Commercial awareness is incredibly important for law students. While you may not need to analyse business needs, identify problems and design solutions for clients just yet, being commercially aware can help you develop an understanding of what’s actually important for clients. It’s also a very important skill to display in clerkship and graduate interviews at commercial law firms.
What is commercial awareness?
In a nutshell, commercial awareness is being able to think commercially about a particular situation. This is really broad and can include things such as:
- being able to identify a problem that a business might encounter;
- thinking about different options to address a problem;
- finding different ways on how to proceed in any particular situation, including what might help and hinder them;
- being able to identify what management would consider important, and being able to take this into consideration for the above points; and
- identifying the best case and worst case scenarios.
Why is commercial awareness important?
This doesn’t sound so difficult, but learning this skill is highly valuable and sought after by law firms for one single reason – it is essential in providing quality advice to clients.
We spend years at university learning legal theory, legislation and case law, but the simple fact is the client’s don’t really care. While we might think what Justices Kirby or Heydon said was absolutely fascinating, and that the legal theory stemming from Salomon v Salomon is amazing, clients don’t want to hear about it.
When a client comes for legal advice, what they want to know is how can they achieve the result they want. This could be entering into an agreement with another company, or building a factory or distribution centre in a particular region. They might want to fire an employee for misconduct, or stop someone using their trademarks. While all of these scenarios require knowledge of the law to provide an answer, the legal advice presented by a lawyer should be geared less about the theory, and more about how the law helps or hinders the proposal.
In other words, they want to know whether they can achieve whatever business objective they have given you, not what some court has to say on the issue. Knowing the law is our job, and we know the law so we can help our client achieve their goals.
Learning commercial awareness
Law school only teaches legal theory, which is great to learn how to read cases and extract principles. However, we need to learn how to think commercially on our own so that when we are interviewing for a clerkship or graduate position, or working as a lawyer, we can provide relevant advice for the partners and clients.
There is good news and bad news.
The good news is that this is a relatively easy skill to learn. The bad news is you can’t learn it quickly, and you will never be able to bluff commercial awareness without knowledge; if you are speaking to a lawyer, they will be able to tell (which is important to know for interviews). I think this is a good news story overall – with some persistence, you can learn and apply commercial thinking within 6 to 12 months.
Five steps to learning commercial awareness
There are only five steps to address, but learning how to think commercially by the time you finish law school hinges on one simple habit; reading one or two news articles per day. This will only take around 5 to 10 minutes, and can be done on your commute to uni or work, during a lunch break, or before you go to bed each night.
As a general summary, what you will be doing is learning everything you can about a single company; who they are, what they do, what is important to them, what helps them and what hinders them. Superficial knowledge will come quickly, but if you can persist for 6 to 12 months, you will develop a strong understanding of the company (in particular), and more importantly, how the company operates in, and is affected by, the broader national and international economy.
This is commercial awareness.
Step one: choose a company
First of all, choose a company to learn about (start with just one company). It could be any company at all, but for this process to work you will need one that is in the media regularly, so try looking at the ASX top twenty. There are a range of industries represented in the ASX top 20 (though they are mainly in the financial sector), but if you can’t find any that interest you, check the ASX top 50.
Step two: Google alert
Set up a Google alert for the company name, so that any new media articles are sent to your email address. Make it a daily alert so you don’t get emails at random times throughout the day. This is probably the easiest way to keep track of what is happening, and if you find that there are lots of articles, just choose a few to read. The chances are that any articles released on the same day will be pretty similar, so you could even just skim read a few.
This will take around ten minutes each day, so it’s very manageable.
Step three: learn
Over the period of a few months you will find that you have a wealth of knowledge on the company you chose. This will provide you will the perfect answer to the question frequently asked in interviews: “What media stories have interested you recently?”
Further, you will also understand what factors are affecting the company. Is the global economy causing problems, or is the national economy more important? If the company is struggling, is it the political environment that is causing issues, or is it just poor company management? You will also learn about the company objectives. How are they going to invest the profits that have been made in previous years? If they are looking to expand, are they going to do this organically, or through acquisitions?
The amount of knowledge that you pick up is extraordinary. The real advantage is that this knowledge is transferable, and you can use this knowledge to apply to any other company of interest.
Step four: read the annual report
Each year the company will release an annual report, so download a copy and read every page. This is an opportunity to learn about how the company performed in the past year, and what it wants to do in future years.
Keep in mind that the board of the company approves the annual report, so it also doubles as a way to boost investor confidence (or calm investor anger).
The annual report will include a managing director’s report on the previous year. When you read it, consider whether you agree with his or her analysis. Read about the predictions for the future; do you think the company can achieve these goals? Just as critical analysis is necessary to do well in essays at university, the critical analysis of any (and all) information related to your company is important in developing your commercial awareness.
Step five: review and consolidate
If your main source of information is reading the business section of a single newspaper each day, you will be learning a lot, but you might be missing out on different types of commentary on your company.
Every few months, sit down for an hour or two and Google your company. You will find commentary from a whole range of sources that you might not have read before. Further, you will have an opportunity to review and refresh your memory on older material. What you want to do is consolidate the knowledge you have gained over the previous few months, and find commentary from different sources that can complement and reinforce your knowledge.
So that’s it, the path to commercial awareness. There is no complex strategy, or secret trick you need to learn. It’s absolutely simple and anyone can do it. The hardest part is getting into the habit, and sticking to it throughout your law degree.
Commercial awareness for interviews
Many law firms want clerks and graduates who keep up with recent events in the business world. This is particularly true for all top tier and mid tier firms, as these firms typically have large corporates as clients. It is also true for smaller firms; knowledge of the commercial world is simply a valuable and sought after skill for law students and junior lawyers.
Many interviews will have questions testing you on your commercial knowledge. If you follow the above steps, you will be able to easily answer this question and discuss the topic with your interviewer. This will definitely improve your chances of standing out from the rest of the applicants, because most people will only be able to provide a superficial answer based on a few days (or hours) reading.
Just remember, this is what senior commercial and corporate lawyers do every day; they first spend their time understanding what is important to their clients, and only then do they provide legal advice to help. While clerks, graduates and junior lawyers might not be providing high level advice just yet, law firms want to see this potential, so make sure you can demonstrate it.
A call to action
I want you to start today. I promise you that this information will be absolutely worthless unless you start putting these steps into action. To increase your chances in interviews, take a look at the ASX top 20 today, choose a company, and then start honing your commercial awareness skills tomorrow.
Commercial awareness topics
If you would like help choosing a topic, check back here soon. I’m going to post a list of commercial awareness topics for the second half of 2015 shortly. This will be part of a series, posted every six months, to provide you with some of the best companies and topics to learn about.
Anyone can appear confident and knowledgeable on commercial topics with a little bit of work. There is no secret formula or trick to learn; you just need to be persistent and spend 10 or so minutes a day reading about a company.
Leave a note in the comments section about the company you have chosen, and I might be able to offer some feedback on your choice. Best of luck on this journey – I guarantee you that it will be worth it!If you found this helpful, please share it around!