You Need Lawyers for More Than Legal Acumen

Successful entrepreneurs know that lawyers are indispensable to the growth of a company and a necessary expense—just like accountants are necessary for taxes and dentists for oral hygiene.  Seasoned entrepreneurs hire lawyers very early in their company’s lifecycle, maybe even before an idea is fully baked and even if they probably know certain legal principles well enough and have enough familiarity with certain basic documents to handle themselves.  These executives view lawyers, including outside lawyers, as part of the full slate of team members necessary to make a company successful.  They also recognize that the value of lawyers goes far beyond their legal acumen, knowledge of obscure regulations, or fluency in document drafting.

What are some of these intangible factors that good lawyers bring to the table and that good business people know how to leverage from their lawyers?  In short, they are factors that relate to the principal-agency dynamic that defines the attorney-client relationship.  Outside lawyers are not the company but an agent for the company.  And they can be critical to setting or maintaining negotiating dynamics and business dynamics between principals. 

For instance, when two parties enter a negotiation, particularly for deals with any degree of complexity or uncertainty, often there is simply no way to avoid certain contentious deal points.  These perceived zero-sum moments can strain business relationships even when the overall deal is seen as win-win.  Those are the moments when lawyers can be critical.  Lawyers can serve as a buffer between the principals and can hash out the nitty-gritty details without the principals expending critical good-will that may exist between them and their organizations.  In short, lawyers can be the bad cop when it is necessary to drive better terms.  They can haggle over seeming minutiae that actually may be very important, but which can also be corrosive to a principal-principal relationship.

The principal, i.e. the client, may have the final say over the deal and the deal terms, but having a lawyer serve as the messenger can be an extremely important negotiating technique.  Additionally, the best lawyers—who often will not allow clients to micromanage them and tell them how to negotiate—can often drive better deal terms and steer principals in a direction they may not fully appreciate at first.  Principals are often best served knowing what they do not know and deferring to their lawyers when prudent.  But even when the clients are heavily involved in managing the negotiation behind the scenes, it is precisely from behind the scenes where clients can most effectively negotiate while preserving maximum good-will with partners for the future.

Lawyers also give clients flexibility to say things to their counterparts like, “Sorry, but my lawyers insist that we have this provision.”  Of course, experienced negotiators can often spot lines like that as posturing from miles away.  Yet, it can still be important.  Effective executives know that successful companies require that different players on the field have complementary roles.  These executives are generally are far more concerned about delegating the right task to the right player rather than saving money on lawyers for things they perceive as manageable by themselves.  They also realize that the right lawyers can be worth far more than the time they bill drafting documents.  

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