Morrison on Metrics: A Metric That Matters

A typical US law department spends approximately 80% of its internal budget on people costs. People costs include salaries, bonuses, benefits load (often as much as one-third of salary) and other compensation components. The remaining costs include facilities, IT, CLE, postage and other non-W2 costs. Stated differently, headcount remuneration drives by far the largest share of a general counsel's inside budget.

Much rides on that benchmark metric, but this column will adumbrate only four consequences. For one, just as the president of the United States has relatively limited room to maneuver on budget reductions because large chunks are committed statutorily to entitlement programs, so too a general counsel cannot reduce spending much on the internal budget without terminating employees. Yes, a general counsel can shrink bonuses and equity awards to nothing, but base salaries move as the corporation dictates and actual reductions are rare - and they account for perhaps three-quarters of the compensation expenses. The baseline spend internally stays pretty much the same year to year unless positions are added or lost.

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Rees Morrison

Rees Morrison, Esq. is the founder of General Counsel Metrics, LLC. Based in Princeton, NJ, Rees has for the past 25 years consulted solely to...

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