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Great advice from The Lawyer Whisperer

May 14, 2018
Question

What Is Business Acumen and How Do I Develop It?

answer
Julie Q. Brush

Once upon a time, there was a lawyer. S/he was a solid lawyer: Heads down, hard worker and always ready to solve the next legal issue with precision and correctness. Possessing a single focus on what was allowed…and what was not. The lines were clear – and “no” was a frequent uttering in the office of The Big Cheese. The lawyer stayed in the legal lane to which s/he was assigned and never drifted. Ever.

Then one day, the lawyer’s boss expected more. Understand the business! Help move it forward! Focus only on the risks that matter! Be proactive! Be a business partner! Possess executive presence! Aaaaand…no more “no’s”! The boss knew that her/his legal counsel could offer more…should offer more. And such became the new expectation.

Suddenly the world was different and the old way of doing things was out of date, unwanted and less marketable. The lawyer quickly realized that in order to gain a competitive career advantage…in order to stay relevant, a new way of practicing was in order: One that incorporated business acumen.

But the lawyer wasn’t sure how to proceed: What exactly is “business acumen”? Is it something a person is born with or is it something one can develop with education and diligence? If it’s the latter, then what is the best way to achieve it? The lawyer began a quest for answers – and in that quest encountered The Lawyer Whisperer who imparted the following words of wisdom:

____________________

The meaning of “business acumen” may vary slightly depending on whom you ask – as personal experience tends to heavily influence how individuals define it. But generally speaking, lawyers who possess business acumen have a comprehensive understanding of the factors that influence and affect how a business operates and achieves its goals to maximize growth, economics and cultural harmony. They derive this understanding through intellectual curiosity and an ability to identify and assess how the puzzle pieces of an entity fit together…outside of their own nook. They are educated on relevant industries, trends and the domestic/global economy, which helps inform them of corporate rhythms and possess good business judgment. This influences a lawyer’s understanding that the purpose of her/his function is to be an integrated part of the wheel that moves the business forward – whether in house or as outside counsel. And the pursuit of an entity’s business objective is the priority, which can be facilitated by legal solutions while simultaneously mitigating risk. Business acumen can also involve a more evolved EQ including a lawyer’s ability to embrace the priorities of the Top Brass, understand their temperaments and idiosyncrasies and tailor style and approach accordingly.

Conventional wisdom has held that business acumen is one of those human qualities that is subjective in nature and the product of innate wiring: You either have it, or you don’t. Could this be true? Most certainly no. While temperament is a factor, business acumen can be learned and acquired – even early in a career.

So if you are striving to hone your skills in this area, the best starting point is with the corporate basics. Below is a list of questions that every lawyer should be able to answer about her/his employer or client’s business. Take a read and see what you know about yours:

  • What are the company’s annual revenues?
  • What are the company’s profits (losses)?
  • What are the company’s earnings per share (if publicly traded)?
  • What are the company’s gross margins?
  • If publicly traded, how many shares are outstanding?
  • Who are the company’s biggest shareholders?
  • Who are the company’s largest investors?
  • How much, if any, debt is outstanding? Is it convertible? When is it due?
  • How much of the company’s sales are domestic? How much international?
  • What kind of customers does the company sell to?
  • Who are the company’s biggest customers?
  • Are the company’s sales subject to seasonal cycles?
  • How does the company sell and deliver its products/services (direct sales? distribution channels?)
  • Are the company’s non-exempt employees unionized?
  • How long are the company’s product life cycles?
  • Who are the company’s most significant competitors?
  • Does the company rely on technological advantages or price competitiveness (or both) to lure customers?
  • What are the company’s most significant expense items (raw materials? labor? research and development?)
  • How much do the company’s products cost?
  • How big is the company’s patent portfolio and what, in general terms, is its composition?
  • What are the executives’ business priorities?
  • How many employees does the company have?
  • In which geographic areas does the company have offices and conduct business?
  • What are the company’s industry trends?
  • How are marketing and sales aligned in the organization?
  • How is the company culture viewed externally and by its employees?

After working though this list, identify where your knowledge is robust and where it is lacking. Then take the time to fill in the blanks with the resources available to you. This knowledge will serve as the foundation for your business acumen and will help you refine your approach and quality of your practice as your career progresses. This is where you start….

