June 04, 2013 Articles

Why Working with Entrepreneurs Is Different New

By Richard Sudek

Working with entrepreneurs may be very different from working with corporate executives. Entrepreneurs take a different approach to risk, decision making, failure, and ambiguity. This difference can be confusing or challenging for attorneys and may create difficulties in effective communication.

The Entrepreneurial Mindset One myth about entrepreneurs is that they are big risk takers. In fact, they are not; they are calculated risk takers. The media tends to focus on the big risk takers like Richard Branson, founder and chairman of Virgin Group, because he makes for a much more interesting story than the entrepreneur who has toiled quietly for 20 years building a successful company. Often, entrepreneurs are willing to take a risk if they understand the likelihood of the corresponding rewards; they will, however, want as much data as possible to understand the reward-to-risk ratio before taking the risk.

Most entrepreneurs also have a higher than average tolerance for ambiguity. For instance, they will not stress as much as the typical executive about whether the product will work, if they will make payroll, or if they will land the clients they need to be successful. It is not that they don’t stress about this stuff, it is that they have a higher tolerance for these ambiguities. Most corporations take measures to reduce ambiguity by putting in procedures and processes that remove risk and ambiguity. Entrepreneurs instead see ambiguity as opportunity.

Entrepreneurs also tend to have a higher optimism bias than non-entrepreneurs. Optimism bias manifests as a mindset that things will work out (e.g., they will figure out the product problems, fix the client problems, or work cash flow enough to survive). Obviously, this has advantages and disadvantages. When an entrepreneur is launching a company, optimism bias can be very helpful. For instance, if every entrepreneur sat down and listed all the reasons why a startup could not work they would never launch. A common saying of successful entrepreneurs who started their companies when young is, “I was not smart enough to know I could not do it when I started,” or “If I knew what I know now, I would never have started this company.” Not knowing all of the things that can go wrong can help the entrepreneur to be less distracted and focus on success. However, being too optimistic can blind an entrepreneur and lead to failure. It really comes down to a choice of whether you focus on why a startup will not work or, instead, on how you can make it work. Entrepreneurs focus on how to make it work.

Entrepreneurs also have been found to have a higher than average internal locus of control. Locus of control is a psychological continuum. On one end, there are those who feel they have little control of their life and career. In other words, their success at work is dependent on their boss or peers. People on this end have an external locus of control, or they believe control of their lives is dictated by others. People who believe they can control most things in their life are said to have a high internal locus of control. For instance, when they run into a barrier, they find a way to get around it; in fact, they might simply ignore the rules and get “around the system.” When someone with a high external locus of control runs into a barrier, he or she quits. Entrepreneurs have been found to have a high internal locus of control; they attack barriers and find ways around them. They see rules and procedures as guidelines to utilize when convenient, rather than as rigid sets of rules they must abide by every time.

Failure is a part of entrepreneurship. Entrepreneurs have been found to have a higher than average tolerance for failure. They see failure as a learning experience and accept failure as part of the process. This is connected to their tendency toward calculated risk taking: Most entrepreneurs calculate how much risk/reward each action involves, and they are willing to take the risk if the rewards appear to outweigh the risk.

When you combine tolerance for ambiguity, optimism bias, and internal locus of control, you can imagine why entrepreneurs in general appear to be big risk takers. In reality, they are simply wired differently. They focus on how to accomplish something, rather than why it cannot be done.

Attorney Mindset While reading the portion on the entrepreneurial mindset, did you find yourself saying something to the effect “Yes, but what if they don’t think of this, or miss that…?” This confirms that you likely have a different mindset than your entrepreneurial client. You are wired to look for what can go wrong; an entrepreneur is wired to look at what can go right. Attorneys are trained to avoid risk and anticipate the things that can go wrong. They are focused on an external locus of control. They focus on how others can negatively impact their client. In addition, attorneys are trained that failure, in a legal sense, is client and career failure. Although entrepreneurs want their attorney to be focused on what can go wrong, their different viewpoints can lead to a disconnect in communication.

Communicating with Entrepreneurs Openness has to go both ways to build a trusting relationship. If we hide or maneuver around an issue, we can send out confusing signals that can be misinterpreted. If you want the client to be open, then you need to be open and not worry about what you don’t know related to business and entrepreneurship. Law school has probably trained you to know everything you can, be prepared, and not show a weakness. This might be good in court, but it is not helpful in developing your client relationship.

Consider how your clients want to interact and communicate risks and detailed data around those risks. Some like a summary up front and the data later; some like a buildup to the conclusion. It is important to uncover the style of your client to understand the most effective way to communicate. I can remember situations when I ran my business and an attorney would give me a detailed buildup to the recommendation. This drove me crazy because my style is to understand where we are going first, before we start the journey. I want the summary of options and the associated risks, timeline, and rough costs first. Otherwise, my need to know where we were going would often distract me with details that were simply not important to me. After understanding the summary, I could then drill down into the alternatives that I thought made the most sense for my business. As an entrepreneur, there is nothing more distracting and uncomfortable then to have an attorney ramble on about the technical legal aspects of a situation while I am paying him or her by the hour. Some clients don’t want all of the data or detail; they just want to know the top alternatives and the associated risks.

Simply ask your clients what is their preferred way to have a specific discussion. You can do this be asking how much detail they want, if they would prefer that you start with a summary, or build the detail up to the conclusion. Be sure you are not doing too much talking without stopping to listen and ask questions. Find ways to probe your clients to see if they understand what you are explaining without embarrassing them. This can be accomplished when you put the issue back on yourself rather than asking your clients. For instance, if you are not sure if they understand a particular issue, ask them if you are being clear or if they would like to go over the issue again. Stopping, probing, and listening are crucial to building a good client relationship.

In summary, entrepreneurs are different. They see opportunity where you may see risk and ambiguity. The more you can understand their mindset and their desired communication style, the more effective you can be in helping them.

Keywords: woman advocate, litigation, clients, entrepreneur, communication