The following is an edited excerpt of an interview conducted by MeetTheBoss TV, featuring former Schering-Plough CEO Fred Hassan. Go to MeetTheBoss.tv to watch the entire interview or LifeScienceLeader.com to read the entire transcript.
MeetTheBoss TV: When you first took over at Schering-Plough in 2003, you inherited a company that was being investigated by both the FDA and SEC for accounting irregularities. From day one, what was your biggest challenge?
Hassan: I’ve faced a lot of challenges in my career, but this one was the biggest I’d ever seen. There were several things that needed to be done right away, but we couldn’t do them in sequence; they had to be done at the same time.
There were the immediate issues of the regulatory and legal challenges. But there was also a financial challenge in the sense that the major businesses were going down. And part of that financial challenge was something I did not know about before I got there — a cash flow challenge. That is something which is not seen very often in pharmaceutical companies. But this company was looking at a big cash burn, and something had to be done about it very quickly.
MeetTheBoss TV: How did you overcome that challenge?
Hassan: I set up a road map as quickly as I could. I had to move forward with imperfect data, and that’s where experience and insight helps. I anchored it with the board. I anchored it with the shareholders at our general (annual) meeting, which occurred a few days after I came. And I anchored it with the entire company in a global town hall.
All this happened in the first week I got there. So, from top to bottom, people understood the road map. It was a very simple road map of five different phases. It also showed that we had a problem; we had to do a lot of work, but we had to break the problem down into bite-size pieces that we could deal with.
MeetTheBoss TV: What leadership qualities enable you to lead teams through adversity?
Hassan: Perhaps the biggest quality I try to work on is a sense of humility, because if one keeps balance in one’s life and a sense of humility, then one becomes a better listener. So it always begins with a sense of humility. There is also a sense of urgency. Once you’ve built up a sense of direction in terms of where you’re going, you have to build up a sense of urgency. And if you can show that you can generate energy inside yourself and generate energy around you, the whole system starts to generate energy around that sense of direction, and you start doing some very purposeful things. Bringing about change is not easy, but once it starts to happen, it’s a very good feeling because the whole organization comes on board, and people start to believe that they can make a difference, and then change does happen.
MeetTheBoss TV: You once said in an interview, “No restructuring or strategy will succeed long term unless you get control of your top line.” How did you successfully gain control of that top line at Schering-Plough? You’ve mentioned there was a cash flow problem.
Hassan: This is a very common problem with people who come in and try to make big moves in a hurry. It’s relatively easy to get the bottom line to go up by slashing costs. It is very difficult to make a good customer experience so you can grow the top line.
If you’re growing 0% or 1%, and your cost structure is facing an inflation of 3% or 4%, you might be able to, in the short term, keep your bottom line okay by reducing costs. But, long term, you have to beat inflation when it comes to the top-line growth if you’re going to make the business prosper. So, wherever I’ve gone, I’ve always worked on the cost structure. But, I’ve simultaneously worked on building the top line — on making good advances with the customer experience. If one can do that well, even as one goes through adversity, then one emerges a lot stronger after the difficult times.
MeetTheBoss TV: There must have been some forms of internal conflict when you first took over. Can you give me an example of where you won a conflict for the best of the company?
Hassan: I’ve come into many new situations, including Schering-Plough, where I’ve run into some resistance. There are people who immediately see you as somebody who might not be very good for their own careers. Some of them may become active resisters. However, those people are easier to deal with than the passive resisters. These are the ones who say they’re on your side, but they’re actually not, and you don’t know about them until a lot later.
When I try to develop a new program — a sense of change — I try to make a judgment about those people who are the fence-sitters, those who are the passive resisters, and those who are the boosters. The boosters really make the program work a lot better. The fence-sitters you can work on. You can try to convince them. It’s those passive resisters that you have to find and ask them to make a basic judgment. Are you with or are you against the program? And if you’re not with the program, then you probably belong somewhere else. That is what I have worked on very aggressively, and in every place usually there’s been a wave of change in terms of people leaving the company within the first 18 months. But not all the people who leave the company leave in the first six months, because sometimes it takes a longer time to find out those who really don’t belong with the company in the long term.
