmarking a try, for free.

Just Google Morrison and on his homepage, you’ll see a link to participate in his 2012 survey of legal departments.

It takes only a few minutes, with just six substantive questions: your law department’s number of lawyers, paralegals and other legal staff, as well as your inside legal spend, external spend and revenue.

The information is confidential, and it’s “normalized,” meaning that one figure is divided by another. No one particular legal department is identifiable by its responses, although the names of participant companies are listed.

Morrison has more than 800 companies for 2012 so far, he reports, and more than 250 companies have participated for the last three years. Both numbers will increase before year’s end, he said.

“It’s aggregating data, and it gets more and more valuable, the greater the aggregation,” Morrison explains.

Every two months, he releases a 65-page PDF report, free to all participants, broken down for legal departments within 20 industries and replete with approximately 25 graphs, showing “medians, averages and quartiles” for all (yes, quartiles … those sound fun!). The next report will be released in October.

For his part, Winmill takes a different approach to benchmarking, gathering and sharing data that tends to be much more detailed for a client’s particular industry, in response to individualized concerns. His customers don’t want to know what hundreds of other legal departments are doing – they want to know how their five top competitors are tackling the same concern.

While Winmill often works with larger enterprises, that kind of information for can be obtained and is extremely valuable for law departments of all sizes, he said.

“There are a lot of law departments out there who can learn something from this – and it will cost them zero,” Morrison said.