A “game-changing” creation, development and implementation of a true, risk / reward engagement model—regardless of the legal work being provided—called ACES (Alliance Counsel Engagement System).
In its simplest terms, we withhold 20% of a law firm’s billings over the life of a project creating an “at-risk” bucket of money. At the end of the project, the law firm can earn 0% to 200% of that “at-risk” bucket of money, depending upon how they performed to the agreed-upon budget and delivered to the agreed-upon goals or definitions of success. In essence, we want to buy fewer hours than the law firm intends to sell us, and in return, we want to pay our law firms more per hour (e.g., we want their effective hourly rates to be higher than their stated billing rates).
What we think is novel about this model is that not only was our General Counsel the first to pioneer something like this, but it employs the right financial levers to ensure law firms do only what it absolutely necessary on a particular matter (no more and no less). Furthermore, it allows us to avoid the typical, micro-management of law firm fees and costs because the law firm must exert its own cost and fee discipline or they will leave money on the table—and there is nothing law firms hate more than leaving money on the table.
Unlike most law departments which may have some of their external engagements on some type of risk-reward basis, this model is baked into our DNA. Said another way, we use it on each and every matter we have where external counsel is involved with rare exceptions. Moreover, and also unlike most company law departments, it’s a structured process consisting of an interactive spreadsheet and clear definitions of the evaluation criteria, and it’s clearly communicated up front. More importantly, it’s financially working for the law firms and our company. Specifically, metrics are showing that our law firms are making more per hour than their stated billing rates, and we’re saving money year-over-year in absolute terms.
advertisement