Between 1,000 and 1,500 jobs are expected to be lost at Teva Pharmaceutical Industries as part of the company’s cost-cutting measures.

Reports from Israel claim the majority of the layoffs will be made in the US and Europe and mainly focused in Teva’s recently acquired Cephalon’s generic business.

The reports say that Teva is hoping to raise $500 million in synergies from its takeover with job losses expected to raise the majority of its target.

Teva has already said it is planning to cut sales, marketing and administrative expenses by $300 million, R&D by between $120 million and $150 million, and production costs by $50 million to $80 million. R&D savings would be achieved by cutting duplicate operations, the company said.

Teva has a history of job losses following takeovers of generic companies. In 2008 it bought US generic specialist Barr and reduced its workforce by 10%, reports say.

A reduction of 1,000 jobs at Cephalon would represent a loss of 27% roles before the takeover. But one company where job losses will be made, the reports say, is at Mepha, the Swiss generics manufacturer Cephalon bought last year. The company had 620 jobs prior to the acquisition.

The switch to Key Account Management is one more companies are introducing to tackle current challenges. Apodi’s Tony Swift highlights the principles of effective execution and making a strategy work for a smooth transition.

More and more companies are now addressing the changing healthcare market by transitioning the sales process from one which primarily involves representatives engaging with healthcare practitioners on a ‘one-to-one’ basis, to the establishment of Key Account Management (KAM) teams.

The rationale for this change is irrefutable. Access to GPs is increasingly difficult and the ‘customer’ now represents a series of more complex accounts with numerous stakeholders and influencers. Furthermore, decision making is both at a national and regional level and there is now a greater need than ever to focus on local healthcare economy needs and requirements.

As a result, pharmaceutical companies have established, or are in the process of doing so, KAM teams in which individuals have increasing responsibility and autonomy in addressing the needs of their customers at a local level. Some pharmaceutical companies have even taken the model further and given team members, or a small collection of them in a specific locality, P&L responsibility – essentially establishing micro business units within the team itself.

 

A different approach

Some years ago it could have been argued that any company transitioning to the KAM model was differentiating itself from the competition. This argument is much more difficult today because most pharmaceutical companies have moved, or are moving this way – in short, almost everybody’s doing it.

However, there is still a key source of competitive advantage in this environment – and that is to actually make the new model succeed.

Our research, and the feedback we have received from companies trying to adopt the new model, is that the execution process is much more difficult than originally anticipated. The type of feedback we receive often includes the following observations:

• Account managers do not appear to be acting in any materially different way than the sales representatives of the past
• They are adopting the new model at vastly different rates with a small number leading the way and the rest struggling to come to terms with the new strategy
• The move to more local autonomy is creating confusion about the role of the centre and its interaction with the decentralised function.

 

Difficulty of execution

So why is it that so many companies are finding the execution process more difficult than anticipated? The primary reason is that there is often an underestimation of the scale of the organisational change required.

For instance, many sales functions in pharmaceutical companies have historically been based on a traditional command and control structure. Here, the sales management instructed sales representatives on which HCPs to target, how many times they should be called on and exactly what to say during any meeting with them.

Within the new model however, many of these individuals are now faced with adapting to a new environment where decentralisation, decision making, autonomy and P&L accountability are now among the order of the day. Given the above, managements’ task of transitioning the organisation from the old to the new model requires considerable skill, focus and expertise.

 

A decentralised approach

Many management commentators argue that decentralisation is a panacea for all ills. If executed effectively, in an appropriate environment, this structure can deliver enormous benefits to an organisation. However, the move towards decentralisation often creates a number of serious problems which, if not addressed directly and quickly, will significantly impact on performance.

These problems are as follows:

A lack of expertise: a decentralised structure almost always requires an increase in expertise in the key roles within the structure. For example, increased knowledge will be required by employees AND management to solve problems, address more complex customers and, in effect, run businesses – particularly if P&L account responsibility is part of the role.

Inertia: many employees enjoy going to work in an environment where they understand exactly what the day will bring; the common challenges they always face and, in exceptional circumstances, being able to refer any unusual problems to their line manager. In a new environment where their decision making authority is increased, many employees will be reluctant to do things differently and may continue behaving much as before.

Lack of responsibility: the new environment is a scary prospect for some people. The last thing they want is more responsibility and a fear of failure and an inability to work in the new way paralyses them – again leading to ineffective execution.

At Apodi we have looked at specific pharmaceutical companies that are struggling with the implementation of KAM teams and researched the reasons for their difficulties. In every single example, one or more of the problems outlined above was prevalent – and in most cases all three problems coexisted together.

