A gimlet eye at a metric about how many law firms are at risk of being fired

I’m out on a limb on this, but the view is important. InsideCounsel July 2006 at 52 discusses the results of 407 law department lawyers who indicated whether their department “fired or planned to fire” one of their law firms in 2006. In bold print, the magazine proclaimed: 34 percent!

Wait a numerically-challenged minute! The average department in this survey had 31 lawyers, so at a plausible benchmark of five lawyers per billion dollars of revenue, assume the average department was in a $6 billion company.

Based on my consulting projects, a rough rule of thumb may be that companies of that size pay 25-40 US law firms per billion dollars of revenue, which means that average department perhaps paid around 200 law firms.

Now, back to the trumpeted finding that one-third of the respondent departments fired or planned to fire a single firm (See my posts on Oct. 4, 2005 about loyalty and July 30, 2005 about fear of losing the department’s favored firms.). Isn’t it amazing, but completely contrary to the impression created, that less than one percent of the firms were terminated or might have been in jeopardy?