How can in-house lawyers learn business acumen or commercial astuteness?
PayPal’s Tom Brown on how to be “a businessman first and a lawyer second”.
One question which is asked most frequently by new lawyers on deciding to go in-house or joining in-house teams in my experience (usually with great intensity) is how can they develop commercial astuteness or business acumen and quickly understand and contribute to the business, win the confidence of senior management and be seen not only as a lawyer but a strategic business partner.
In answering this question, I am reminded of the words of the politician David Mellor that lawyers are like rhinoceroses: thick skinned, short-sighted, and always ready to charge. When I decided to go to law school, my father who was a farmer and dentist mentioned this saying to me and said “Son, try to be a lawyer who helps the business and be a businessman first and a lawyer second.”
These two sentiments sum up a widely held but often incorrect view of lawyers in some cases in spite of brilliant careers in university, business or private practice as not having a strategic view of the business, being commercially naïve so as to make their advice less relevant or being limited specialist who only offer legal advice rather than what in-house lawyers should be business enablers, a revenue source rather than a cost centre, entrepreneurial and a key source of commercial as well as legal advice to help develop company strategy.
The Law Society estimates that almost 20 per cent of all solicitors now work in-house so business acumen and commercial awareness are now required skills for lawyers and in my role at PayPal, it is one of the main traits that I look for in hiring new lawyers as part of the PayPal UK team.
What is business acumen? Business acumen is defined as a keenness and quickness in understanding and dealing with a business situation in a manner that is likely to lead to a positive or revenue generating outcome for the business.
The In-house legal team is the conscience of the business and in a privileged and unique position. The In-House team gets a view across the business, different functional areas and different products and initiatives that other teams do not. There is a wonderful opportunity to understand all that is happening in the company and exercise a key influence on the companies’ board, management team and senior executives.
In my experience in the last 5 years at PayPal in the UK, it may take time but even the least commercial in-house lawyers can quickly and effectively develop commercial awareness or business acumen and it can be taught and learned in the following ways:
It is important to speak to the business in the language of business. In-house lawyers need a good understanding of the basics of business finance and accounting. Lawyers operate in a highly specialised environment with its own vocabulary that is foreign and/or hard to relate to for many people in the business. Lawyers need to write in a sufficient and clear style focusing on the key points, key risks and decisions needed from the perspective of the management team or senior executive.
It is important for the in-house lawyer to have an in-depth knowledge of the products and services of the business, its strategy and experience of what it is like to work in other functions in the business or at least what those functions do, their best practices and how they interface with legal.
No great task was ever accomplished without enthusiasm is the often quoted saying and In-house lawyers need an interest and active enthusiasm for the business of the company and a natural curiosity about its products, services and corporate structure. However, most importantly, they need a strong desire to put the customer first and to try to meet the needs of the customer, understand their feedback and improve or change their services to delight the customer.
Many of the best lawyers are actually former customer service representatives in my experience as they understand the need to listen to customers and can communicate effectively. At PayPal, this is easy as online payments and financial services are very cool and PayPal’s products are fun to use so I have a natural curiosity and enthusiasm for the business.
It is also important for an in-house lawyer to have an understanding of the real risk to the business of any legal issue, be able to clearly articulate the risk and inform management with an understanding of risk appetite of the business.
In order to develop the commercial acumen of lawyers in the PayPal UK Legal team, we found the following steps helped increase engagement with the business, the quality of our advice, the lawyer’s knowledge, and in the end, to the revenue of the business:
Members of the PayPal legal team spend time with the PayPal customer service teams listening to customer calls, working with the Risk and underwriting teams to learn how PayPal on boards and vets customers, working with the marketing team on assisting with new promotions and advertisements, personally testing products and attending customer research and feedback sessions with customers. We also require our lawyers to shadow the Products and technology teams learning how products are developed, tested and rolled out.
We send members of the UK legal team to other PayPal offices to give them experience of the business in other geographies. For example, one member of my team did filled in for six months in our Singapore office and one member of our team worked in the Paris office supporting the western European business for five months.
Members of other functional areas like marketing or sales spend several days shadowing or working in the legal team to understand how legal works and the contracting process.
Members of the UK legal team are assigned to attend the core team meetings of other UK functional teams to understand their upcoming projects and priorities in detail.
Members of the legal team are also included at the inception of a project as core team members to input into the design and development of the product at an early stage. During the development of new products, members of the legal team not only advise the business but help to lead and drive initiatives with the business teams. This makes the lawyer in effect a legal project manager and a trusted business partner. The lawyer then knows the product in as much detail as the other team members and the need for legal advice is greatly decreased as legal requirements are built into the product from the beginning.
The inclusion of the head of legal role in the core UK management team with a key role in developing strategy and leading initiatives with budget responsibility.
These steps have helped to increase the legal team’s skills and knowledge of the business but also helped to increase the trust that senior management have in the commercial judgement and risk tolerance of the legal team. However, more importantly, the UK legal team through a closer familiarity with the PayPal business was able to save the business millions of pounds by setting up an improved procurement process which eliminated duplicative billing, set up a process for analysing pricing with a business plan template and the automated tracking and analysis of supplier agreements.
Business acumen is a fundamental requirement for any in-house lawyer and it can transform the in-house legal function and its perception by the business from a specialist support function (or a rhino) into not only a key strategic business partner but also a driver of change, revenue and innovation for the business.
Tom Brown, director, head of legal UK and Ireland, PayPal will be speaking at this year’s In-House Counsel as Business Partner conference on 24 and 25 November.
The conference is designed by and for corporate counsel wanting to transition to business partners that are at the forefront of their business whilst still meeting their multiple requirements around legal risk and consultation. To register, click here.