In fact, some of our own executives have reported their own first-hand experiences of working with companies in which the almost evangelical zeal and enthusiasm of top management continued unabated whilst chaos reigned and they failed to achieve an effective transition.

 

The way forward

As we have seen, the execution process can be difficult. And because of this, it is critical that a clear procedure for managing an effective transition is implemented. This process needs to address the following:

1. Identify clearly the strategic intent of the company, including the projected benefits of changing the model and how these are to be measured

2. Given the strategy noted above, clearly identify the role of the centre and the role of the decentralised units and how these might evolve over time. In our view, companies are often too ambitious in managing the transfer of responsibilities from the centre to the divisions or KAMs. Clear standard operating procedures need to be driven from the centre in the early stages and KAMs need to understand the rules that they are expected to work to. Think carefully about giving newly formed KAM teams P&L account responsibility. It may be better to transition to this over time, and in some cases, not even to go this far

3. Identify very clearly the roles and responsibilities of management and KAMs at all stages in the change process

4. Given the roles identified in the new structure, carefully recruit the appropriate personnel. Implement a training and development programme focussed on areas such as the role of Key Account Management, the implementation of a complex sale, general business disciplines and other skills

5. Management need to quickly identify any KAM team member who cannot make the leap to the new world of working and deal with this appropriately

6. Instil best practices across the whole KAM team by establishing effective coordination and information sharing processes

7. Establish effective incentives to drive the performance required

8. Put in place appropriate controls, feedback, learning and corrective action processes to improve performance. Key to this is the management team that drives KAM performance. This team needs to be highly experienced and knowledgeable about the requirements of KAM teams and how to manage a change process.

 

Leading the way

As ever, the role of the leader is absolutely critical in driving through the changes to address the needs of the new healthcare economy. Whilst the development of a sound strategy is critical, it is also the relatively easy part of the process. In every pharma magazine, nearly all consultants and most competitors will support the notion of moving towards a KAM driven business.

However, it is the effective execution of this transition that the leader should focus on. They will also invariably experience many of the challenges that are common to such change programmes, such as internal politics, resistance to the new way of operating, lack of appropriate skills within the team and so forth.

It is because of this that a leader needs to draw on commonsense business disciplines to be successful. It is also crucial that the immediate management team are able to do the same. Therefore, before embarking on the process, it is important to make sure that the management team is capable and ready to execute change.

As I noted at the beginning of this article, many companies are implementing similar strategies. It is therefore logical to assume that, everything else being equal, it is the company that has the management capabilities to execute these changes most effectively that will gain a competitive advantage over its competitors.

 

Tony Swift is the Managing Director of Apodi. He may be reached on tony.swift@apodi.co.uk.

Every organisation strives to be successful and maximise the potential of its workforce. Apodi’s Tony Swift discusses how a solid strategic leadership model can help drive individual and corporate success.

For many years I felt that it was harder to define individual and team achievement in business than it was in sport, as there seemed to be no clear definition of success, or of winning, in the corporate world that individual employees could relate to and affect.

That was until I came across the definition of success given by John Wooden, the most successful American basketball coach of all time who was named Coach of the Century by ESPN, elected to the Basketball Hall of Fame, and even awarded the Presidential Medal Of Freedom.

His definition of success is as follows: “Success in coaching or playing should not be based on the number of games won or lost, but rather on the basis of what each individual did in comparison with others when taking into consideration individual abilities, the facilities with which you had to work, the calibre of the opponents and so on.

“True success only comes to an individual through the self satisfaction in knowing that you gave everything to become the very best that you are capable of. In the final analysis, only the individual himself can correctly determine his success. You may be able to fool others, but you cannot fool yourself.

“It is impossible to attain perfection, but that should be your goal. Less than 100% of your effort toward obtaining your objective is not success, regardless of how many games are won or lost.

“Others may have far more ability than you have, they may be larger, faster, quicker etc. but no-one should be superior in team spirit, loyalty, enthusiasm, cooperation, determination, industriousness, fight and character. Acquire and keep these traits and success should follow.”

Many observers, particularly those with the responsibility for delivering financial results to their bosses, their boards or their shareholders, may review this definition with a certain amount of cynicism. Indeed, they may find it difficult to relate to it given the pressures of their everyday lives and the nature of the results they are expected to achieve.

Five-star model

A closer inspection of the Wooden definition, and a careful analysis of where and how it can fit into the hard-edged world of business, shows that his opinion, rather than being somewhat irrelevant, should form the foundation stone of leadership practices at every level in all organisations – whether in business, sport or other enterprises.