____________________

And with that, the lawyer and The Lawyer Whisperer parted ways. The lawyer returned to her/his role with a plan and newfound optimism – and implemented what s/he had learned on her/his quest. It wasn’t easy and it took some time working through the discomfort zone. But with perseverance, the lawyer was transformed and the practice of law took on new value and meaning. Relationships were enhanced, recognitions were received and the lawyer’s stature was elevated.

The lawyer went on to receive numerous accolades and achieved career success beyond her/his wildest dreams. In the sunset of her/his career, the lawyer spoke publicly and addressed eager-minded audiences about the importance of business acumen and how to develop it in this modern day profession. And in closing, the lawyer always left them with the parting words s/he heard long ago:

“Conventional wisdom has held that business acumen is one of those human qualities that is subjective in nature and the product of innate wiring: You either have it, or you don’t. Could this be true?” s/he asked the audience. “Most certainly no. “

“This is where you start….”

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Comments

Brian Heller, Partner, Outside GC

David - I agree. A good lawyer never merely spots risks or tells you what you cannot do. Rather they help you weigh the most important risks in context, tell you how to accomplish your goals in a different way, proactively help you come up with mitigation solutions and help business people understand in plain English what certain legal risks mean. Just as one small example: I don’t want my clients to “tune out” because the lawyers are talking about indemnity. Instead I want my clients to understand why they should care so they can decide for themselves whether or not to take that risk.

David Boundy, ,

Another follow-up, bouncing off Brian Heller's post -- ** Wordpress is removing all the paragraph breaks. Let's try marking them with ** ** The theme under Brian's observations is that everything in business is about considering alternatives, and balancing them. Much of business thinking is about that thing you probably discussed in your Econ 101 class -- "next best opportunities." A project costs money -- yeah, but not doing the project has costs too. A project has risks -- but not doing the project has risks too. Time has costs. Money has costs. You can spend one resource that you have plenty of to get more of another that's scarce. The part of the organization that wants to do x sees the benefits -- how will the ripple effects affect other parts? ** Plan around the most constrained resource first, and then shape the rest of the plan around that (most people start by thinking about the easiest part of a problem -- and that raises constraints that makes the hardest part even harder.) ** In law school, as junior associates, and as litigators, we're taught to understand and think about one particular set of immovable past facts. In most business contexts, the facts are mostly in the future, and you can change them. Business acumen is about the war-gaming, the chess planning -- if we do x, they;ll do y, and then we respond with z. It's about exploring that entire cause and effect tree, and making sure that almost all of the branches in that tree end well, that the probable ones end really well, and none are catastrophic. ** And then it's about building consensus -- which often means adapting the plan to accommodate concerns of those you're trying to bring it.

David Boundy, ,

Most lawyers (especially law firm lawyers) view their roles as eliminating the last particle of risk. Clients want lawyers that can do two things (a) help balance risks against benefits, and choose which risks to embrace, and (b) As JP Morgan said, “Well, I don't know as I want a lawyer to tell me what I cannot do. I hire him to tell how to do what I want to do.” Be a problem solver, not a blocker. While I was looking up that JP Morgan quote, I found another: “No problem can be solved until it is reduced to some simple form. The changing of a vague difficulty into a specific, concrete form is a very essential element in thinking.” Lawyers have the ability to identify the specific issue, the precise point on which everything else turns. That's really valuable.

See all 2 comment(s)

Brian, Partner, Outside GC

All true and great advice. But beyond the big picture business questions about the client (whether in house or outside) there are a host of additional questions about each particular deal too. The best question to remember is “why?” Why are we doing this deal? Why/how is it important? What happens if the deal doesn’t get done and why? Are there alternatives? Who within the organization wants it and why do they personally want to push for it? Is that person getting a commission on the deal or are they otherwise biased? Is it in the overall comany’s best interest or just for that person or that division? There are questions about the counterparty too. Who needs this deal more, us or the counterparty and why? Is the counterparty big company or small. How flexible are they? What’s in it for them? What are their motivations (both at the company level and for the individuals on the deal team)? Have you negotiated with similar companies (whether in terms of size, industry, product, etc.) and how did they react to various asks? Perspective is key. Why’s and motivations are key. Negotiation leverage is key.

Andrew, Founder & CEO, Avokka LLP

Great post. Even as commercial counsel, I like to think of our role as a 'helping profession' that should be innately curious about the direction our clients wish to go ... and with them finding the means to get there.

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