Engagement letters

You did what today? Wrote an engagement letter.

I’m not a lawyer, but as a management consulting graduate in a Big 4 firm, you get your fair share of exposure to legal documents. You will inevitably be required to create one at some point – but, thankfully, not from scratch.

What is an Engagement Letter?

At the most basic level, an Engagement Letter, or EL, is a legal contract that details the services we will provide to our client and how much they will pay you. It also includes a lot of other legal necessities such as who will be responsible for delivering the services, how long the engagement will last and a long list of terms and conditions. This contract provides both the client and the consultants with legal protection to varying extents and binds them to meet certain obligations. For these reasons, it’s important to get the Engagement Letter just right and it can take weeks – or in some cases, months – to reach an agreement.

Why not leave it to the lawyers?

Consultants are not required to create documents like this from scratch and our legal teams produce numerous templates to get us started. However, it is far more efficient to ask consultants to produce engagement letters as each one must be tailored to the specific project and client. As a task for graduate, it can be challenging at first but is a great way to really understand what the engagement is about and how Partners and Directors negotiate contracts with clients. Often, a graduate will be asked to produce a first draft of the Engagement Letter and a senior colleague will review it for technical content. The legal team will then be asked to help refine the document before discussing it with the client and reaching a final version.

What can go wrong?

One of the most common pitfalls involved with writing Engagement Letters is to be too ambiguous. It is vital that the Engagement Letter is written carefully and very specifically so that both the consultants and client agree precisely on what work will be performed. If the Engagement Letter leaves room for interpretation, scope creep (see jargon buster) can occur and disagreements can arise. Consultants and their legal teams understand this intimately and scope will often be the most important aspect of the Engagement Letter.

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