Commitment contracts as a way to induce lawyers to monitor budgets, alternative fees, discounts, etc.

The Economist, Jan. 2, 2010 at 55, reviews various points on procrastination. Why we tend to put off doing something often has to do with our magnified sense of the cost of doing a task now as compared to in the future. One idea for a way to alter that initiative calculus and nudge people to stick with a promise to act is the “commitment contract.”

Let’s create a few to illustrate the technique. Each of the lawyers in a legal department who manages outside counsel and approves payment of significant amounts of invoices puts $1,000 into an account. If at the end of six months 95 percent of their major matters have a budget, they get the money back; if not, the money goes to charity. With another commitment, if at the end of a year, less than a third of their matters are under some form of alternative fee arrangement, they forfeit the money to charity. When we increase the costs of inactivity, people are more likely to act.

This approach, as is apparent, does not increase the budget of the legal department. Whether employment laws permit it is beyond my knowledge.

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