Pharma challenge: don't let change drain your value
This article was originally published in Scrip
The pharmaceutical sector is without doubt one of the fastest paced industries in the world. It is also remarkable in its ability to manage frequent and often rapid regeneration and strategic changes. This places those at the helm in the difficult but exciting position of being able to initiate and drive complex strategic changes on a regular basis. Change management expert David Ferrabee explores how to avoid the pitfalls and retain value while effecting these maneuvers.
David Ferrabee, director of change management consultancy Able and How
The relentless search for new drugs or the preparation for the next acquisition can often result in one key omission: in the haste to push through M&A transactions or drive R&D processes many pharmaceutical companies fail to adequately develop and communicate the vision for their change. While to some this may not appear to be a major priority, there is a demonstrated likelihood that this will seriously undercut the potential benefits of the change program.
In our experience, a key barrier to growth for many pharmaceutical businesses is a limited awareness and understanding of the impact of poorly communicated strategic priorities, compounded by missed opportunities in the delivery of change programs. In real terms, the cost of this can be high, not only financially but in business continuity, lost opportunity, unexploited resources and diminished morale. All of which can drain substantial value out of strategic change programs.
Currently about 30% of change projects meet their key performance indicators, according to various sources of research. Little wonder then that change management as we know it is often viewed with some scepticism and sometimes even blamed for poor results.
Having worked with many big multinational pharmaceutical organizations on their changes, we have gained valuable insight into the complexity of this dynamic sector as it continually restructures in a bid to adapt to its new, faster paced cycles. It is these insights that have enabled us to understand the key areas where change programs in pharmaceutical businesses are at risk of failing.
Ultimately we know that change can only be effectively delivered when the gap between the aspirations of executives and those who are impacted by the change is closed.
The experience of one multinational
This is something that a young CEO of a multinational pharmaceutical company understood all too well when he engaged us in creating a greater sense of urgency in his organization. As the business went through an intense period of growth and of mergers and acquisitions, he knew that they needed to improve change capability across the business.
One of their key business strategies focused on the need to reduce certain key costs – not just at a 'facilities and administration' level, but in production cycles, packaging, marketing, through to R&D.
Positioned between these specific initiatives and the overall business, we needed to demonstrate the value of accelerating the change process by reducing the time it takes to embed the changes, and minimising the disruption to the organization's overall operations.
To do this it was necessary to determine exactly who would be impacted by the numerous changes and to focus the sense of urgency and help them understand and act on the need for change. That made it possible to rapidly address the many areas of resistance which emerged, and to speed up adoption.
A recurring issue, faced here and elsewhere, is when highly polished repeatable processes, which large industrial businesses hone over thousands of hours of continuous improvement, get in the way. The natural inclination to fall back on these can impede the successful implementation and execution of change. It is often this habit of honing processes, in the absence of a clear over-arching vision, which silently erodes the value sought in change.
Likewise, as the level of mergers and acquisitions accelerated there were many opportunities for cultural misunderstandings. Counterintuitively, this was particularly noticeable when national or linguistic similarities gave the false illusion of greater commonality. However, the organizational cultures were very different, driving a need to proactively manage the integration of systems, processes and people in the two different organizations. Actively managing cultural integration helps to bring new facilities and businesses online faster. We did this by focusing them on 'change leadership' and getting the new teams quickly up to speed with the business culture.
From a strategic perspective this meant those who were going to be impacted by the change were fully briefed and risks and issues were proactively discussed and mitigated. It is important to make sure people don't just understand the change, but that they embrace it, rather than resist it. Achieving this reduces the risk of value leaking and frees up vital resources to bring forward the return on investment.
Align leaders to maintain momentum
In all major change programs there is always the danger that change management is viewed as something that can be delegated. The delegation of responsibility can result in leaders distancing themselves from the challenge of implementing the strategic priorities they once championed. And that allows the initiatives to fail. In this instance, however, the change leadership started with the CEO, who seized the opportunity to demonstrate real interest in the management of change, and drew attention to the need for successful implementation.
The operational teams and LEAN process managers were the next to follow. We supported them to engage the organization in the process and drive that urgent view on how to accelerate business results by driving through the change.
How ready is your organization for change?
These are examples of some of the questions we ask companies when helping them assess the kind of change capabilities they need.
Change Capability Check List
Does the organization carefully allocate resources to change programs and successfully meet their pre-determined deadlines?
Is the organization readily able to focus on root causes of the need for change and recognize the interdependencies within and outside organizational boundaries?
Are employees free to actively participate in change and voice their concerns if appropriate?
Can the business support innovation and encourage innovative activity?
Are senior leaders equipped and able to show people the way to meet collective goals in change programs?
Are there processes in place to support change programs, e.g. a change team, change plans, network of change champions, etc.?
In change programs can middle managers make the link between the vision of senior leaders and the practicalities of the rest of the organization?
Does the business communicate well up, down and across boundaries, as well as with external stakeholders?
If more than half of your answers are not in the 'yes' column, then work is required to prepare your organization for change. Managing change is a process that requires different capabilities, systems and processes from those used daily in most operations. If your organization doesn't have that ready 'change capability' then you are likely losing significant value that need not be lost.
Focus on implementation
In conclusion, the success of organizational change – supporting the delivery of business strategies – in the pharmaceutical sector is driven by a common and effective organizational change capability.
Today's evolving pharmaceutical landscape requires leaders to view change management as key to capturing value. A clear view of the importance of operational change capability is required. The emphasis needs to shift from initiation to implementation, and leaders must avoid the temptation to delegate the responsibility for delivering value out of change. As a result, the evolving business environment means that change management is an area requiring considerable leadership attention and organizational capability.
In this context it is possible to see change management as vital to effective strategic implementation. It ensures that value is captured, and supported by institutionalised change leadership. The pharmaceutical businesses we have worked with have built and cemented a strong position in a shifting market, and continue to grow and thrive.
As organizations increasingly need to invest more energy and resources into new strategic priorities, they need to develop, communicate and execute their change programs effectively, or risk losing the strategic value they are seeking.
David Ferrabee is Director of change management consultancy Able and How. He works with clients on issues ranging from organizational change delivery and change strategy through to leadership development and stakeholder engagement. His clients are usually looking to gain competitive advantage through change. David has worked closely with many leading international businesses, including BP, GE, HSBC, Rio Tinto, Santander, Sony Ericsson, Shell and T-Mobile. He has consulted in the global pharmaceutical industry for nearly 20 years.