How to restructure on a global level

Melanie Margolin leveraged her litigation experience to transform the global litigation strategy at Cummins. Now that she’s taken over the company’s largest business unit, she’s reorganizing her practice

In the early 2000s, Cummins grew more rapidly than anyone could have predicted. Already a successful Indiana-based designer, manufacturer, and distributor of engines, filtration, and power generation products, the company hit a period of growth unprecedented until that point. This culminated in operations on six continents and $20 billion in global revenue in 2014, but it also presented challenges for Melanie Margolin when she assumed responsibility for the company’s global litigation function.

The Impetus

Cummins’s growth in revenue and operations increased its exposure to risk and the amount of associated litigation activities. Until then, its litigation management strategy had involved a mix of in-house and outsourced attorneys in regions around the world. However, with the new scope and volume of business, that process created a lack of consistency in the legal department’s processes, strategies, and outcomes.

Additionally, similar risk management matters and lawsuits could have very different results depending on their location. Whereas a party might settle based on a particular assessment of the facts, another could be involved in years-long litigation before resolving based on completely different analysis of the same set of details.

“Our original litigation management strategy was appropriate and highly effective when it was implemented, but we had outgrown it,” Margolin says. “We had also accrued a much larger portfolio than we needed to have. It was essential to look at all of our issues around the globe from a holistic perspective and find more cohesive, consistent approaches, reduce our risk exposure, and add value by being strategic with the business stakeholders from the very beginning of every matter or risk.”

The Plan

Cummins is a strong believer in Six Sigma, a data-driven approach to eliminating defects. Margolin undertook extensive research and interviewed more than fifty internal leaders to gain insights into past corporate risks and litigation, how those matters were approached, and what improvements those leaders believed were necessary.

She also met with heads of litigation at other companies in similar industries. The legal team then created benchmarks that clarified the range of potential strategic options.

One of the problems revealed by this research came from Cummins’s attorneys. The legal department felt that business leaders were not including them early enough in addressing issues. In many instances, they said they were not even aware of risks until it was too late to make timely, strategic decisions.

Margolin also asked leaders details such as their internal business structures, how much they relied on outside counsel, and how they balanced their business objectives with risk and regulatory compliance.

“These were all extremely productive exercises,” she says. “They helped educate us on what was working and what wasn’t. That helped determine which alternative approaches were best suited to our business and to our culture.”

The Results

All of these perspectives were taken into account when Margolin crafted the company’s new global litigation strategy.

Under that strategy, a member of the global litigation team is assigned to work with regional in-house counsel every time a new issue faces the legal department. The global team has access to a single catalog of past and present matters, which allows them to implement strategies that have proven successful. This helps them pool resources and coordinate activities for similar actions happening in different parts of the world.

In addition to creating a more cohesive approach, this strategy has produced measurable results. Material litigation reported to the Cummins board has decreased; the number of claims and amount of reserves have been reduced by 30 percent in the first two years; and there have been corresponding savings on expenses for outside counsel.

The new, holistic perspective has enabled the legal department to better define and assess potential risk and reduce the company’s long-term exposure. “We can do risk assessments before litigation happens and make resources available sooner,” Margolin says. “We get our business clients involved right from the start and set expectations that can be used as a guide by all stakeholders. Ultimately, all of those steps help us add value because we can act more efficiently and strategically much sooner for every matter in every location.”

In 2015, Margolin left the global litigation team and became assistant general counsel of the engine business unit
and deputy general counsel for the Americas. In these positions, she manages all regional attorneys in South and Central America.

The experience she brings from her time streamlining the international process—in addition to mentorship she received from general counsel Sharon Burner and engine business unit president Dave Crompton—taught her valuable lessons about what it means to provide truly effective in-house counsel.

“I’ve seen how important it is to align my efforts with a business unit’s objectives,” she says. “That’s very different from litigation as outside counsel, which can be much more locked into the specific letter of the law. My exposure to the intricacies of customer interactions and what’s required to manage those relationships have made me wish I better understood what was really going on behind the curtain for clients when I was in private practice.”