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Systems With Room for Hunches: Celanese
When employees walk into Celanese Corporation's headquarters in Dallas, they see documents wrapped up in locks and chains. They are also reminded to "keep our secrets our secrets." The evocative image and catchy slogan are emblazoned on a poster touting "IProtect," a campaign to teach Celanese employees about safeguarding intellectual property. The same polished marketing campaign pops up on computer screensavers. It's even on the coasters on coffee tables.
A framed version of the poster also hangs above the desk of Gjon Nivica Jr., who took over as the chemical company's GC in 2009 as part of a shake-up of the legal department. Nivica needs no reminder about the importance of IP, but he does like reminders about what the 34 lawyers in his global department have accomplished. Celanese lawyers, under the guidance of an in-house project manager, dreamed up nearly every aspect of the marketing campaign without the help of ad men.
The fact that the Celanese legal department created this marketing campaign isn't why Corporate Counsel named it one of the best in the country. We were more impressed by the legal team's tripling the company's patent filings, reducing litigation, and slicing 30 percent from the outside counsel budget. But that marketing campaign told us something, too: These lawyers are full-service providers.
Nivica has been crucial to the department's success. The previous general counsel had more of a shoot-from-the-hip management style, says Joe Fox, Celanese's vice president of employment law since 2006. Many people in the department, including Fox, prefer the more proactive and organized approach they find today. Several new processes have been put in place to bring legal issues bubbling to the surface earlier. The department's early case assessment allowed Celanese to settle 13 disputes internally in 2011 and drive down legal costs. And Celanese employees receive regular training on how to spot and report dubious conduct.
The initiatives have bolstered the legal department's credibility within the company. Thanks to widely distributed and user-friendly internal publications that the department produced about daunting legal topics, employees on the ground are increasingly using hotlines to report potential wrongdoing. And higher-ups are approaching in-house lawyers earlier and more often with news of potential disputes.
The department accomplished all this partly through skillful use of Six Sigma, the process-driven management strategy. Decisions once made with hunches and guesses, like what outside law firm to hire or whether to settle a contract dispute, are now made with formulas. The approach makes sense at a company full of scientists and engineers. As Fox puts it, "If you don't have a process for making acetic acid, you're going to end up with spaghetti gravy."
Celanese lawyers balance Six Sigma with other approaches to decision making, however. Process, they say, is just the foundation. When hiring outside law firms or deciding whether it's wise to expand into a developing country, they have been known to break with their own processes and follow their instincts. And they take on unconventional tasks, like IProtect, that emphasize creativity and interpersonal skills rather than rote process. Processes are "just a tool for continuously improving the services we offer," says Nivica. "It's a way of institutionalizing the more profound reforms we are trying to push through."
Nivica came to Celanese from Honeywell International Inc., where he served as general counsel of its transportation systems business. He made several key hires in his first few months on the job, including deputy general counsel Ben Clark (another Honeywell alum) and chief IP counsel Jaimes Sher (formerly of Exxon Mobil Corporation). About half the lawyers currently at Celanese came aboard during that time.
The Celanese lawyers that predate Nivica praise him for helping make the department more proactive. His predecessors too often found themselves hastily and aggressively trying to catch up with a crisis, they say. "We had a culture here of management saying, 'Let's sue!' and the general counsel saying, 'Go for it!' " says Fox. That led to what he calls some occasional "oops moments."
The legal department now thinks more long-term. Employees in the United States are regularly trained in employment law issues. A campaign called "Speak up!" encourages employees to immediately report workplace concerns. Potential legal issues come to Fox's attention earlier now, he says.
Under Nivica, Fox says, he's been pushed to help develop procedures and checklists for tasks he's been doing throughout his career, like negotiating with labor unions. It can be frustrating at first to have to slow down and explain one's actions, he says, but the new processes have paid off in increased organization and efficiency. "Nobody likes to be forced into a process. But it really has had a huge benefit," he says. "After a while, it becomes like muscle memory. You don't think about it."
It's hard to argue with the results. When Fox joined the company, it was mired in 18 lawsuits with employees, including three class actions. Since 2009, just two employees have brought suit against the company, he says, thanks to the new initiatives.
A similar emphasis on process has been crucial to Celanese's IP boom. After the company tripled its patent budget, Sher, Celanese's chief IP counsel, adopted an accounting system that explains where the money goes. Recognizing that innovation can be found, and squandered, at all levels of the company, Sher trained thousands of employees on patents, trademarks, and trade secrets. He also helped create committees that bring together lawyers and employees from the business side to discuss new inventions: "We're trying to get innovation bubbling to the surface."
It seems to be working. A few years ago, Celanese filed a relatively small number of patent applications for a chemical company of its size. By 2011, the number of filings had more than tripled. Many of those patent filings relate to ethanol, a crucial new growth area for the company.
Celanese also introduced structure to the sometimes murky process of assessing outside law firms. A committee of Celanese lawyers grades firms in several different categories, like raw intellect and experience. Rather than grading on a sliding scale of 1 to 10, they force themselves to take hard stances on whether firms are poor, average, or exemplary in a certain category. Law firm hiring "used to be ad hoc," says Jeanne Walker, an associate general counsel who oversees litigation. "Now it's a robust process."
