Combine incentives, feedback loops, and accountability

Before moving to portfolio-level fixed fees, many organisations can capture most of the benefit by requiring budgets and caps for individual matters, or for phases of complex matters. A practical trigger is any file likely to consume 50 hours of legal time or more.

A useful budget is more than a single number. It breaks the work into phases, lists the key tasks in each phase, and shows expected hours by role (partner, senior associate, junior associate, paralegal). It also spells out the planning assumptions that drive the estimate - ideally assumptions you believe are correct with roughly an 85% probability.

This level of detail forces a constructive conversation early: what is in scope, what is out of scope, which risks could change the plan, and what “done” looks like. Just as importantly, it gives the client a way to spot misalignment in staffing and approach before the invoice arrives.

Longer-term arrangements that bundle a large volume of work under non-hourly fees are more complex than running a panel process every few years. When you commit more work to fewer firms, you are effectively integrating external providers into your operating model. That can be powerful - but it needs governance.

In practice, multi-year non-hourly arrangements succeed when performance is assessed on a regular cadence (for example, twice a year) and also at major milestones on complex matters. Reviews should not be ceremonial. If the relationship matters enough to consolidate work, it matters enough to measure it.

Key performance indicators are essential, but they only help if they are tied to outcomes the business actually cares about. No one wants a semi-annual scoring exercise that consumes time and then predictably releases a holdback because “the relationship is good.” That kind of administrative overhead creates resentment and teaches everyone that the process is optional.

Effective KPIs are built to change behaviour. They should improve results, increase productivity, encourage innovation in service delivery, and/or reduce total cost. The choice of what you measure influences how firms staff matters, how they allocate senior attention, and how both sides collaborate to manage risk.

Examples of KPIs that typically drive better delivery include:

• Scope adherence: how often the work stays within agreed assumptions, and how quickly scope changes are escalated.
• Staffing and leverage: whether tasks are performed at the right level, with transparent allocation by phase.
• Cycle time: time to key milestones (first draft, key filings, closing) adjusted for matter complexity.
• Quality signals: rework rates, error rates, or agreed business-user satisfaction measures collected at defined touchpoints.
• Efficiency and innovation: use of playbooks, templates, process improvements, and technology-enabled delivery that reduces total effort.

If corporate counsel are accountable for the quality and cost of external counsel, then they need a structured way to manage that performance - just as they do internally. A basic program usually has three components.

It is tempting to manage a preferred-firm relationship informally, intervening only when something goes wrong. But exception-based management is exactly how fixed fees quietly lose their value: the client stops monitoring, the firm reverts to familiar habits, and the pricing model becomes a label rather than a discipline.

A performance program is not about mistrust. It is a way to make expectations explicit, keep quality visible, and create a shared incentive to improve delivery over time.

• Pick one workstream where fixed fees are already used (or could be piloted) and define the scope in plain language.
• Build a phase-based matter plan with tasks, staffing mix, and assumptions that are expected to hold in most cases (aim for around 85% confidence).
• Select 5-7 KPIs that connect directly to outcomes: results, cycle time, staffing discipline, and innovation.
• Set a review cadence (twice a year, plus major milestones) and assign one owner on each side to prepare a short debrief.
• Put real money behind performance: a small upside for hitting targets and a clear reset conversation when targets are missed.

Fixed fees can absolutely deliver predictability and value. The difference is whether the arrangement is treated as a pricing mechanism only - or as part of a broader operating model that combines scope clarity, measurement, and incentives.