A cost centre is broadly defined as a department to which costs are allocated but that does not produce revenue for the business.
When a lawyer works in private practice as a fee earner they are revered as the money-making engine driving the machine forward, a definite profit centre. Lawyers here can point to their tangible contributions to the firm in the form of billable hours and attributable business wins/relationships. Congruently fee earning associates and more notably partners are held in high esteem and remunerated upon their evidenced contribution to the firm.
The phrases both profit and cost centre have questionable conceptual efficacy. Peter Drucker who originally coined the term profit centre later recanted, calling it "One of the biggest mistakes I have made". Asserting that there are only cost centres within a business, and “the only profit centre is a customer whose cheque hasn’t bounced”. Nonetheless the fear that hiring an in-house lawyer will cost your business money rather than saving it or even producing it is one which has stymied the growth of in-house legal teams for years.
It is best to begin by looking at the results you want to achieve. The two most desirable outcomes for all in house legal functions are to effectively serve their customer, ‘the business’ and reduce the total expenditure on legal while still providing that great service. Maximising the resources you have in place and developing a talent roadmap is essential to delivering on both the first and second objective.
Substantial in house legal functions usually take on a layered pyramid structure with the Group General Counsel at the top. Then one or more Deputy General Counsel below some may be based at headquarters, others leading regions of importance; EMEA or APAC or perhaps overseeing functional areas such as corporate or IP. Below these divisional heads you will find a series of further layered mini-pyramids, extending down and out to define the foundation of the department.