On Friday, I had the pleasure of speaking with another of the panelists for Wednesday’s General Counsel Panel here at the Legal Marketing Association’s Annual Conference. Joseph Otterstetter is the Managing Counsel and Associate General Counsel with 3M. The position was a new one created two and a half years ago, with Otterstetter acting as a type of “Chief of Staff” for the legal department. He overseas a range of areas, including budget, human resources, and operations, and works with the General Counsel and leadership to run the department.
I started off by observing that in Otterstetter’s LinkedIn biography, he indicates that he was appointed to lead the efforts to improve efficiency and effectiveness of 3M legal affairs. I asked him to comment on how he’s been focused on accomplishing that.
Primarily, he answered, it’s been focused around three things.
- Working with his colleagues on the convergence process, which has led them to reduced their outside counsel by 75%.
- Related to that, there’s been a big push for using non-time-based bees for outside lawyers, and that’s now the majority of the work that they do.
- They’re also doing strategic insourcing – moving more of the work that they’ve typically done outside in the past in-house.
Otterstetter added that there are other areas that he’s been involved in as well, such as shifting work around, using paralegals better, utilizing technology, insourcing and offshoring, and more. But the three areas above have been his primary focus.
It would seem that these efforts, particularly insourcing and convergence, would have an impact on the company’s relationships with their outside counsel. I asked Otterstetter to comment on that.
He felt that insourcing hasn’t had as much of an impact as convergence, but said that it’s actually been a good thing for everyone. With fewer firms, it’s been easier to develop relationships with outside counsel – they now have 50 firms instead of 200 firms to work with. As a result, they’re able to get to know them better, and the firms are able to get to know 3M better as well.
They have what they call their “Preferred Counsel Network,” and they work hard to keep all of their legal work “in the family,” as Otterstetter says. 90% of their legal work goes to their preferred counsel. As a result, spending is down, and there is less litigation, because they’re working more collaboratively on solving problems.
He offered a great example of a recent project they worked on – one of his colleagues had the idea to bring together some of their law firms and people within the department for a problem solving meeting. They had 2 days together, resulting in collaborative sessions that were positive and dynamic. It was a pleasant surprise for Otterstetter and those involved.
I mentioned that there’s been a lot of discussion recently around metrics, and that I would assume that they’re quite essential for him in his role, with the focus on efficiency. I asked Otterstetter to comment on which metrics he’s focused on in terms of his outside counsel.
He answered that they’ve done two things really well when it comes to metrics, and the first of these is starting slow in order to go fast later. They thought about metrics critically in the beginning and where they wanted to be, and benchmarked with about 20 companies and firms.
Important metrics that they look at include:
- Percentage of outside spend versus inside spend: when Otterstetter joined 3M, it was approximately 2/3 outside versus 1/3 inside, and they wanted the inverse. They’re not there yet but they’ve moved the needle to about 50/50.
- Percentage of spend within their preferred network, which he’d mentioned earlier (90%).
- Percentage of work that is done on an AFA basis (or CFA, as 3M refers to them in-house).
- Number of days matters are open: this is more important for non-AFA matters, because obviously cycle time is a key driver of costs. This can prove challenging because some matters are open for a long time – in some cases, there are matters that they wan tot keep open, or “sleeping dogs” that you don’t want to kick. Otterstetter observed that this is more of a secondary metric, while the first three are really the most important ones that they look at.
Based on his comments, I had a feeling I knew how the answer to the next question would go, so I said to Otterstetter that a GC I’d recently spoken with had said that until now, the purchasing of legal services has been relationships- and reputation-based, but there’s no need for that anymore because of metrics. I asked whether he would agree with that.
He said that for them, it’s never been about metrics alone. Costs can vary based on value delivered and scope, and while metrics are important, it’s far more important to have a firm that they trust.
Otterstetter then added something that we hear more and more from general counsel these days, that outside counsel are becoming an extension of their law department. He said that while they’re not there yet at 3M, he feels they’re on a really good path, and they’re not far off.
Before we wrapped up, I asked if he had any closing thoughts, and Otterstetter observed that the questions we’d covered were those that everyone is discussing. He added that legal marketers are in a challenging position these days, stuck between law firm partners and general counsel who are driving for efficiency, trying to find a balance and set their firms apart. He feels a lot of sympathy for the position that they’re in, and looks forward to attending many of the sessions alongside them during the conference.
A big thank you to Joe Otterstetter for his comments – I look forward to his session on Wednesday and hearing what he has to say with his fellow panelists!