Most of us who run companies aren't lawyers, perhaps fortunately. Yet we are dependent on the skills, education, and background of professional attorneys to advise us.
The challenge is we have to be careful about how we engage lawyers, because they typically see the world very differently than we do. Lawyers are, as a rule, risk averse. They are trained to uncover risky or negative issues we might run into when we, say, sign a contract or strike a deal. A lawyer's job is to protect us from every negative scenario they can imagine. That ultimately gives them a bit of a dark view of the universe. On the other hand, it's an extremely valuable skill to lean on, and one entrepreneurs generally lack.
Where you have to be careful, however, is when you ask your attorney for advice on doing something they might perceive as risky. I've seen CEOs ask their lawyer: Can we do this? Most of the time your lawyers will tell you, "No, you can't take that action because it's too risky," because they wouldn't do it given their perception and acceptance of risk.
But life is very rarely as black-and-white as a lawyer might paint it--especially when it comes to business. There are times when your job as a CEO is to assess what an acceptable level of risk is relative to the return you might get. To be successful in business, you can't hide from taking on risk. Rather, we intelligently embrace and manage it.
It's also important to recognize that lawyers are typically rewarded only for helping steer you away from risk; all their incentives push them in this direction. They know if the company gets into trouble that should have been avoided, they'll potentially lose a client. So it only makes sense they would use their skills and education to minimize those risks.
That's why I've found a better way to tap the strengths of my lawyers. Rather than asking them for permission, I tell them I am going to do something, then I ask for their help is making sure we do it legally while also minimizing our risks. In other words:
How can we do what I want to do without getting into trouble?
See what I did there? I took the question of taking the action off the table and shifted it to making sure the action we are going to take is vetted well by the lawyer. It's a way to engage your lawyers in a creative risk management that yields a better outcome.
I recall a time when I was involved in a contract to purchase a company with a customer, and the lawyers flagged 60 different points of risk in it; in their minds they would never do the deal. But when we walked through those points, more than half of them involved minimal risk. We could manage the risk of the next 25 points and get to the five that were substantial. In the end, we made the deal--but we might not have if our risk tolerance had been set to zero from the start. It's important to note the last five points of that deal needed to be solved with all the businesspeople in the room. We didn't let the lawyers try to solve these critical issues.
To be fair, I'm not saying there aren't lawyers out there who think and act like entrepreneurs when it comes to dealing with risk. But they're rare. And if you have found a lawyer like this, you'd better hold onto to them tight.
You can find Jim at www.IncCEOProject.com