Mental Models for Corporate Counsel - Circle of Competence

We can better assist our clients once we know the limits of our capabilities.

Mental Models for Corporate Counsel - Circle of Competence

Snapshot

Corporate counsel should regularly assess their capabilities; then prioritise those matters that match their strengths and lean on extra resources for those that do not.

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What is the model?

The Circle of Competence Model suggests that each of us have the skills and experience necessary to achieve consistent results within certain subject areas. And, by knowing these areas, we can focus our efforts where they are likely to achieve the greatest results and avoid unnecessary failures. 

It seems to me the Model builds from a few key assumptions: 

• (Components of Expertise) — True expertise, that is the capability to achieve consistent results in an uncertain environment (and not merely chauffeur knowledge) requires a combination of:

  • genetic characteristics (e.g. the height of a basketballer);

  • natural talent (e.g. the creativity of a painter);

  • developed skills (e.g. the muscle memory of a tennis player); and

  • lived experience (e.g. the wisdom of a teacher). 

• (Expertise Takes Time) — While some of these attributes might come at birth, certainly it takes time to build others. 

• (Time is Finite) — Time is a finite resource. 

• (Expertise Must Be Finite) — Therefore, it is not possible to build true expertise in all subject areas. 

If we accept that no person can be an expert in all areas, we can take some of the pressure off and stop trying to achieve that.

Instead, we can review our blend of characteristics, talents, skills, and experience, and consider what we can do better than most. This introspection can then inform our actions, ensuring we put our energies into the projects we are most likely to achieve. 

How does the model apply to corporate counsel?

This Model is particularly relevant to corporate counsel, who are often expected to have a specialist’s expertise and a generalist’s range. 

You might often hear about the importance of ‘staying within your Circle of Competence’, especially in corporate circles (though there’s no shortage of ‘corporate advisers’ purporting to be experts on metals one week and medicinal marijuana the next!).

I’m sure that’s good advice for circumstances where the pressure to respond to opportunities is low, and the consequences of failure are high. Certainly, it is better to play those games that value your natural strengths than those which do not. 

However, the in-house legal counsel does not always have that luxury. There will be times clients look to you and expect you to advise them on the law; regardless of whether that area of law falls within your specialty.

They may not - in fact likely will not - appreciate the differences between front-end and back-end matters; between securities law and land law; or between the regulations of one jurisdiction and another. 

To your clients, you are the legal expert and they have brought you a legal problem. They expect a solution. And so, in my view, the Circle of Competence Model has extra significance for corporate counsel. 

Firstly, it is essential to identify your own circle of competence. And this requires work. You will have extensive knowledge in some areas of the law, and in others not as much. Your technical skills might allow you to draft complicated agreements but let you down as an advocate. Plenty of lawyers live among the details; others prefer to command big-picture strategy.

You may find, after really thinking it through, the borders of your circle are not where you assumed they were. 

And yes, obviously after having done the work to identify its edges it is preferable to stay within your circle. But even more important is for corporate counsel to have the presence of mind to recognise when they might be venturing outside it. Then take steps to avoid the pitfalls that come with that. 

It may be acceptable for you to advise your client on an unfamiliar area of law provided you’ve taken the time to carefully consider just how complicated the issue is and how confident you are in your limited understanding. 

It may be suitable for you to provide an initial response to your client, with a commitment to confirming your advice after researching or (more likely) speaking to another lawyer with more relevant experience. 

It may be necessary for you to decline to provide advice. And instead, explain to the client the importance of getting the answer right, and suggest taking the issue to another lawyer. In the same way a local doctor might diagnose a problem then refer to a specialist for the remedy. 

Be on the lookout for..

I recall a time in my own career as a corporate counsel when an internal HR adviser suggested a plan for dealing with a relevant award (an Australian term for a set of minimum standards of employment). Her suggestion sounded odd to me — to put it nicely. It seemed completely contrary to my limited understanding of how things in that space work. I was tempted to dismiss her proposal.

But I knew employment law can be tricky. And it’s not my specialty.

And so I ran it by an old colleague with the right specialty and, sure enough, she confirmed what the HR adviser said was correct — “Yeah, that’s right — weird, huh?”.

Had I immediately shot down the strange suggestion in the meeting, I suspect the rest of the team would have followed my lead. I would have burned my relationship with the adviser. Later, when we ultimately discovered I was in the wrong, I would have burned credibility with the client.

I think most in-house legal counsel will be familiar with the icky feeling that comes with being required to act outside our specialties. The temptation to make a snap decision so that the icky feeling goes away.

Although it might be unpleasant, it’s important not to ignore the ickiness. Instead, listen to it, and recognise the feeling is simply due to the issue falling outside your circle of competence. And that it’s not only ok to have limitations, but being both aware of and respectful of your limits makes you a much better lawyer. 

A much better adviser to your client. A much better asset to your team. 

Where to read more.. 

You can read more about the Circle of Competence Model on the Farnam Street Blog and Sahil Bloom’s Substack.

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Thanks

My thanks go out to Russell Smith and Caryn Tan for comments on an earlier draft of this issue.

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