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LawVest: silk embroidery

There's no contradiction between law firm profit and client satisfaction in a fixed-fee billing system; unlike the inevitably zero-sum hourly billing model, fixed fees give each party a fighting chance to come away happy. The classic example is FMC Technologies in the US, whose GC, Jeffrey Carr, is a leading fixed-fee advocate. His outside counsel agree to the following system: 80% of the pre-set fee is guaranteed, while the remaining 20% depends on the success of the mandate. If the firm fails to meet the client's criteria for success, the 20% is lost. If the firm meets the criteria, the 20% is paid. If the firm exceeds expectations, the 20% is paid and an additional 20% is tacked on as a bonus. Jeffrey has stated that his average payout is something like 106% of the agreed fee. The firms obviously are happy, but so is he. Number one, he has price predictability: he knows he will pay no less than X and no more than Y. And number two, he knows the firm is heavily motivated to meet his performance indicators and earn a bonus -- and like all GCs, performance is his number-one priority. That kind of common ground is usually impossible with time-based billing, though it stands to become more common as more LawVest-type operations emerge in the corporate/institutional legal market.

20-Feb-2012

3:49 pm