In many companies, business and legal operate as separate silos. On the business side, there is business development, corporate development, marketing, finance, and human resources. On the legal side, there are in-house attorneys and outside counsel. Business sees legal as a cost center, not as a value driver. Unfortunately, this separation of business and legal prevents many companies from fully benefiting from legal advice and results in wasted time and money.
Case Study: The Divide Between Marketing And Legal At Yahoo!
A senior marketing manager at Yahoo! told me a story that illustrates the point. She said that the marketing team spends substantial time and effort to develop a marketing campaign, which is then reviewed by in-house counsel. In-house counsel will often come back and explain the legal problems with the plan, which might include intellectual property, privacy, and cyberlaw issues, or potential litigation down the road. As a result, the legal team will either nix the entire project or force marketing to substantially revise the plan.
But marketing complains that in-house counsel does not understand the business objectives of the plan, or that in-house counsel is too risk averse. The consequence is that marketing wastes time and money. Further, the legal team might force the wholesale revision of a plan whose purpose they don’t fully comprehend. The effectiveness of the original plan is unnecessarily diluted.
This is precisely what marketing thinks, causing unnecessary tension between marketing and legal. Legal is shaping marketing’s activities when the direction of influence should run in the opposite direction. At the least, legal should be facilitating marketing’s objectives. In order to do that, the attorneys need to understand marketing’s goals and marketing’s role in promoting the company’s success.
Too often, both within a company, and between a client and outside counsel, business and law are unfortunately treated as separate silos. This is largely because lawyers are limited in their ability to integrate business strategy and organizational management concerns into their legal advice. Thus, business people think like business people, and lawyers think like lawyers.
Two Solutions: Legally Informed Strategy And Business Education For Lawyers
1. Legally Informed Strategy.
One solution is Legally Informed Strategy. Under this approach, strategy and organizational priorities are simultaneously considered with legal concerns. Business strategy drives legal advice. Successful implementation of this approach requires a deep understanding of strategy, organization, and law. A combined Strategy, Law, and Organization lens is needed for Legally Informed Strategy to work. Properly implemented, Legally Informed Strategy produces superior advice and results.
2. Business Education For Lawyers.
However, many attorneys, including corporate lawyers, do not possess the business knowledge or experience to provide Legally Informed Strategy. Many business lawyers could benefit from education and training in strategy and organizational management.
First, consider outside counsel. In 2009, the Wall Street Journal reported that law firms recognize as much and are sending their corporate attorneys to executive education and leadership development programs to learn finance, management, and strategy. Why? So that lawyers can better understand their clients’ businesses.
Similarly, the Association for Corporate Counsel (ACC), the organization of in-house counsel, recognizes that corporate counsel need additional business education and training. ACC now offers a Mini-MBA for in-house counsel to boost business knowledge. If any set of lawyers would understand business, you would think it would be in-house lawyers. However, even lawyers in that domain of the legal profession understand that they must have a stronger understanding of strategy and management.
In future posts, I will elaborate on how executive development for attorneys benefits both them and their clients.
I would like to hear what you think. Do you agree that the separation of business and law into separate silos leads to suboptimal advice and outcomes? Do you think that lawyers can add value to their clients if they possess better knowledge and understanding of business?
Douglas Y. Park
Twitter: @DougYPark
Hi Doug, you’re absolutely right. Congratulations for the article.
Law faculties do not train people to understand the Law as a means of reaching a goal. The focus is on concepts and procedures, and end in itself. That needs to be changed.
Law is a social science made for people to attain prosperity through an organized society.
I have been teaching law to business people for a long time and business concepts to law students. The thirst for information and for merging concepts is huge.
Please continue giving your excellent contribution to the Legal/Business community.
Best regards
Dan Kraft
Hi Dan,
Thanks for reading and for your feedback. You make excellent points. Both business people and lawyers should seek a better understanding of each other’s perspectives. Working at this intersection will promote organizational goals.
However, while lawyers could benefit from education and training in business and management, so could business people benefit from a stronger grasp of how the law can help companies improve their effectiveness.
Specific areas where merging business and legal will reap great benefits include:
Business strategy formulation and implementation
Intellectual property strategy
Corporate governance
Risk optimization
International management
I will continue to offer my thoughts on how merging business and law can result in better results for everyone.
Doug
I couldn’t agree more, Doug. I was in major law firms for 18 years, including many as the head of a venture capital practice group. The law firm model makes it impossible to integrate the silos, in my opinion (not a legal opinion, which would include at least five pages of disclaimers, assumptions and other drivel…), because including the lawyer in business discussions just costs too much on an hourly basis. I left big firm life five years ago and started a practice offering outsourced part-time general counsel services. No billable hours, and my clients now feel free to include me in strategy meetings, operations meetings, without worrying about the meter ticking. As a result, I can provide guidance on a proactive basis, enjoy my work more, be more value-added, and be viewed as part of the business team. I couldn’t be happier, and I believe my clients are as well.
The legal system is so used to adversarial relationships that we’ve carried them into our relations with clients. All you lawyers out there–when was the last time you DIDN’T have to have one of those painful discussions with your clients about bills? How can your client see you as a member of the team when what you’re doing is increasing their burn rate? Businesses have been crying out for alternative business models for the legal profession, and they’re painfully slow in coming. I hope more postings like yours will help.
Audrey Roth
Hi Audrey,
Thanks for your perspective. Unfortunately, business too often sees legal as a cost center, not a source of value. The adversarial relationship between lawyers and clients that you mention is a big problem. Billing is only part of the problem.
A bigger problem is business people’s lack of confidence in the business acumen of lawyers. Practicing business transactions or corporate law does not necessarily teach lawyers about strategy formulation and execution, organizational behavior, and leadership imperatives. That is why law firms and corporations increasingly want their attorneys to formally learn the fundamentals of business. As I wrote in earlier post, What Clients Want From Their Lawyers: Good Business Strategy Advice, companies want lawyers who understand and can contribute to business strategy. How can lawyers contribute to business strategy? I have argued that a combined Strategy, Law, and Organization lens better solves business and legal problems than any one of these approaches alone.
Doug