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25Jun2015Jun25,2015

​Learning a new language

No one ever said becoming a lawyer was easy, but a small proportion of lawyers are opting for a lengthier and costlier road to the top than others. Lawyers with a master of business administration (MBA) are few and far between in Latin America, but some are using them to support their clients’ expansion strategies and modernise their firm’s internal management. Lulu Rumsey considers the pros and cons​.

After years of gruelling, expensive legal training and countless late nights to progress through their firms, the last thing on most lawyers’ minds is returning to school. But a small number of Latin America’s legal professionals are doing just that: putting their careers on hold and studying MBAs in the belief it will make them more business savvy and boost their careers in the long-term. The legal directors of many of Latin America’s companies have traditionally required in-house counsel possess an MBA, and many in-house lawyers readily admit to preferring external counsel with the qualification. Now, a notable contingent of external counsel are developing a working knowledge of financial concepts and business strategy that will help them maintain profitability within an increasingly competitive environment.

However, whether a budding in-house lawyer hoping to land a role in a multilatina or a managing partner hoping the qualification will help the firm retain talent and trim costs, both will find that studying for an MBA does not come without its costs or sacrifices. “It was honestly exhausting, and on top of that you have to be really humble because you’re dealing with things you’re not accustomed to,” says Pedro Pellegrini, who is a partner at Chilean firm Guerrero Ol​ivos, but studied for an MBA at Pontificia Universidad Católica de Chile while working in-house at Embotelladora Andina. Echoing his view is Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados partner Fabiano Ricardo Luz de Brito, who warns lawyers considering taking the course that they should be prepared to spend every waking hour either working or studying: “Don’t expect to be able to run a marathon while doing this,” he says. “You have to be prepared that for two years your MBA will take over your nights and weekends and you have to have a positive attitude about that.” Where both agree is that lawyers considering studying for an MBA should be acutely aware of both the advantages and disadvantages before taking the plunge.​​

Calculating the costs

For most lawyers, one of the biggest attractions of studying for an MBA is the rapid immersion in macro­economic theories, management strategies and corporate finance transactions provided by the qualification. Lawyers are typically not trained to read spreadsheets and financial statements and understand the quantitative side of businesses, so those who understand the numbers behind a company can be more sought after by clients. Indeed, many of the top MBA programmes seek to give students practical skills by tasking small groups of students with setting up and running a fictional company, for example, rather than pouring over case studies in textbooks. Patricia Barbelli, Latin America legal director at US multinational manufacturer Whirlpool, says MBA-trained counsel are often a valuable asset because they are able to communicate in both business and legal language, and translate for anyone not educated in both. “They are better at explaining,” she says. “An MBA provides a lawyer with skills and knowledge about business, which are essential in not only understanding a client’s needs, but also allowing lawyers to easily explain legal advice to their client.”

Receiving in-depth training in financial terms and methodology can also put a legal practitioner in a good position to negotiate the best possible deal for their clients. Guillermo Ferrero, managing partner at Peruvian firm Ferrero Abogados, says his MBA qualification helps him understand the intricacies of complicated finance packages. “Now when I advise a client I fully understand accounting standards and how a merger or discounted cash flow actually works, for example, which means I am able to knowledgably negotiate along with the investment bankers involved in the transaction.” Ana Claudia Utumi, head of tax at TozziniFreire Advogados, says knowledge gained through her MBA has added depth to the tax advice she provides clients. While acknowledging that much of the syllabus she studied could have been learned on the job, she says her MBA course has nevertheless given her a deeper understanding of, for example, complex financial transactions and gave her a broader view on companies’ perspectives in financial and accounting areas far quicker than if she had been self-taught.

A further benefit provided by the qualification is that it can help counterbalance one of the keystones of legal practice: risk aversion. While caution may be advisable from a lawyer’s perspective, excessive reluctance to take a gamble can have its downsides from a business perspective by closing off potential opportunities. “Lawyers are trained to always anticipate everything that can go wrong and all the ways a deal could fall apart so they can prepare for it. In contrast, business people start from an assumption that their idea will work, and focus on how to do it most profitably,” says San Diego-based Barrett Avigdor, managing director for Latin America at legal recruiters Major, Lindsey & Africa. “The stereotype is that the lawyer always finds all the ways why the deal should not happen, but what distinguishes an outstanding corporate lawyer is that they understand the deal so well that they are part of the team brainstorming to make the deal work, but still bring the practical pessimism that helps the team make better decisions.”

