The Core of Correlation

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Managers of law departments (and of law firms) often believe that there is an identifiable connection between one set of numbers and another. Perhaps they sense that the size of the plaintiff’s law firm has some bearing on the cost of defending a lawsuit; they feel the number of patents applied for rises and falls with their company’s R&D investment; or they’ve noticed that client satisfaction scores relate to keeping close to budget. Fortunately, those types of subjective impressions of managers can be tested and quantified.

Correlation is the statistical tool to quantify such possible connections – the degree to which two sets of numbers (called variables) are associated with each other – and it can also clarify the relationship between them.

Insightful correlations are plentiful for legal managers if they collect the data. Consider law firms working with a law department: a general counsel might suspect a connection between their overall effective billing rate and their number of lawyers. Or perhaps a lawyer’s gut feeling is that the more years practicing law an in-house counsel has, in general, the less closely she or he manages their outside counsel spend. A billing partner might suspect that the longer an invoice goes unpaid, the lower the realization rate. After collecting some data, someone can run a correlation and test those suppositions.

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