Alternative fees ought to target desired outcomes, and in proportion to their odds

To craft a fee arrangement that makes a difference, law department managers needs to think hard not only about the outcomes they seek in a matter but also the likelihood of achieving those outcomes. Bonuses for the law firm that achieves a particular goal, such as a resolution of a case before substantial discovery begins or completion of a transaction by a certain date, need to be in line with that probability.

If there’s reason to believe that the odds of that outcome are less than one in four (25 percent or less) a bonus might be sizeable, such as up to 50 percent of fees billed. Whereas, if the company is likely to prevail substantially on a motion for summary judgment or complete the zoning approval by the year end, the bonus for that success ought to be negligible. Whether or not, the bonus as percentage of fees is not the only standard. An absolute dollar amount might also work its charms.

In other words, don’t promise a bonus for the inevitable; reward outcomes that on the probabilities known at the start are exceptional.

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