Being able to undertake risks is particularly key for companies on an expansion drive or at the start of their growth cycle, where they have to take risks to gain market share and survive. Recruitment specialists say employers particularly seek the business acumen an MBA gives a lawyer because it better aligns them with a company’s expansionist mindset. Henrique Bessa, a director at Michael Page in Brazil, says economics MBAs provide lawyers with a valuable profit-focused outlook that helps them pursue potentially lucrative deals. “Lawyers working in law firms tend to avoid risk at all levels, but companies have to take some risks and lawyers need to be able to accept that in order to help the company take the right smaller impact risk for the company to grow.”

Lawyers who have MBA qualifications attribute the shift in their legal perspective in part to the company they kept at business school. “I had the great opportunity of being in a classroom with engineers, economists, mathematicians and marketing specialists and working with them gave me a completely new way of thinking. For someone from Latin America, who has had an education solely in law, it was very enriching,” says Humberto Pacheco, who has an MBA from Columbia Business School and is managing partner at Central American firm Pacheco Coto. Law students from Latin America begin their law studies as soon as they finish high school, so they miss out on interactions with other industries and disciplines during their undergraduate years that, though not part of a legal syllabus, are valuable for their professional growth. Flavio Franco, legal director at Latin American retailer Netshoes, agrees and adds that the professional diversity of a typical MBA class is what makes lawyers better equipped to understand the business needs of their future clients, because they have some context and experience of industries besides law. Indeed, forming relationships with non-lawyers at an early stage in a lawyer’s career has a practical purpose too. Colleen France, director for JD/MBA recruitment and administration at the University of Pennsylvania’s Wharton School of Business, points out that a lawyer’s MBA classmates can represent a potential client-base for lawyers at the start of their career.

Further up the pecking order, managing partners may also find that MBAs have the added bonus of helping them apply a business mindset to running their own law firms. Growing demand for an increasingly broad range of legal services has not only contributed to more sophisticated Latin American legal markets, but also led many firms to launch efforts to professionalise their service offering. For firm’s seeking to transition away from a more informal, family-led management structures, MBAs can help ease this transition by educating future law firm leaders on accounting standards or management techniques they may not have previously encountered. For those at more institutionalised firms, MBAs, which may include modules on alternative business models or marketing techniques, can provide the tools to help firms retain and maintain profitability within a more competitive environment. “The legal industry is in such a flux at the moment... and changing from the traditional billable hour and no-holds-barred billing of clients,” admits Pacheco. “Nowadays you have to run firms more like a business and analyse the cost and pricing structure.”

Business training could also provide an impetus for a managing partner to re-evaluate internal management structures. Ferrero used his studies in corporate governance to organise the firm, proposing and assisting in the implementation of agreements to decide which political rights each partner should have, which decisions should demand more than the simple majority of votes and how to divide partner compensation. Furthermore, the management skills taught on some MBA programmes can benefit the firms’ human resources departments. Training in how to manage and reward individuals can help managing partners introduce more sophisticated career plans for junior lawyers, which may prevent some associates from becoming disengaged with the firm and leaving. Ferrero, for example, says that his MBA training at Cambridge University helped him recognise the importance of associate retention and other important internal factors that needed to be addressed for the smooth running of the firm. “Our strategy used to be orientated solely on bringing more clients to the firm and improving our services to existing clients, but in the past five years we have been thoroughly looking at giving lawyers a career plan that tells them how to achieve clear, defined steps in their progression and what the firm expects of them for them to become a partner.”

Looking closer to home

While some may have benefited from studying MBAs and have been able to utilise their skills in their legal roles, the qualification is not for everyone. Those considering an MBA as a means to implement new management strategies or introduce a greater business focus may discover that hiring professional business consultants with expertise in specific areas can prove a more cost-effective and less time-consuming option. Meanwhile others may find that while economics and finance-focused MBAs may be a natural fit for corporate and banking lawyers, it wouldn’t offer the same wealth of experience to IP, disputes or criminal lawyers, for example. With full-time programmes at the highest-ranking institutions in the US leaving students between US$100,000 and US$200,000 in debt, making the wrong decision could prove costly.

