August 18, 2017
Dr. Friederike Rotsch of Merck KGaA on Creating a Single Legal Team
Dr. Friederike Rotsch is Group General Counsel of Merck KGaA, a role she has held since 2014. Responsible for legal, compliance, trademarks and data privacy, she is also a member of Merck's Management Committee. She joined Merck in 2005 as Corporate Counsel and has headed Corporate Legal Services and Group Internal Auditing.
Currently the legal department houses about 180 people; the other hundred members of Rotsch's staff work in compliance, trademarks and data privacy. The department's structure mirrors that of the company's three main business lines in healthcare, life sciences, and performance materials.
"The size of the department relates to the amount of risk, so the greatest number work in healthcare," she explains. All legal and compliance functions report to Rotsch, a result of a major corporate reorganization undertaken by new leadership in 2011.
When Rotsch assumed her current role, she commenced a major initiative to create a single legal team, free from silos. Under the tagline "One Team, One Mission, One Voice," Rotsch developed the team to work as one team that has a common mission and speaks with one voice.
"My objective was to bring colleagues together, to work together more closely, so that in the end they are able to better serve the client," she says. "It's also more fun now for colleagues to work as part of one team. They still have their reporting lines, but the mindset has changed dramatically. Now it is clear that everyone is responsible for the success of the entire team."
Client feedback has been positive as well. "Clients like having someone they can turn to with questions and get legal advice," Rotsch says. "Sometimes in the past they were a little bit lost, but now they know who to talk to."
Rotsch tackled the necessary change management on two fronts: by establishing rules of collaboration, guided by a new mission statement and a 10-point team charter; and by outlining roles and responsibilities, followed by new rules and processes. But those steps alone would not have done the trick, she says.
"We started a mindset initiative that helped colleagues understand why they should work together and how to think about it in a new way," she says. Key to that was bringing people together physically; Rotsch initiated an annual global legal and compliance summit that includes about 170 professionals.
While Merck does not have a legal operations function, Rotsch is considering instituting one. She notes that the role is not common in Germany. The company's outside legal spend is relatively lean, and Merck does not have much litigation, she says. "We look to provide legal advice internally. We go outside for reasons of expertise or capacity." Rather than work with a formal panel of firms, external counsel are selected on the basis of successful engagements in the past, special challenges and expertise. Rotsch strives to negotiate favorable fees with outside firms, and estimates that 60 percent of the work is still done on an hourly basis while 40 percent is under fixed fees, which often feature rebates.
"It is very hard to assess the effort required for major transactions such as mergers and acquisitions," she says. "I still feel that the hourly rate is a fair method for both sides."
The most pressing issues facing Merck's healthcare business are related to launching new products. Rotsch notes that there had been no successful new oncology product approved and launched for about 10 years; therefore, internal legal and compliance professionals lack experience in product launches. Looking forward with optimism, Rotsch has hired new colleagues to bring that experience and share it with others in the department through regional meetings. "The demand for our legal and compliance advice in this area is very high, which is a nice problem to have," she says.
The same holds true for the other businesses, Life Science and Performance Materials. New technologies such as gene editing pose not only new legal challenges but require the lawyers to also look at the ethical dimension. Lawyers and compliance officers are expected to take leadership in not only applying the law but recognizing trends and understanding future ethical principles.
Data privacy is also an enormous concern. Rotsch has her eye on a new European law that must be implemented by May 2018, challenging Merck and other companies to map and identify all data processing activity and ensure legal compliance with the new regulations. "The business must be involved and understand how important it is for us to be compliant," she says. "Fortunately, we do not have that many gaps." She notes that many of the rising trends in healthcare, such as personalized medicine, also raise data privacy challenges.
Prior to joining Merck, Rotsch worked for several years as an attorney at law for an international law firm. She enjoys in-house work because she likes being privy to the big picture about why decisions are made the way they are, and the opportunity to influence those decisions.
"People see me not just as a lawyer but as a true partner to the business," she says. "What I bring to the table is good judgement and a legal gut feel."
Key strategic initiatives for the coming year are built around digitization and data within the legal department. Rotsch plans to look at tools to make the work more efficient and effective, and has brought a new colleague onboard to spearhead that effort.
"Digitization has many implications and brings many challenges for the coming year," she says. One way the department is trying to anticipate and get ahead of those challenges is to create a digital law map, an IT tool that provides an overview of the legal topics the company is facing and cross-reference those with the colleagues who have expertise in those areas.
In-house lawyers hoping to achieve a future CLO role are well-served by being flexible about the path their careers take, Rotsch advises, and find the moves that aid the development of business knowledge. "Now it's not enough to just manage a legal department," she says. "You have to have vision, to identify trends and challenges early on and to guide the legal department in the right direction."