Leadership: The Critical Element In Midcap Growth

By Susan Snyder

Growth is a wonderful thing. But it raises issues that can keep stakeholders and executives in today’s burgeoning midcap (i.e. a company with a market capitalization between $1.5 and $10 billion) pharmaceutical companies uneasy at night.

Growing an organization through its stages of development is a tricky proposition. When that organization is a midcap pharmaceutical company — usually started from scratch, initially focused on raising capital and advancing its R&D efforts, and led by entrepreneurs — the challenges of growth get more complicated. Adding to these challenges are the uncertainties of the global economy, as well as regulation and healthcare reform in the United States.

Recent interviews with operational and human resources leaders in four growing midcaps confirmed what our considerable experience with midcap pharmaceutical companies has told us: Leadership that pushes decision making down to the right levels, preserves a patient-focused culture, and focuses people on an organization’s critical priorities is the greatest source of advantage for shareholders.

In its early years, a growing pharma/biotech company will focus on managing scientific expertise and assessing technical and financial risk. Leadership concentrated in the hands of one person or a small group can work here. But, as the company grows, it must face issues related to an increase in organizational complexity. Many midcaps add a commercial organization; often, R&D must be reconfigured to handle multiple therapeutic areas; and frequently the company establishes an international presence. These circumstances require a new model of leadership to ensure a transition that continues and even accelerates the company’s momentum.

According to Lisa Kelly-Croswell, senior VP of human resources at Vertex Pharmaceuticals, successfully integrating new structures is all about getting leadership right. “Certainly you want structures that do not make operations harder or interfere with speed. But the key is making sure you have operating effectiveness in them with capable and empowering leaders at the helm.”

Changing The Nature Of Leadership
One company embracing leadership development as the key to successful growth is Cubist Pharmaceuticals. Maureen Powers, VP of HR at Cubist, recalled how the organization’s commitment to leadership planning and development began: “Our CEO wanted to ensure we had people in place with the capability to lead a more complex business. As I conducted a series of conversations with leaders about capabilities and potential — theirs and others in the organization — I saw it was difficult even to get a baseline measure. I never got the sense that my definition of a strong leader and someone else’s was the same. We didn’t have a common language to have the conversation.”

Powers’ realization about this leadership “disconnect” is not uncommon, even in larger organizations. The problem is even more acute in smaller midcap pharmaceutical companies, where there usually is no sense of urgency around the need to understand leadership requirements — until, of course, the company grows to a critical mass.

In 2008, in anticipation that this level of growth was nearing, Cubist launched its first-ever workforce planning initiative. This initiative focused on bridging the gap between leadership in its current state and leadership that a bigger and broader Cubist would need.
“Through this exercise, our business unit heads realized they needed help, and we gained their support for the creation of a competency model to define outstanding leadership and then a program to hire and develop leaders to get there,” said Powers. “The process we went through was really valuable. We looked at what we would be facing as a business, what situations we will find ourselves in, and what differentiates successful leaders in those situations.”

Address Leadership Systematically
At Alkermes, which focuses on chronic diseases such as central nervous system disorders, addiction, and diabetes, the company assessed emerging leadership needs and made necessary adjustments to develop a more collaborative environment. “We understand the importance of developing both technical and leadership expertise,” said company VP of HR Madeline Coffin. “During the last two years, we have instituted a comprehensive leadership development program for all new managers. The program offers managers the opportunity to collaborate with each other and learn from one another’s experiences as well as their own. We find that people appreciate the opportunity to participate in a program that is dedicated to helping them develop their management and leadership skills.” This is exactly what is needed in an industry that faces technical and business challenges that cannot be met by one brilliant individual or small group, but only through the efforts of many working together.

Failing to give appropriate attention to this issue has a significant downside, according to Cubist CEO Mike Bonney. “If you don’t manage leadership change as you grow your organization, you will dilute the strategic thrust of your firm. Without appropriate leadership you’ll lose the capability that is essential to successful growth: the ability to focus on people.”

Creating a New Decision-Making Process
The ability to make effective decisions in a timely way is a valued corporate competency, especially for midcaps, where a mistake can waste years of time and resources. In the current lending environment, where funds are difficult to find, this competency takes on even greater currency.

A familiar problem that confronts many start-up companies arises when those whose entrepreneurial spirit and talents have grown an organization (e.g. founder) must “cede power” just as their vision seems on the verge of fulfillment. However, the risks of continuing to concentrate decision making in the hands of a single person or small group are well-documented. As organizations get larger and more complex, it is virtually impossible for an individual to have all the knowledge it takes to make the myriad decisions the organization needs to make. Plus, as the number of decisions increases, having a single person or small group address all those decisions in a timely manner becomes problematic. The consequences: Decision making slows just when it needs to be faster, while the probability of making a bad decision rises.

COO Jason Hanson of Medicis, a pharmaceutical company specializing in dermatological and aesthetic conditions, echoes other leaders in noting that “the perfect structure isn’t as important as making sure the right people are involved, that decisions are made at the right level, and that we’re able to make decisions quickly rather than being paralyzed waiting to analyze 100% of the information. We’ve learned to be more comfortable going forward with a decision with less than a perfect information set.”

Part of what they’re doing at Medicis, Hanson notes, is “selecting and developing R&D leaders who can make decisions on their own and even potentially kill projects on their own. We have operating mechanisms where the R&D portfolio is reviewed with representatives of commercial, finance, patent groups, etc. There’s definitely been a transformation from the old days, one that all growing organizations eventually have to make.”
 
Part 2 of this article will continue the discussion of how growing midcaps ensure appropriate decision-making processes and preserve key elements of their culture.

About The Author
Susan Snyder is a senior principal at Hay Group, a global management consulting firm. She leads the Leadership & Talent practice for Hay Group’s U.S. Life Sciences sector as well as Hay Group’s U.S. legal sector.