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Commercial Awareness: Defining the Undefinable

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About The Author

Chris Bridges (Executive Editor)

Chris is an IT and Data Protection solicitor at a top 20 full service firm and the founder of Keep Calm Talk Law. He also contributes to Computers and Law and other sector specific publications.

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Commercial awareness is a catchphrase that makes many aspiring lawyers shudder. What exactly does it mean? One can find many different answers for this simple question, but it then proves difficult to decide on which definition is correct. Who has it right, and which definition should you try to emulate in your applications and at interview?

You would be forgiven for thinking that asking this question is like seeking the answer to ‘The Ultimate Question of Life, The Universe, and Everything’ as in The Hitchhiker’s Guide to the Galaxy. Thankfully, my attempt at seeking to define ‘commercial awareness’ did not take 7.5 million years, and has not produced an arbitrary and incomprehensible answer.

Saying that, it is not straightforward either. I believe there to be many different limbs to commercial awareness. Consequently, I also believe there are many discrete ways to demonstrate your commercial awareness, each of which is as valuable as the other. It is not a matter of choosing your favourite, but seeking to demonstrate elements of each. Further, not all of these limbs are unique to those searching for a career in commercial law; many are equally applicable to those looking to practice outside of the commercial world.

Ultimately, all of these different limbs are logical tangents from the literal circular definition of being commercially aware: being aware of commercial issues. I deal with what I deem the three most important limbs below.

The Populist Definition: Identifying Commercial Implications

This is by far the most recognised answer to 'what is commercial awareness', and reflects the typical 'commercial awareness question' found on commercial law firm’s application forms, which takes the form of something similar to: 'Tell us about a recent development that has taken your interest. How might this affect our firm?'

To properly understand this take on commercial awareness, you need to understand why they want you to demonstrate this skill. It may be somewhat perplexing until you do. You might think ‘how is me seeing the effects on ABC business area of XYZ event going to help me when advising a client?’

For undergraduate students, this is not always obvious, particularly before your first vacation scheme, but in many cases, it remains unobvious for a long while after.

In a utopian world, clients would come to your future firm with a clear idea of every single issue they are facing. However, in reality, this is very rarely the case. Often, it is extremely easy to glaze over a clause of a draft contract that could be extremely detrimental to your client’s business plan. It might be a clause you see all the time, which usually proves unproblematic. However, given this client’s specific circumstances, it is a pit of angry vipers.

Therefore, when answering these questions, you are not providing irrelevant commentary on topical issues; you are hopefully demonstrating the ability to spot commercial issues where they are not immediately obvious.

By way of an example: it is common for commercial contracts to include a provision granting the right to terminate the agreement where “there is a change of control of the other party within the meaning of section 1124 of the Corporation Tax Act 2010”. This essentially means there is a right to terminate the agreement where shares are transferred which carry more than 50% of the voting power in a company. In a loan agreement, this would mean an immediate repayment. In a long-term supply agreement, this could be the loss of a large customer.

Your client may come in, excited about an extremely advantageous contract that will skyrocket the company’s value, but has not reviewed it in detail. Typically, such a clause is not a problem; many businesses will accept such a term knowing they are not planning to sell, and negotiating an amendment could result in less beneficial terms elsewhere, or a less advantageous price (whether that be interest or the cost of goods).

However, if you knew said client was looking to sell in the next few years (assuming the contract extended beyond this), this clause could be a big problem. Any future buyer of the company would notice this during his due diligence, which if unresolvable will result in a devaluation of the company, or your client having to grant an expensive indemnity.

Therefore, when choosing your ‘recent development’ on which to write, try to make it difficult yourself. If you can spot the commercial issues arising from an extremely un-commercial event, you will be receiving big ticks. Of course, there is equal danger of being fanciful; make sure the commercial issues you discuss are plausible and are likely to be of significance.

How do you practice this? Read, and then instead of moving straight on to the next article, take some time to consider the implications of that news story on a business, or even better, a specific time of business. You do not need to jot down notes; what is important is that you are going through the thought process. Practice makes perfect, the more you go through this process, the better you will be; if you do these year round you will be very well equipped to answer these types of questions on an application form, and at interview.

Good sources include BBC Business, the Economist, the FT, or any industry specific publication (or sub-section of a newspaper) if you have a particular interest. However, a great way of receiving easy-to-comprehend updates on legal developments is to subscribe to email updates from Keep Calm Talk Law (fear not, it is free), articles from which provide great starting points to do your own further research.

Important: answering this question well does not conclusively demonstrate commercial awareness. For many law firms, commercial awareness is pervasive and should be demonstrated throughout your application. Each of the following limbs can be worked into other questions with relative ease.

