Twenty Questions

Why do so many legal careers seem to stall out while others break on through to fame and fortune? Competency, mentoring, personality, and luck (of course) all play a part. Still, there are too many good and personable lawyers whose careers never take off. More often than not, a lack of good business judgment is to blame.

The conventional wisdom has always held that good business judgment is one of those human qualities, like leadership, that is subjective in nature, ineffable, a product of natural endowment and depth of experience. You either have it, or you don't. Not true. Good business judgment can be acquired (even quite early in a career), but it does require a modest re-direction of the analytical skills you have developed as a lawyer.

Business Literacy

General Counsels have it. Law firm rainmakers have it. And clients increasingly demand it of even their more junior lawyers. At its most general, good business judgment requires the lawyer to understand the business context within which legal advice is delivered. And, what is context other than the basic facts that define the client's enterprise? Comprehension of these facts will go a long way towards making a lawyer business literate. Here is a list of questions that every lawyer should be able to answer concerning their client's business (this list has a modest corporate practice bias, but is generally applicable to litigation practices as well):

1. What are the company's annual revenues?
2. What are the company's profits (losses)?
3. What are the company's (if publicly traded) earnings per share?
4. What are the company's gross margins?
5. If publicly traded, how many shares are outstanding?
6. Who are the company's biggest shareholders?
7. How much, if any, debt is outstanding? Is it convertible? When is it due?
8. How much of the company's sales are domestic? How much international?
9. What kind of customers does the company sell to?
10. Who are the company's biggest customers?
11. Are the company's sales subject to seasonal cycles?
12. How does the company sell its products (direct sales? distribution channels?)
13. Are the company's non-exempt employees unionized?
14. How long are the company's product life cycles?
15. Who are the company's most significant competitors?
16. Does the company rely on technological advantages or price competitiveness (or both) to lure customers?
17. What are the company's most significant expense items (raw materials? labor? research and development?)
18. How much do the company's products cost?
19. How big is the company's patent portfolio and what, in general terms, is its composition?
20. How many employees does the company have?

Notice what is not on this list. Establishing business literacy does not involve mastering the glossary of management-speak. It isn't about throwing around terms like "enterprise resource planning," "talent multipliers," "demand-side innovation," or "performance anatomy." For a lawyer, it is simply about mastering the basic facts that drive the business. While most of these questions may seem pretty basic, we can assure you, that after more than twenty years of interviewing and screening candidates, we have found that a shockingly large percentage of perfectly capable lawyers can not answer a majority of these questions. Typically, especially for more junior lawyers, mastering these facts is not part of any given assignment; and, hence, rarely is it part of a young lawyer's training. As a result, many young lawyers never take the time, or demonstrate an inclination, to do a little digging and try to understand their clients' businesses. But, as a legal career evolves, the development of business literacy becomes a crucial component of success. Clients will expect that the legal advice they receive reflect a comprehension of the business context within which they themselves operate. Fortunately, no special qualifications are required to achieve this business literacy. You don't need an MBA and you don't need to be an accountant. You just need to take some time and direct your lawyerly curiosity towards the business.

In an ideal world, lawyers would have access to "Client Summaries" that answer the above questions and provide the basic business data so that every lawyer on every deal or case would have a basic understanding of the client's business. A few law firms generate these documents internally, but the vast majority does not, leaving it up to individual lawyers to answer these questions. It is important to take the time to do it.

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