The evolution of Commerciality: Some personal notes for in-house lawyers

Old way new way conceptCommercial awareness is a vital skill for in-house lawyers. Gordon Donovan sums up ‘commercial awareness’ thus:

  • An interest in business and an understanding of the wider environment in which an organisation operates: its customers, competitors and suppliers.
  • Understanding of the economics of the business and understanding the business benefits and realities from both the organisation’s and the customer’s perspectives.
  • The need for efficiency, cost-effectiveness, customer care and knowledge of the market place in which the company operates (current economic climate and major competitors).

A report by Bond Dickinson LLP states that “The domain in which general counsel and legal teams operate is changing. In-house legal professionals are playing more business centric roles and looking for ways to add greater strategic and commercial value to their organisations. At the same time, questions of economic, social and environmental sustainability have risen to prominence in boardrooms around the world and are becoming a more explicit influence on corporate strategy, governance and decision-making”.

What this means is that being an effective lawyer requires not just legal expertise, but a real understanding of an organisation’s objectives and the commercial dynamics that surround them. This is more so for in-house lawyers, who should increasingly move away from the traditional role of ‘risk spotters’ to ‘strategic partners’. Legal departments have a legacy of being naysayers, deal-stoppers and those folks with poor business acumen, but that is changing, and rightly so.

The Bond Dickinson reports states further that businesses are increasingly looking to their legal advisers to contribute at a strategic level; and whatever their professional remit or legal specialism, lawyers who really understand the more holistic dimensions of a business’s activities will be in a position to provide the best counsel.

How to become commercially aware:

  1. Keep up to date with what is happening about the future of your organisation, and the markets in which your organisation operates;
  2. Understand the nature and structure of external supply markets, list out the things that affects them and keep a track on when they occur;
  3. Understand any historical patterns which will help in predicting future trends. It is particularly useful to be aware of any typical cyclical patterns, such as how wider economic conditions tend to affect a particular industry;
  4. Understand and map out the key strategic relationships you have with your suppliers. What is their strategic vision and do you feature? Gather data on the suppliers and supply market(s) you serve and are served by and pay attention to the trends;
  5. For any piece of legal analysis you do, remember to ask SO WHAT!

According to Thomas Eckardt, lawyers who demonstrate the ability to be business ‘enablers’ and make commercially savvy decisions arguably find it easier to connect with the business teams and will be more successful in their careers. Management increasingly look to legal teams to help make strategic decisions based on both commercial and legal analysis. The ability to provide this combined advice is where in-house can really add value to a business.

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