The Less Populist Definition: Understanding the changing legal market

This limb of commercial awareness is equally applicable to those seeking a career outside of commercial law. Like a jobseeker in any industry, you are expected to understand the industry. This is particularly pertinent for aspiring lawyers, as the legal industry is currently taking a serious shake-up.

This is far more than knowing what an Alternative Business Structure is. You need to have a solid understanding of what impact they are having, and are likely to have, on the profession. If you are able to form a coherent opinion on them, you are probably on the right track.

That is not to say ABSs are the only thing you need to know about, but it is a good example of where many aspiring lawyers fall down (by knowing what they are, but not being ready to discuss the implications).

The implications of ABSs are beyond the scope of this article, but you should certainly be able to give a coherent answer to the following questions, among others:

  • What effects might allowing non-lawyers to own and/or operate legal businesses have? [Hint: business expertise]
  • What effect might ABSs have on competition? [Hints: “Tesco law”, the micro-system the firm operates in, i.e. consumer vs. business, low end vs. high end]
  • What new legal services might ABSs give rise to? [Hint: things the traditional law firms tend to avoid such as law as a good rather than a service: precedent banks, DIY contract tools etc.]

The things you need to know about are largely dependent on what practice area you wish to enter. Criminal lawyers would be foolish not to understand the Legal Aid Reforms and the impact thereof, and should be familiar with the government of the day’s other policies, for instance making criminals pay their own way.

Another topic that you should know about and understand is the make-up of the legal profession. You should be aware of:

  • The growing role of non-traditional lawyers: i.e. professional paralegals and CILEx qualified lawyers;
  • The growing role of the in-house lawyer;
  • Direct Access for barristers, and higher rights for solicitors; and
  • Outsourcing as opposed to instruction (lawyers working directly for a company’s in-house legal team as contractors, as opposed to instructing a law firm when greater resources are needed). You should look at Peerpoint by way of example, which is Allen & Overy’s response to this trend.

All of these boil down to one thing: downwards pressure on costs. The UK has one of the most expensive legal systems in the world. For a long time it has gotten away with it and continued to be one of the most widely used. With recent economic troubles, it has finally had a wakeup call. On this point of cost control, you should also understand the reasoning behind the Woolf and Jackson Reforms, in particular concerning costs management.

When discussing the changes in the make-up of the legal profession, you should understand the effect this has on the particular firm you are applying to. For instance, if applying to a traditional law firm:

  • an increase in the use of paralegals and CILEx qualified lawyers, who are generally cheaper to employ, resulting in an even greater pyramid structure, both in terms of hierarchy and take home pay. This trend may also result in a decrease in solicitors;
  • The growing role of in-house lawyers will likely result in fewer instructions. Less demand coupled with increased supply could result in lower fees, lower profit and potentially lost jobs;
  • Direct Access means clients can go straight to counsel, or may conduct litigation without the need for a solicitor;
  • Outsourcing may reduce fees for the traditional law firm, but it can also create opportunity for early adopters, as A&O are demonstrating with Peerpoint.

This is just a quick-fire overview of these issues; more research should be done to aid your understanding.

Finally, you may wish to consider what impact technology might have on the legal industry.

Many of these issues are discussed in greater depth in Richard Susskind’s excellent book. For a summary of the book see my previous article 'Tomorrow’s Lawyers: A must read for every aspiring lawyer', or move straight to go and buy 'Tomorrow’s Lawyers: An Introduction to Your Future' on Amazonir?t=kecatala-21&l=as2&o=2&a=019966806X.

Some of these issues work very well in ‘why XYZ firm?’ questions, if the firm is doing something particularly innovative. They are a great alternative to giving cliché answers on the firm’s corporate social responsibility goals, which more often than not probably bore the human resources member doing the initial application sift (and you can guess where that goes).

Alternatively, these issues can be used in questions similar to any of (among others):

  • ‘What difficulties is [our firm] likely to face in the future?’;
  • ‘If you could suggest one thing to change at [our firm], what would it be?’;
  • ‘What do you consider to be the greatest challenge the legal profession will face over coming years?’ [Tailor your answer to this firm, but acknowledge and show briefly an understanding that different firms/type of legal business may have different challenges/opportunities]; and
  • ‘What opportunities should [our firm] capitalise on?’

The Law Firm as a Business

Whilst you will likely have seen this phrase used elsewhere, you need to understand what this entails, and even if you do, it is actually quite a difficult one to demonstrate and substantiate.

You need to understand that once you qualify, you will be a fee earner. Whilst work will be handed to you as a newly qualified associate, if you want to progress or even maintain and/or improve your standing within your firm, you need to come to the terms with the fact you are as much a salesperson as a lawyer. You will never reach the lofty ranks of the hierarchy unless you bring the firm business.

We are not talking Del Boy here. There are a multitude of ways that a lawyer can bring in the business, a few of which I highlight here. If you can demonstrate a proven ability to do these things, these are commercial awareness ticks.

