As reported in The Lawyer on Monday (19 May) Tyco has signed up for the second year of its groundbreaking $10m (5.14m) deal with Eversheds.
While most companies have law firm panels (see feature), Tyco has taken this a step forward by choosing just one law firm, Eversheds, to advise it on all its legal issues.
The first company to do this was DuPont, which founded the DuPont Legal Model about 10 years ago. The general concept is that by partnering with one law firm, a huge amount of benefits are gained by having an extremely tight relationship. While DuPont has a single law firm for each jurisdiction (and in the UK that firm is Eversheds), Tyco has gone a step further and chosen one law firm for 28 jurisdictions.
That does not come without its problems. For the first time this week, The Lawyer revealed that Eversheds was almost fired as it struggled to cope with the transfer of 783 files from 282 law firms across the globe.
The new deal aims to conquer what Tyco EMEA general counsel Trevor Faure calls the "zero sum game". This describes the opposing interests of law firms and clients. One is always looking for higher rates while the other wants lower ones. One wants to work more hours, the other wants less hours. One benefits from the company's misfortune, the other wants to avoid it...
Despite the seemingly obvious benefits offered by partnering, this is relatively uncharted territory for law firms and in-house counsel, which is why we're all talking about it!
Tyco has added a number of new innovations to financially reward good performance and diversity achievements.
The deal aims to escape the "zero sum behaviour" associated with the hourly rate and instead has a mixture of fixed fees and hourly rates. And Eversheds is set for six-figure bonuses if it achieves a 35 per cent improvement in client satisfaction and if litigation against Tyco drops by 15 per cent.
Eversheds will also win the same bonus if it meets eight challenging diversity targets, including: if more than 25 per cent of Eversheds' 2009 partner intake are women (in 2008 the number of women promoted dropped from a third to 23 per cent); if more than 10 per cent of its 2009 trainee intake are from black and minority ethnic (BME) backgrounds; and if more than 10 per cent of Eversheds' staff are BME.
Diversity is a relatively new concept to City law firms, which as one diversity champion memorably noted, tend to be overwhelmingly "male, pale and stale". When clients start banging the diversity drum, and, better still offering hard cash for increased diversity then even the stalest and palest partner is likely to sit up and take notice.