A simple five-stage process for a model of leadership can be developed to drive success within organisations that builds on the definition given above: An exciting overall vision for the organisation can often energise it and help sustain motivation, focus, effort and productivity, as can the setting of regular and periodic goals.

However, the establishment of ridiculous visions and goals that are clearly not achievable is one sure way of totally demoralising an organisation. And sadly, this practice is more common than many people realise.

I have seen numerous examples of organisations establishing goals that were almost impossible to achieve. More often than not in business these are financial targets that the organisation insists on achieving, even though most realistic observers with the full facts would assess the chances of success, given the various constraints in play, as being virtually zero.

In some cases, leaders refuse to acknowledge that the problem is not the performance of the team or the individuals within it, but rather with their own goal setting. In such scenarios monthly meetings are held where the leader demolishes the team for under performance, resulting in a demoralised workforce and a total loss of respect for the team’s leadership.

The founding father of the study of management, Peter F Drucker, identifies how effective team leaders need to act and think if they are truly committed to the team’s success. He said: “The leaders who work most effectively, it seems to me, never say ‘I’. And that’s not because they have trained themselves not to say ‘I’. They don’t think ‘I’. They think ‘we’; they think ‘team’.

They understand their job to be to make the team function. They accept responsibility and don’t sidestep it, but ‘we’ gets the credit. This is what creates trust, what enables you to get the task done.”

Essentially, leaders who talk ‘I’ rather than ‘we’, are normally either self-promoters, lacking in confidence and self belief, or actually fundamentally do not understand the function of leadership.

I have often mentioned in this series of articles about the importance of the recruitment process in establishing effective organisations. It follows that establishing an effective recruitment process and selecting the very best possible candidates for the team is critical.

Of course, many leaders do have constraints within which they need to work. The most obvious constraint – but by no means the only one – is the availability of finance. For example, in the Premier League, Manchester City’s net spend – players bought less than players sold – has been more than £400m between 2006 and 2011.

Compare this with that of their near neighbours Blackburn Rovers whose net spend in the same period has been minus £35m. Given this vast gulf in spending ability, it is clear to see that Manchester City is in a far better position to access talented players. As a consequence, it would be unfair to judge the respective merits of both teams’ leadership as though on a level playing field.

Similar constraints exist in business and all that can be expected of any leader is to recruit the best people given the constraints that exist.

It is important that terms such as the ‘very best’ should be defined and communicated in a clear and concise way. In helping to achieve this, a leader should focus on the process of improvement and not on the ultimate goal. This empowers the leader to make a valuable contribution to an individual’s success – every minute of the day.

Many people find the transition from team member to leader difficult. They find it distinctly uncomfortable to be in a position where the efforts of others take precedence.

However, more adept leaders understand that a key role is that of a teacher and, as put by John Wooden, they “must never forget that he is, first of all a teacher. He must be present, diagnose and correct. He must continuously be exploring ways to improve himself in order that he may improve others...”

Effective leaders must ensure there are processes in place for planning, preparation, practice and performance. Within these processes should be a focus on continuous improvement. This has become a feature in modern business life since it was popularised by Japanese industry, where it is known as ‘Kaizen’.

The goal is to improve processes and products over time, taking care to maintain improved performance levels while seeking out further opportunities for improvement. Whilst very powerful, I have to say that I have seen very few successful continuous improvement programmes in business and even fewer that are truly focused on the improvement of an individual’s performance.

However, in sport, continuous improvement is a necessary process conducted by all top performers. For example, Johnny Wilkinson ensured that he was coached by the best kicking coaches in the world and practised hard to achieve perfection. “Each week leading up to the big day, I hit about 250 to 300 practice place kicks alone. I average 200 to 250 punts using my left foot and exactly the same number using my right. A daily total of 20 dropped goals with each foot and 15 to 20 restarts, six to seven times a week, would pretty much constitute a solid pre-preparation build-up. That makes a total of about 1,000 kicks to prepare for just 20 – kicks in the game. That’s near enough 50 rehearsals for each single defining event,” said Wilkinson.

The important point to note here is that the review process is not a biannual appraisal, but a constant and consistent review process that is focused on improvement.

Born to lead

We have all heard the statement, ‘they were born to lead’. Fortunately, in the vast majority of cases, leaders are made and not born – that is they have to learn the art of leadership – it is not an innate talent that exists in just a few.

I believe a great starting point on this learning process is to adopt the fundamental definition of success created by John Wooden – it focuses all of us on looking to make the best use of our talents and for those in leadership positions to assist others in doing the same.

Tony Swift is the Managing Director of Apodi.