The department has also put in place a step-by-step approach to resolving litigationan area where it used to be more inclined to follow hunches, not patterns. Celanese lawyers meet regularly with business-side executives to discuss potential disputes with customers or partners. The program has helped bring potential lawsuits to the attention of the law department early on. A minidiscovery process is conducted in-house, assisted by a strong internal forensics department. Sometimes Celanese says it has no choice but to aggressively pursue litigation. But other times, armed with knowledge about the dispute, it can work out a resolution and head off costly court battles. Several disputes were resolved this way last year, says Walker. "We've tried to change the culture internally," she says. "If something is brewing, we want to know about it."
Business executives can sometimes be reluctant to approach in-house lawyers about potential issues with one of the deals, Walker says. But the process of approaching the law department early is gradually catching on, she says. "If you can point to positive examples where early case assessment has worked in the past, that makes people more willing to come to you earlier in the future," she says. Thanks in part to these processes of assessing firms and monitoring disputes, Celanese's outside litigation costs have decreased by more than 30 percent since 2009, if you factor out a recent uptick in patent filing costs.
All these new process-based initiatives have won the department respect from the business side. "We're a data-driven company," says Steven Sterin, Celanese's CFO. "It's always been part of the culture. . . . But [Nivica] has now deeply ingrained that trend in the legal department. That certainly helps them have credibility."
The legal department isn't imprisoned by a system, however. For instance, when assessing outside counsel, Celanese sometimes dispenses with its formula. Nivica has been known to pass on the firm with the highest score if his instincts tell him that another one is better suited for a case or deal, he says.
The same approach can apply to evaluating investments. Deputy general counsel Ben Clark is tasked with assessing the geopolitical risks Celanese faces when investing in developing countries. Clark created a formula that takes into account factors as disparate as a country's credit-default swaps, IP law system, and history of civil unrest. Relying on his formula and data from private research firms, Clark found that Celanese could open a plant in a Middle Eastern country that faced political unrest last year. But he urged Celanese to hold off. He was worried about employee safety, which is built into the equation, but can also trump the numbers. Subsequent events have made Clark and his company very glad they followed his gut.
Nivica similarly pushes aside a by-the-numbers approach when hiring his staff. Because he places a premium on interpersonal skills, he says he won't hire people who lack them. And he values other qualities that can be hard to measure, like creativity, because his staff takes on unconventional projects. IProtect would have flopped, he says, without imagination and smarts to guide it.
The most visible of the creative projects has been the revamping of Celanese's code of conduct. A few years ago, the policy was a booklet of small text. Eyes tended to glaze over when they read it, says Celanese chief compliance officer Gary Rowen.
Celanese's compliance lawyers decided to modernize their approach. Instead of listing rules and regulations, they made a magazine-like document full of glossy images, lists of "dos and don'ts," and intriguing hypos. For instance, a hypothetical Celanese employee asks: "A manager for a customer that is a state-owned business is traveling to the U.S. for meetings. Can we take the manager on a sightseeing trip to New Orleans?" The guide provides short responses; in this case: "No. You are prohibited from paying for travel for government officials unless it is related to the promotion, demonstration, or explanation of the company or its products or services or for executing or performing a contract."
Celanese execs rave about the new content. "I've seen legal departments put out the same type of content," says Sterin. But the reception, he notes, was quite different. "The organization basically blew it off because it was too full of legalese." The Celanese lawyers, on the other hand, "put the user in mind," says the CFO. "It's not just a pretty document. It's changed the way we think about running the business."
Following up on the success of the conduct guide, Celanese lawyers created sleek and colorful booklets about fair competition and fighting corruption. As part of what Nivica calls "an internal branding effort," the same logos, layouts, and color schemes appear in all three publications. Few departments seize the opportunity to create brands for preventive law and compliance products, Nivica says: "The idea is to capture hearts and minds and make something memorable. It can't read like a warranty disclaimer."
Celanese also emphasizes interpersonal skills when interacting with foreign workers. When Celanese lawyers recently trained Chinese employees on ethics, they let Chinese managers do most of the talking. Peter Neumann, Celanese's deputy general counsel for Asia, explained to his cohorts back in Dallas that because hierarchy is deeply ingrained in the Chinese workplace, employees are more likely to take seriously information coming from their direct supervisors.
Cultural differences also prompted Celanese to modify "Speak up!," the campaign for reporting workplace violations, when it rolled out the campaign at its offices in Budapest. Many Europeans dislike the idea of anonymous whistle-blowing. It conjures painful memories of World War IIera and Communist-era blacklists. So the company scrapped an ominous black background on posters ("We weren't trying to make a political statement," says Rowen, "but we were told it looked like something the Communists would have made"). And when training European employees, Celanese's deputy general counsel for Europe, Martin Fischer, explained that communicating with supervisors doesn't have to mean ratting anyone out.
It's this sort of dexterity that has helped Celanese's legal department win respect from all levels of the company. Whether they are working on a court case, closing a deal, or training employees, Celanese's ambitious lawyers skillfully combine a process-driven approach with creativity and imagination.
Deputy general counsel Marilyn Moore Basso, a nine-year department veteran, credits Nivica with bringing rigor to their work. "If you don't have someone championing process, it can fall by the wayside," she says. But she doesn't stop there. "You have to be flexible," she adds. "We're not slaves to the process."