Publication

This is nothing new per-se. Lawyers have been publishing for business development for years, but traditionally this has been in subscription-only journals, to which only lawyers have subscriptions. Therefore, this has been inherently dominated by barristers looking for instructions from solicitors, as opposed to barristers and/or solicitors seeking instructions from lay clients.

In an increasingly digital age, access to information is booming. Some of the most up-and-coming lawyers of today are those that have jumped on the online publication bandwagon, and used journalism as a way to boost their profile, and in turn boost instructions. We are talking free publications that are accessible from Google. Blawging (blogging on law) has become a very useful tool.

Although it is difficult to be published on such blogs as a student or a without-organisation aspiring lawyer (most are practising individuals’ personal blogs, or operated by a law firm/chambers), it is not impossible.

Whilst very few exist, some publications do encourage contributions from aspiring lawyers. Some universities offer this opportunity. Alternatively, the very journal you are currently reading encourages submissions from aspiring lawyers as well as practising lawyers, and has a considerably wide readership.

You can talk about using publishing to bring in business as much as you want, but ultimately already having experience will demonstrate that you are not all talk. Showing that you are proactively getting ahead of the game by building an online profile, and more importantly developing a passion for legal writing and the ability to write in the correct manner for lay-clients, will score you many commercial awareness ticks.

Interested in writing for us? You can do so regularly, or on a guest basis. See our 'Contribute' page for more information.

Networking

You will likely already know about networking, as it has become somewhat of a buzzword along with commercial awareness. What many fail to realise is that it is a part of commercial awareness, and should be demonstrated on your application. You may already have this experience and not know it. Ever had a sales job? Whether as a shop assistant, door to door salesman or telesales, this can be made relevant by drawing out the skills which are shared with networking: confidence speaking to others, the ability to come across knowledgeable (easier said than done without practice), and a tenacious attitude.

Again, this can be a difficult one to demonstrate on an application, but it is worth finding yourself something to talk about in relation to networking, if you do not have it already.

Cross Selling 

Whilst cross selling is not something you can necessarily demonstrate experience of, it is certainly something that you should know about. Cross selling essentially involves being aware of what other work your firm can do for current clients, even if it is not you doing it.

There are several things that can be done to promote cross sales, both on a micro level (individual solicitors) and at a macro level (firms).

Internal Networking

Knowing colleagues in other departments is just as important as going out and meeting clients. What kind of work are they doing? Do they have any particular specialisms? On the flip side, the potential recipient of a referral will be networking to make sure other departments know of him/her, and would not hesitate to pick up the phone to refer something on. On a micro level, you can contribute by making sure you go along to internal events, whether social or formal. At a macro level, a firm should be creating opportunities for internal networking.

A broad understanding of the law

This is where trainees are at an advantage, fresh out of law school. However, further down the line, solicitors can compartmentalise, becoming unaware of what is going on around them. For instance, you, a corporate lawyer, are advising a small business on its first seed round. Although you are not an employment lawyer, you're aware of an upcoming development that your fast-growth client could benefit from, thus making a referral to your employment team. If you didn't have this broad knowledge of what is going on in other legal spheres, you would have missed out on an opportunity. For this reason, you should be sure to catch up on legal press on a weekly or fortnightly basis, even if you just read the introduction and conclusions of articles. Keep Calm Talk Law is popular among practising lawyers for this very reason; our articles are easy to digest, even if outside your ordinary practice area.

Internal Report

Internal bulletins on new client wins, upcoming meetings with prospective clients, and easy to access information on existing clients all help those departments targeting particular clients. It may be that the commercial property department has been trying to find an in to a large retail chain for years, and someone in their corporate team has just made a connection. You can ask to come along to the initial meeting, or ask the corporate team to throw you a mention and arrange an introduction. A single business win can turn into a double, triple or even larger win.

What Next?

I hope this has proved to be food for thought. This is not intended as a definitive guide, but as a starting point for you to address the areas in which you might fall short.

Next, you should be sure to subscribe to free email updates from Keep Calm Talk Law to get into the habit of picking out commercial issues, do some further research on the changing legal industry, get yourself published, and find some networking experience. Do these things, and you will certainly be on the right track to impress your future employer.

For advice on other elements of applying to law firms, see my previous article 'Law Firm Application 101: Maximising Your Return'.

Further Reading

Law Firm Application 101: Maximising Your Return

Oil Prices and Your Commercial Awareness

The Many Forms of A Law Firm

The Biggest Challenges Facing The Legal Profession In 2015

For the latest articles straight to your inbox, you can subscribe for free. Alternatively, follow @KeepCalmTalkLaw on Twitter or Like us on Facebook.

Tagged: Commercial Awareness, Legal Careers

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