Large Firms
Jul. 30, 2002
Different View
Column by Robert Steinberg - Did you ever wonder what running a company has in common with being a lawyer? After 11 years as a technology lawyer in private practice, I got my chance to answer that question when I accepted a three-year contract to be the chief executive officer of a Seattle software development company in 1999.
Did you ever wonder what running a company has in common with being a lawyer? After 11 years as a technology lawyer in private practice, I got my chance to answer that question when I accepted a three-year contract to be the chief executive officer of a Seattle software development company in 1999.
Almost immediately, the first difference I noticed between being a lawyer and being a chief executive officer was my relationship with time. Chief executives think and work in moments of time, not hours of time. A chief executive's job is to manage every second of the company's activity and ensure scarce resources are properly assigned and efficiently maximized. Timely results are the measure of success, not the amount of time put into a project. On the other hand, private lawyers - by the nature of the job and how they are paid - measure personal success in terms of chunks of time actually billed.
Another difference I noticed was who owned the risk. While as a lawyer, I analyzed situations from a risk perspective, I never fully appreciated how it felt for the client to "bear" the risk.
As a former practicing lawyer, my initial tendency was to overanalyze an issue as a chief executive because I bore the responsibility for every decision. Steering a company requires thousands of judgments about product mix, market analysis and opportunity, legal analysis and financial considerations. While a chief executive gets a lot of support from his staff, his decisions are always closely scrutinized by the board of directors.
I also noticed a difference in the level of control. Lawyers are masters of control. We deal with a set of variables that are for the most part known: the client, opposing counsel, facts, arguments, judge and deal points. If something is truly an unknown, we investigate by conducting discovery, asking our client or holding mock events to simulate a situation.
In business, however, the chief executive guides a process that feels a lot like "controlled free-fall." Choosing product mixes and conducting market analyses are functions often controlled by variables that are soft at best, but most often completely unknown. If a technology company's product, for example, is truly cutting edge, there's probably little precedent out there with which to compare or outside expertise with which to refer.
In the software and hardware sectors, the best technologies don't always make it. It's not enough to be smart and have a great product idea. A chief executive must have an impeccable sense of timing, a great engineering team, cooperative market conditions and the ability to make educated guesses about what customers really want to spend their money on.
If a lawyer is wrong about his legal predictions, hopefully he has protected himself by having adequately informed the client of the risks. In business, if the chief executive is wrong about predictions, the company may go under with all the employees losing their jobs.
With that said, what chief executives want out of their lawyers is advice that helps them minimize risk by controlling the seemingly uncontrollable variables. Chief executives need lawyers who think like them, who understand the legal issues but also efficiently solve their business problems. Lawyers, just like chief executives, need to think about objective measures of their success from their client's point of view.
For example, a lawyer must litigate a case while constantly weighing the expected value of success. At every stage of a case, he should appraise the probability of producing a return on investment for the legal dollars spent. The lawyer needs to quantify difficult-to-measure variables so that mathematical heuristics can guide litigation strategy. Chief executives live in a world of numbers, whereas lawyers try hard never to quantify their advice. Lawyers can better serve their clients by using numbers to assist the chief executives in making some of their hardest decisions, such as whether to settle or continue to litigate.
A lawyer also must negotiate like a chief executive. Negotiating deals with a chief executive's "moments-in-time" perspective helps the lawyer understand just how result-oriented the chief executive is and helps focus the lawyer's attention on the bigger picture. By analyzing the chief executive's pain points, a lawyer can better understand when he can give up ground to close a deal. A chief executive measures a deal's success by closing it without giving too much away.
When I negotiated deals as a chief executive, I always felt I had an edge because I could easily combine the business and legal points to make them deal points. Negotiating a strategic deal feels a lot like a sumo wrestling match - knowing the proper moment and custom to show respect, as well as knowing the precise moment when to throw an opponent out of the ring when he's off balance.
By carefully determining in advance the "win-win" list (a list of both the legal and business points, which may never appear in the body of the agreement) for both parties and considering the leverage points of the opponent, a deal strategy composed of a carefully choreographed series of concessions and requests can produce an efficient, results-oriented outcome for both parties. Keep in mind how fast two chief executives often strike a deal and work out the most difficult and contentious deal points, compared to how long it takes their legal advisers to complete the negotiations on the rest of the less significant transaction issues.
Chief executives need to have savvy legal skills. Today, more and more of their time and strategy revolves around evaluating the legal landscape of their business. I am amazed in recent years at just how sophisticated chief executives and their boards have become in order to competently run and direct their businesses.
In the end, however, the chief executive's job has an awful lot in common with lawyering. Besides navigating the landscape, every moment of the day requires skillful negotiation - whether with employees, board members, customers, strategic partners or the government. For me, the best part of business was negotiation. It reminded me of the practice of law, probably because it took the most effort and was the most intellectually challenging and rewarding.
My experience as chief executive taught me what I missed most - practicing law. I returned to private practice last month, armed with a better understanding of how the two roles are similar and different - and how to leverage this newfound perspective to provide my corporate clients with legal services they truly consider "value added."
Robert Steinberg is an intellectual property partner at Latham & Watkins in Los Angeles. He is the former chief executive officer of xSides Corp., a Seattle-based software development company.
Contributing Writer
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