What's Eating Big Pharma Innovators?

By Matt Gurin

Congratulations! You’ve been promoted. You’re a global leader in the new R&D organization. This is exciting since you’ve been sweating the outcome of the long-impending transformation for over a year. The good news is that you will lead a global team spanning three continents. The bad news is that your drug development function will be spread across four global centers of excellence, and some of your colleagues will lose their jobs or be transferred.

You begin to formulate an inaugural summit in Singapore to launch the team and determine your priorities. Then the other shoe drops: Travel budgets were slashed as part of reorg, and the new global teams are expected to operate virtually. You take a deep breath. And then you ask yourself, “How can I drive a faster, cheaper, more innovative approach to drug development — asking people to take risks and behave in new ways — if I can’t meet with my team to build the relationships and trust?”

This common scenario is just one example of the challenges R&D leaders face as they try to reposition the industry as a beacon of growth. In fact, at the very time that Big Pharma innovation is stagnant, its scientists report record-high levels of demotivation. According to our research, while traditional management approaches are mostly ineffective in motivating bench scientists or driving innovation, a combination of evolving leadership strategies and appropriate incentives is showing promise.

In a recent Hay Group study of more than 800 R&D professionals in Big Pharma, 56% of scientists described their working environment as “demotivating” and another 15% as only “tolerable.” These scores are worse than any other function in Big Pharma. In fact, Big Pharma R&D’s working environment — what we call organizational climate, or what it’s like to work for a specific boss — is lower than the R&D functions of any sector in our database. And this was the case even before the recession. So how can organizations change the tide?

Chasing big, crazy ideas
According to Naveed Shams, M.D., Ph.D., VP and head of Global Clinical Development and Medical Affairs for ophthalmic pharmaceutical manufacturer Santen, Inc., Big Pharma wants to innovate, but its size and complexity are roadblocks. “Once you are a certain size, with a certain amount of products and revenue, and you have shareholders, you become very territorial,” he says. “You spend most of your energy preventing others from invading your territory.” In such an environment, companies make sensible investments, such as tweaking a blockbuster drug that’s threatened by a generic. But, says Shams, that’s not innovation. “You can’t make a good case for chasing after a big crazy idea that may pay off,” he says. Between the CEO and the bench scientist, there are 13 or 14 layers at a typical Big Pharma company, according to Shams. “If an idea gets stuck in one of these layers, that’s the end of it. This is the opposite of an entrepreneurial company.”

Another feature of the innovation roadblock, according to Matt Daniels, an HR leader at Merck, is the need for leaders to educate their R&D employees about the new needs of the business. “Given the heightened focus on return on investment for R&D spending and reorganization activities, many leaders have not had the capacity to sufficiently educate their scientists about the changing needs of the business. As the pressure on pharmaceutical R&D organizations continues, it will be very important for leaders and managers to ensure that scientists know how their work aligns with both the scientific and business objectives of the organization.”

According to Shams, not enough R&D leaders tie meaningful rewards to innovation. “You say, ‘Okay, you are doing routine everyday stuff, but you have a crazy idea.’ So, offer a big reward and say, ‘Here is a time frame — 5 to 10 years, and here is a clear goal with well-defined criteria.’ That, he says, will encourage entrepreneurship and innovation.

In a 2003 interview in Strategy & Leadership, University of Pennsylvania’s noted systems thinker Russell Ackoff echoed Shams’ thoughts: “Most managers currently manage the actions of their organizations’ parts taken separately,” he said. “This is based on the false assumption that improving the performance of the parts separately necessarily improves the performance of the whole. That is a false premise. In fact, you can destroy a corporation by improving its individual parts. Try putting a Rolls Royce engine in a Hyundai.”

Making a business case to scientists
Another surprising finding from the Hay Group database: While conventional wisdom suggests that scientists are loners, they describe themselves as professionals who seek collaboration and acceptance from their peers. “Scientists will be more successful if they are able to collaborate well with others — both internally and externally,” says Daniels. “The next great idea can come from many different sources, so it is important that scientists have an open mind and leverage learnings from internal peers and external sources.”

This resonates with Hay Group research that suggests the most innovative scientists are the ones with the most productive multidisciplinary networks, not necessarily the ones with the greatest ideas. The reality is that scientists are different from most other groups of knowledge workers.

While this may not be popular in the short term, you should start by letting up — just a bit — on efficiency. Sure, it matters, but you also need to invest in enabling relationships and networks. Enable your scientists to share knowledge with external collaborators. This may bring up questions related to intellectual property, and it may require a conversation with the legal department. But, it’s worth the time for a pharmaceutical manufacturer looking to unleash innovation. This strategy has worked in other industries and for global leaders such as Procter & Gamble and Intel.

Opening up career paths
In Hay Group surveys, fewer than half of the R&D respondents feel their performance is linked either to pay or to career advancement. Nor are they aware of the career paths that are open to them. Further, R&D professionals report issues that actively block innovation. Only 52% believe they are encouraged to take risks to increase effectiveness, despite the fact that risk-taking is a key part of innovation. Slow decision making is another obstacle to innovation. Only 48% of our R&D respondents say that “decisions are made without undue delay.”

“I worked for a major biotech company for several years,” says Shams. “When I joined, there were 4,000 employees,” and he had fairly easy access to the CEO. “When I left, it was up to 12,000, and there were three layers to go through.” During that time, he says, decision making slowed down. “The crazy ideas are not floating to the top. I say remove the layers, or create an environment where CEOs have access to the bench scientists. The top has to say, ‘I will talk to this small group of mavericks.” Whether it’s an occasional informal get-together or a regular breakfast with scientists, CEOs must empower their scientists, he says.

Again, the leading experts seem to agree with Shams. According to the Harvard Business Essentials The Innovator’s Toolkit, “Ideas are essential building blocks from which innovation and innovative technologies are made. By one estimate, it takes three thousand of them to produce a single commercial success.” So, as former chairman William McNight of noted innovator 3M said, “If you put fences around people you get sheep. Hire good people, and then leave them alone.”

Since Big Pharma companies are just that — big — what can one leader do to help foster innovation? We believe R&D leaders must address six key dimensions:

• Clarity: Is it clear what kind of innovation is expected and how that relates to the big picture? Does my team know how much innovation I would welcome and how it could improve the company?
• Flexibility: Are new ideas welcome? Do I set an example and a culture of openness to learning? Have we eliminated unnecessary red tape?
• Responsibility: Do employees have the autonomy and authority to work without interference? Is reasonable risk-taking encouraged? Am I calm and encouraging when the inevitable disappointments occur?
• Team Commitment: Do people feel they’re in it together, working for a larger purpose? Do team members collaborate well? When someone has a partly usable idea, do I encourage the team to help develop it?
• Standards: Are goals clear and specified? Are our performance standards realistic and “open-ended” enough to encourage innovation?
• Rewards: Is excellent performance recognized and rewarded? Do I recognize not only my direct reports, but also those who are a level or two lower in the organization? Do I involve my manager in recognizing my group’s innovations?

Again, congratulations on your promotion. As you approach new levels of complexity in Big Pharma and address key motivational issues in your R&D group, we’re confident that this combination of strategies and incentives can motivate scientists, drive innovation, and deliver some big, crazy ideas.

About The Author
Matt Gurin is U.S. reward practice leader for life sciences at Hay Group. He works with senior executives and leadership teams to build effective organizations by ensuring strategic alignment of core organizational processes and systems.