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Managers often put off dealing with legal concerns in business as long as they can, or sometimes even longer. This is usually because they don't like dealing with outside lawyers. High hourly rates and lawyers' conservative – frequently negative – advice explain only part of this aversion.
Hiring and working with a lawyer to assist with a business project is still seen as a black box, poorly understood and mostly avoided. As a lawyer who has worked for businesses and as one who has hired lawyers, I've seen three myths about lawyers that hold managers back.
Myth 1: Hiring the right lawyer is a matter of luck
The reality? it does not have to be.
Managers usually choose their business lawyers from referrals by associates or friends. But the lawyer who drafted your will or handled your residential mortgage isn't the right person to take on that patent infringement action, despite what he might say.
Legal matters, such as a transaction closing or lawsuit, are usually high stakes and time sensitive. It is difficult to compare or evaluate lawyers before signing on as a client. It is better to plan ahead and find a law firm before you need one urgently.
Think in terms of hiring a law firm, not a lawyer. Ask local firms to provide service proposals for your company. Interview them about their bench strength, responsiveness and how they fit with your growth plans. Strive to build a long-term relationship with your business lawyer.
Lawyers also choose clients. They do a work-up on their clients before agreeing to work for them. This involves conflicts-of-interest checks and law firm retainers.
Myth 2: The lawyer instructs the client
The reality? it's the other way around.
The client controls the relationship and always makes the final business decisions.
Lawyers are knowledgeable, expensive and confident. They are an essential piece of your business success. For these reasons, they can come across as intimidating.
The lawyer can usually be counted on to advise the most conservative, liability-proof course of action. They are typically most comfortable when there is no legal risk at all. In fact, they probably would have advised against taking the risks of launching the business in the first place. Most of the time, clients do what the lawyer advises.
For instance, we often see clients refusing, on the basis of legal advice, to talk to or settle with other parties in a dispute. There is no law that prohibits parties from talking and negotiating, even in the context of a continuing lawsuit. Generally, the parties should negotiate. The lawyer is concerned about losing control of the process but it is the client who is ultimately in control.
Moreover, it is irrational to think there is only one correct legal opinion or strategy on any matter. Smart, experienced clients suddenly seem to lose all their business acumen in the face of what a lawyer might say.
Clients who declare they must do something or cannot do something solely on the basis of legal advice are abdicating their responsibilities. The lawyer does not run the business or make your business decisions. You do. You do something because, in your informed best judgment that is ultimately the best business decision.
The lawyer – like any other service provider – must carry out the client's instructions or must withdraw. The only limitation is legal ethics. Clients are free to fire their lawyer in the same way they can terminate the services of any other professional advisor.
Remember, the client instructs the lawyer.
Myth 3: Legal victories are business victories
The reality? not always.
Lawyers frequently pursue expensive and time-consuming legal victories that have no positive effect on business. Their interests may be to burnish their reputation among lawyers and judges, to set legal precedents, or to preserve the way things have always been done. They might want to tidy up loose legal ends or pursue remedies that you neither need nor want. They may seek to bring a measure of certainty or justice to a matter that they believe is long overdue.
Yet, is this what the client really needs? The business might be better served with a quick settlement in a private disposition than having a lawyer embark on a change-the-world brawl.
When I worked for clients buying businesses, for example, the lending institution's paperwork usually contained many technical conditions that had to be satisfied prior to the loan funds being advanced. Some of these conditions were unnecessary. A buyer might not get a corporate resolution done until an hour after the stated deadline. Yet, the lender's lawyer was usually unbending, threatening that if every minor condition was not perfectly met, the loan (and consequently the purchase) would be rescinded. If it were up to the bank manager and not the bank's lawyer, the manager would no doubt be more flexible about technical compliance and would never jeopardize the transaction in this way.
Ensure, do not assume, that your lawyer's interests and actions are aligned with your business interests.
A successful business client is neither intimidated nor controlled by lawyers. Clients must intentionally select and continuously instruct legal counsel, and ensure their goals align with those of the business.
Peter Bowal is a professor of law at the University of Calgary's Haskayne School of Business (@haskayneschool).