Legal Commentary

For litigation, Eversheds has a break-even rate. To make money on a case, the firm has to meet four criteria: time, settlement, victory and cost accuracy. If it misses the targets it loses money; if it meets them it breaks even and if it exceeds them it makes 25 per cent.  There are also three six-figure bonuses available, from global client satisfaction surveys, for diversity and for proactive litigation avoidance.

From the firm's perspective, just think about the value of achieving efficiency!  Instead of losing money (less hours and less revenue), the revenue is the same and less time is consumed to generate it.  I suspect Eversheds does quite nicely on this arrangement.

Here's the client's take:

“Traditional relationships mean that law firms benefit from misfortune or major litigation, which no client ever does,” he says. “This [Eversheds/Tyco] arrangement is not designed to generate settlements but to proactively avoid litigation altogether by obliging the firm to analyse the historical causes of litigation and assist the business to root out such causes.

“This also reduces business disruption and customer dissatisfaction. If calibrated properly, paying a bonus for such proactivity is more financially profitable for both the client and the law firm than litigation itself. Eversheds has changed its DNA to become the firm a modern multinational conglomerate needs.”

The most important line from the client--the part about Eversheds changing its DNA.  Change at that level is what firms will need to accomplish to move away from the billable hour.  Nothing less should be expected.