MeetTheBoss TV: It must be very challenging to find out who those passive resisters are. Are there any telltale signs that you’ve learned over the years for identifying them?
Hassan: Usually, the way you find them is when people give you praise, you listen for signs on whether it’s real or fake praise. Another way is to find out what they are telling their people about the program. It’s my practice not to be bound by the layers in an organization. I go to level three and level four to talk with people in small groups, and if the messages they’re hearing from their supervisors are not reflecting the values I want in the new company, then I do get very concerned about those supervisors.
For example, if I say, “I want a spirit of transparency and building trust,” and the supervisor passes on a message that they want information to be hoarded in a certain department or that certain political things would happen among departments, then I would start to worry whether that supervisor has the values that I’m trying to bring into the company. And you cannot succeed in a company if your management layers are not totally in line with the values. If there’s toxicity in the system, it’s not going to work. People in management jobs have a special responsibility to show with their behavior that they are encouraging the culture you’re trying to create.
MeetTheBoss TV: You once said, “I believe that one of the most important traits in leadership is to take the time to listen and to learn.” Can you give me one example where this approach has served you well?
Hassan: I think listening and learning is so important, and it’s especially important for those who become CEOs, because CEOs are in a situation where there are not too many people who challenge them or check them, and they often end up taking up too much time talking and not enough time listening. So, I go out of my way to structure my time in a manner in which I get to listen.
I’ll give you one example. I joined a company in 1997 that was in great difficulty. There had been a merger between a Swedish company and a U.S. company, and that merger had resulted in a lot of difficulties. I was brought in as a CEO from the outside to try to make this merger work. I was in Sweden on a listening tour, and I was talking to a medical doctor who said that the major product this company was looking forward to for its salvation — for its future growth — was compromised with a company in the United States. That was the first time I heard that. Suddenly, I realized that the future growth product of this company had been compromised in a deal that had to be untangled. So, I verified the information and began the task of dealing with it by making a deal. I got the product back before it got approved by the regulatory authorities and paid a handsome price. But afterwards, the product went on to become very large in the marketplace, and the price that was paid was a lot lower than if we had let the problem fester. We probably would have had a totally different story for that company had I not been a listener at that point.
MeetTheBoss TV: What are your words of advice for anyone who’s looking for an acquisition to expand their business?
Hassan: Be very careful about a transaction, because when one does a transaction, one changes the system, and that can have unforeseen consequences. Make sure the fit with the other company is good. When I look at a situation in my industry, I look at the strategic fit first. Does it fit with the strategy my company is trying to pursue in the next phase of its development? In other words, don’t get enamored by the attraction of the object of the target company.
In a size-driven business like pharmaceuticals, you also want to make sure the size engine will be stronger as a result of this combination, so the combined sales that would be generated would be properly supported by the size engine. In too many cases in pharmaceuticals, the merger occurs, the financial community applauds, there are two or three good years of earnings increases as costs are reduced, and then the stock price starts to go down again because the R&D pipeline is not supporting the larger sales base that’s been created. That’s just short-term thinking, and it doesn’t lead to long-term shareholder value increases. So, I work very hard at the size fit.
After considering the strategy and size fit, you also need to consider the financial fit. If you go in at a price that is not right, and you overpay, then no matter how good a job you’ve done on the operational side after the merger, it takes a very long time for the shareholders to get their money out of the transaction. So, it’s very important that the financial numbers also be right. These are the three hurdles I always look at, and if a target matches those three, then I move.
MeetTheBoss TV: Have there been times when you’ve made a misjudgment, and the lessons you’ve learned helped make you a better chief executive for your next job?
Hassan: Very early in my career I got into the sunscreen business. I bought a brand called Sunbrella, which looked like a very good name, and I brought it into the business, but it turned out to be a total failure. The reason it failed is that the sunscreen business I was involved with was a dermatology-driven business, and this Sunbrella trade name and the Sunbrella approach was based on selling it on the beaches or in totally different environments. I totally missed that. The lessons I learned included: Know who you are, lead from your own strategy, and don’t try to grab something just because it looks good.