Indeed, when it comes to career progression, the true cost for the individual lawyer may be higher still. Unless electing to undertake a joint degree, MBAs are often not viewed as an alternative to the LLM programme as much as a supplement to it. Although the qualification may be fairly common among legal directors working in-house, in Latin America, several structural factors contribute to the qualification’s continued unpopularity among the region’s external lawyers. Among these is Latin American students’ lack of contact with mathematics and economics post-high school, which means that most lawyers are not interested in undertaking an MBA in topics in which they may not be already familiar, often prefering to deepen legal knowledge already gained through an LLM programme. “If you aren’t good with numbers, which unfortunately a lot of lawyers are not, I would not recommend an MBA. It’s difficult, tough, expensive and time-consuming, and you need to have strong willpower to do it,” saysGuerre​ro Olivos’ Pellegrini.

For those for whom a career break is not an option, studying an MBA may also have to be balanced with private practice, which can require making substantial personal and professional sacrifices. Ramón Andrade, who completed an MBA at New York University’s Stern School of Business while maintaining a private practice at Norton Rose Fulbright (Venezuela), says lawyers who can’t forgo up to two years’ worth of compensation must accept a tough couple of years. Furthermore, alongside the high costs of many courses, the inability to invoice the same billable hours may also mean further belt-tightening throughout the period of study. Although Andrade argues that “the pain of paying for the programme yourself will keep you motivated in the challenging times ahead,” many more lawyers may understandably be less than keen to adopt such a gruelling lifestyle.

With numerous examples across Latin America of successful managing partners and star dealmakers whose careers have not been discernibly held back by not having an MBA, some question the client generating advantages of having the qualification. Indeed, even for those wishing to develop their business acumen in the formal setting of the classroom, MBAs are not the only option. One less time-consuming – and cheaper – route is for lawyers to study for a joint law and business programme, rather than taking both qualifications separately. Two alumni of Northwestern University in Illinois, which offers a combined course with Kellogg Graduate School of Management in Chicago, are Marta Viegas of TozziniFreire Advogados and Maurice Berkman of Galicia Abogados. “For me, it made perfect sense to combine subjects, law and business, so I would learn to navigate between one and the other. This allows me to better understand complex business concerns from my clients and perform better legal analysis,” reflects Viegas. However, Berkman admits that while he had a great experience on the combined course, getting a separate MBA would also have been of great value to his professional career because of its more comprehensive academic scope.

Considering the small proportion of lawyers that take up MBA places each year, it is perhaps unsurprising some modules on MBA courses may not be applicable to the legal profession. For example, Ferrero recalls one module he took in supply chain management that was compulsory to his MBA programme, but which has never come in useful practising as a lawyer, or in his managerial role. Moreover, some modules could even distract from client service when applied within a law firm setting. Alfredo Ferrari, CEO of Siqueira Castro Advogados, describes a time he used his training in body language in a negotiation for a complex deal attended by board members, but didn’t pay enough attention to the legal terms being discussed, which should have been his primary focus. “It was really embarrassing, and needless to say we don’t teach a body language module in our in-house training and seminars now.” Ferrari also adds that MBA programmes can sometimes focus too heavily on tried-and-tested case studies at the expense of teaching students new management techniques, such as those that bring about disruptive innovation to help companies break new ground.

Those lawyers who hold an MBA also offer a word of caution to lawyers considering pursuing one: be prepared to have your choice questioned by prospective employers. Many lawyers are reluctant to take an MBA for fear that it could damage their career prospects by putting a question mark next to their commitment to law. “This is particularly true for attorneys in large law firms where competition is fierce and a lack of focus can prove very costly in terms of compensation and career progression. In my case, taking that risk paid off,” says Andrade. With the vast majority of students taking MBA courses en route to a career in business, lawyers hoping to use the course to add to their legal capabilities will have to be ready to defend their decision to future employers. “When you incur expenses training someone up you want to know they are committed and won’t want do something else down the line,” says Pacheco. “It’s a question I have to ask.”

However, despite the rarity of finding an MBA-qualified lawyer and the challenges that acquiring the qualification involves, the tide may be starting to turn in favour of the qualification. France says MBAs are far more popular among practising lawyers than they were 10 years ago as a result of the global recession that began in 2008, and in the past few years MBAs have become the most popular postgraduate degrees in the US. Specific pressures on Latin America’s legal market could provide a similar impetus for Latin American lawyers. For them, isolated from economic studies since their teens, an MBA is a route towards complementing their legal capabilities with a business-focused mindset that they would otherwise find difficult to develop. As such, Franco is confident that the status quo of lawyers maintaining tunnel vision on their legal profession is changing: “As a direct consequence of the increased competition in the legal marketplace, my understanding, and hope, is that we will begin seeing a higher number of external lawyers proudly exhibiting their MBA certifications across Latin America.”​

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