MeetTheBoss TV: As organizations get larger through acquisitions or mergers, there can be a tendency to dampen inspiration. How do you prevent that from happening?
Hassan: This is always the challenge with bigger companies. Many companies are rising stars for a long time, and ultimately they start to run into difficulties. Managing “bigness” is really a challenge, and I think it almost takes a reinvention cycle inside a company every five or six years to make it happen. Otherwise, companies drift toward complacency and sometimes even to arrogance just because they have been so successful in the past.
The other way to deal with the bigness is to create a sense of a small company and a big company. In other words, empower people in smaller groups to innovate, to drive the business forward while still taking advantage of the financial strength and the infrastructure of a larger company. That’s not easy, but that’s the job of the CEOs of larger companies.
MeetTheBoss TV: You once said, “We make it a priority to educate people on the front line about the company’s strategy. That means letting them in on what I’ve been talking about with top management.” What has been your most effective approach?
Hassan: I believe that in a large operation it’s impossible to get complete energy and alignment with everybody unless you get the energy and alignment of the frontline managers. A typical frontline manager might be supervising 7 to 12 people. If you can get them on your side and make them ambassadors of the company to the people that they supervise, then the other workers will be energized and motivated.
Consider a 50,000-employee, global company. It’s much easier to get your message to 7,000 frontline managers than to 50,000 global employees. My approach has been get to the frontline managers very early. Whether you come in as a new CEO or you have a merger and you’re just acquiring a new company, get to the frontline managers early. Get them to understand the strategy. Show them the strategy they are seeing is the same strategy that’s been shown in the boardroom. In other words, treat them as people who are part of management, and show them that you care, and show them that you expect them to lead their people to new heights. Once people are challenged and encouraged, it’s surprising how much they can do.
It’s really surprising how little gets done in terms of reaching out to the front line, and how so many chief executive officers spend time with their division heads or the next level below the division heads, but not really get to the frontline managers.
MeetTheBoss TV: It’s all well and good telling people your strategy, but how do you get it to sink in?
Hassan: First, have a simple strategy like we did at Schering-Plough. Grow the top line, grow the R&D pipeline, reduce costs, and invest wisely. It was mentioned again and again and didn’t change over the years. Basically we said, “Once the strategy is clear, execution becomes the strategy.” We repeated this in different ways through different platforms, whether it was a CEO talking with a few people, email messages coming from the CEO, or different messages being discussed at manager meetings. We just stayed the course, and as long as you don’t shift on strategy, people then start to believe it and execute on it. And in the end, execution is really what holds companies back. Strategy is not that difficult to formulate. It’s the execution that really makes a difference.
MeetTheBoss TV: How would you encourage others in your organization to communicate the vision?
Hassan: It’s both from the top and from the bottom. I expect managers to model the behaviors and the messages I pass on from my level. I also get to people at the front line with my messages and encourage them to expect their supervisors to follow a certain set of behaviors. And by doing it in that manner, it actually encourages the middle management also to get aligned with the DNA of the new company that we’re trying to form.
MeetTheBoss TV: What is the one behavior or trait that you have seen probably derail more leaders’ careers?
Hassan: In my opinion, the biggest derailer is not arrogance, but a sense of complacency that also is a form of arrogance that starts to creep in when people have been very successful, and they have risen up to a level because of certain very strong project management skills or certain quantitative skills that they might have had. And, they believe those skills are going to make them very successful once they are at a senior level. And what they start to miss is being in tune with the environment and being in tune with themselves.
So many times, people get derailed because they don’t have a good balance and a good sense of what the reality is when they face challenges. So, when hard times hit suddenly or problems hit, they are left thinking and wondering. They’re not ready to move with the speed and flexibility that hard times and adversity require. This, I think, is the biggest issue.
MeetTheBoss TV: As a leader, how do you get in tune and stay in tune with your business on a daily level? Do you have anything you do every morning to make sure you’re in tune?
Hassan: There are many different ways. Of course, one can read a lot. One can meet people in the industry. One needs to be a listener — always engaged. One approach I’ve used that works is that when a group makes a decision, it’s almost a good idea to encourage one in the group to be a naysayer or to be the devil’s advocate to show the other side of the case. So as we discuss a problem, it’s always good to look at the other side and prevent this group-think problem from creating bad decisions.
People like to be affable and agreeable with each other, and sometimes it creates a group-think problem, so I encourage one or two naysayers in the group to bring up the other side. And even in my private decision making, I have one or two confidants at the minimum who are my naysayers in terms of things I want to do. It’s very important to have balance when it comes to decision making.
MeetTheBoss TV: How would a member of your executive team describe you?
Hassan: Probably a good person to work for because if you go back to my different changes, it’s amazing how many people have followed me. They would also say I am very tough in terms of my expectations — sometimes very, very tough in terms of what I expect — but that I’m also tough on myself. I put very high standards for myself, and I work pretty hard. They would also say I am caring about people, and that I do connect on an emotional level with people, and that makes them want to root for me because if they do connect on an emotional level, they will be boosters.
MeetTheBoss TV: It’s said that making mistakes makes a successful business. What would you say is your favorite mistake?
Hassan: My favorite mistake often is not moving fast enough when I go into a new situation, and then later on regretting it. In the case of Schering-Plough, I moved faster than I normally would have because I did not move as fast as I would have wanted to in pharmacy in Upjohn in 1997. I was probably taking my time on the cultural changes and the cultural transformation.
At Schering-Plough, I didn’t lose a lot of time, even though I had imperfect information, I moved pretty fast. The key is to recognize one’s mistake and to learn from it and to get better the next time. The best learning, in my opinion, actually occurs when one makes a mistake.
MeetTheBoss TV: Can you name me one or two people in business that you’ve probably learned the most from?
Hassan: I’ve learned from a lot of people – very, very fortunate to have good mentors along the way. My style is not to have a single mentor dominate, but I’ve learned from a lot. One person I learned from a lot was a person who was formerly a schoolteacher who happened to become my boss. I was in Lincoln, Nebraska, and he used to say things to me, and then leave the points that he has made to me on little cards, which I kept, and that was a very good way to learn. So I do remember that person very well.
MeetTheBoss TV: What would you say are the principles by which you run your career?
Hassan: Treat people with respect, make people want to come to work and succeed, and make people want to see you succeed — and make sure people have fun. If people are having fun, they’re likely to succeed. If they’re not having fun, they’re probably not gonna succeed as a team.
MeetTheBoss TV: What would you say is the most important part of your job?
Hassan: The most important part of one’s job is to be a good listener, which is not very clear in any job description, is to be a good diplomat with different audiences. There are times when one has to fall backwards and give way to the other side. There are times when one needs to move forward as a persuader and get them to change their point of view, and that means dealing with external audiences on public policy matters, customers, with one’s own board, with one’s own executive management team.
Dealing with people is perhaps the most important part of any chief executive officer’s job. It’s not a very clear item in the job description, and it’s not a very clear item that gets taught in the business schools and MBA programs.
MeetTheBoss TV: You’ve left the big, fast-paced corporate world. Where do you go from now?
Hassan: I am obviously very happy with being in the pharmaceutical industry. I want to be a part of the change process that’s needed to bring innovation to the forefront. At present, I’m working on many projects in a private equity firm I’m at that is involved with the innovation cascade. Only, in some cases, it may be at an earlier stage than what you might see in many larger more operational companies. But at least it’s part of the innovation cascade.
I also like to help mentor people. Many people in the smaller companies that are the portfolio companies are successful CEOs, but they need a mentoring hand, especially on important matters like succession planning, like having goals that are doable, having good performance reviews for the people — practical tools that young CEOs may not get very easily in the places they’ve been, and where somebody can come and help them. And I really enjoy that role as well.
MeetTheBoss TV: Would you say you’ve got a little more time on your hands now than when you were working in a big corporate business?
I think I will get more time on my hands at some point. It’s surprising. In my whole career, I have left one place and started at another almost immediately. I’m looking for a time when I might be able to take a break, but it seems like people are always interested in accessing me as soon as possible. And in this case, too, once the merger occurred on November 3, 2009, I ended up in this private equity firm very soon afterwards that. So, I did not get the break. But I know in due course, I will get the time that I’m looking for.