The Pharmaceutical Development Cycle - Essay Example

Every organization goes through change as the organization grows and adapts to newer technology, culture and business changes. Organization Patheon Incorporated is a contract manufacturer of pharmaceuticals and manufacturers for all of the top 25 pharmaceutical companies in the world plus a number of smaller biotech companies. Patheon, a business unit of DPx Holdings B.V., delivers a combination of unrivaled quality, reliability and compliance, with a reputation for scientific and technical excellence to customers in the pharmaceutical and biopharma sector. A leading global provider, offering a comprehensive set of solutions to help customers of all sizes satisfy complex development and manufacturing needs at any stage of the pharmaceutical development cycle. ~ 9000 employees worldwide, ~ 2 billon dollars of revenue, on the path to double the revenue within the next 2 years. In the month of March 2015, Patheon just purchased 2 more companies (3 facilities) to expand capabilities and to continue to progress the vision of being a 4 billon dollar company. www.patheon.com Background and Reason for Change Patheon in the last decade has gone through some significant changes that are worth noting to explain the current transformation that it is currently undergoing. Jeff started with the organization in 2002, Patheon was a publicly traded Canadian company on the Toronto Stock Exchange, trading at about $16 or $17. Pharmaceutical companies typically only ran their facilities at a 20-30% capacity, Patheon identified this, and would approach companies to offer to purchase one of their facilities on the guarantee that they would keep their products for a minimum of five year at the facility. In general this worked well, and usually the revenue of making the products for five years would equal the purchase price of the facility. Patheon would then work to bring other products to the facility to increase capacity to 70-80%. Historically this worked very well. The organization was run by the top executive that started the organization 20 years earlier, and seemed to run it similar to a family style operation. As they purchased the facilities, they wouldn’t interfere with operations and ask them to continue manufacturing the way they had in the past, just with a new name on the building. Very little or no corporate oversight. This was an example of transactional leadership because the example discussed above shows that changes were implemented only in order to increase revenue. Organizational culture experienced no changes; family style operation leadership presupposes conservative approach to business and workforce. At the same time, this transactional leadership approach worked well for corporate growth. This worked well, until we made a purchase in Puerto Rico to gain tax advantages. The typical five year guarantee in this case wasn’t as strong. We lost multiple products within two years of the purchase. The rumours shared after the fact related to this purchase was that the CEO was convinced that the deal would benefit Patheon, and either didn’t listen or the other Executive members did not speak up. This caused our debt / equity ratio to be off and caused our lenders to become nervous. At one point our shares dropped to less than $0.99. The Executive team was replaced, and the new CEO was appointed, I believe to stop the bleeding of the financials. Some would consider him and his executive to be a change agent. It was a culture shock for our manufacturing sites. I would not say a clear vision was created, except that he wanted Patheon to be viewed as “One Patheon”. So that clients could have a consistent experience from site to site. This required corporate resources and drive. Many of the decisions were removed from the Plant Manager and made at higher levels. Metrics were created to measure just about everything. Decisions were made quickly and without input from stakeholders at the site level. A number of the non profitable sites were closed. The CEO did start to communicate more at the site levels, although he was known to have “yes” people in the higher levels, which are people he had hand picked from his previous organizations. He was known to have a temper, and I have heard of an instance where he yelled at a receptionist because she didn’t have an idea badge with his name on it. As his career continued at Patheon, there were more examples of this. This is a good example of coalition leadership. This new CEO made sure that he had enough people who supported his decisions at higher level and used their authority to impact all team members. Even though he had a strong temper, he was not a charismatic leader because there were no hits that people idealized his persona. On the other hand, his cardinal approach to organizational culture could be defined as transformational leadership. He made people engaged and kept them supporting novelties within their organization. It was clear that the financial blood loss was stopped, we were gaining clients and business at a steady pass, however our conversion of revenue to profit remained lower than other traditional businesses and was around the 13% on average mark. The CEO was placed with our current CEO, Jim Mullen. He spent the first few months reviewing, observing and visiting each of the sites. From my first meeting with him, it was clear that he knew the business, and knew the company even though it had only been a short time that he was involved. I recall he was very clear that Patheon’s current plan was to go out of business and that we were flawlessly executing the plan. He created a vision, he provided short term goals, and started to execute it. I recall that he explained to the Site Leadership Team, his goal was manage cash flow, and if we could hit one billion dollars of revenue by December, he could double the revenue within three months, and double it again within two years. He was able to achieve this and we have grown and are growing based on acquisitions and mergers. He reviewed the Executive team, and replaced a number of the Executives and plant mangers. The Corporate team continued to grow, and decisions were more removed from the site level, and facilities began to interact together rather than as independent companies. I used to see fights over where revenue would be allocated when site shared work, those changed, and Plant Manager worked to help each other out. All of our sites have become profitable, revenues are up, conversion to profit is up and hitting close to 30%. Patheon started to form teams to leverage resources and consultant to listen to employee feedback on how to increase operating efficiencies. Regular communication through newsletters, videos and visits to the sites started and continue. Mr. Mullen within his messages impeded the drive behind our business, to help patients taking medications we make. Metrics were redone so that they measured the rights things, Right First Time (Quality), On Time Delivery (getting product to the patient), Revenue/Profit and Safety. By putting this into context of how we are helping patients, did help to drive our employees. I can think of at least two years where critical product launchs occurred over the Christmas holidays, and we had employees sign up to work those hours to get the product out. We hit the launch, impressed our clients and got products to the patients to help save lives. These changes characterize Jim as a transformational leader. His actions inspired his followers and empowered them to work better. New quality standards were required in order to give people more clarity in understanding what they did. Also, Jeff took care about his followers in order to make them change agents too. He created the atmosphere where all people felt needed and important. He listened to them and gave them an ability to share their concerns and ideas directly with the top of the company. New CEO added value to everything people did and transformed organizational culture from vising bringing new working ethic to old-fashioned corporate space. Resistance to Change I am sure there was some resistance to change, however that was flushed out at higher levels of the organization. One thing I respected was that he took the time to learn the inner workings of our business before making a judgement and formulating his vision. There were a number of executive members that remained from the previous executive that we hand picked by the previous CEO, however there were also a number that had left and new executive members brought it. It appeared as though he has hand picked these individuals, however, when looking at their profiles, not all of them appear to have come from his previous companies. It seems he has brought individuals for specific purposes. There didn’t appear to be a lot of resistance to change with Jim Mullen, however, we did see some heavy resistance with the previous CEO at the local level. Some of the reasons for this I believe are that he shared a vision with the employees and management, we knew where we were going, and we knew why decisions were made the way they were. We have since had some site closures, however, they were conducted with proper notice and with fairness to employees. Most employees remaining at the company didn’t experience fear of losing their jobs like at other sites, mainly because we knew his vision and therefore could see that our jobs were safe. He hasn’t altered his vision since become CEO. Part of the approach is to run the company like an assembly line rather than the standard pharmaceutical company. Eliminate waste, will reduce our costs and therefore give us a competitive price to our competition. To do this they brough in McKinsey consultants and formed a department focused entirely on operating efficiently called Patheon Advantage. The Patheon Advantage groups focus on work cells with Operators on the floor having ownership of problems and working through solutions to improve efficiencies on their equipment. Employee engagement has become more important under the new CEO. Another new department was related to Talent Management and focused on providing employees with the necessary tools to do their jobs. Training was made consistent between the different sites and focused on practical training on the floor for Operators. For Managers more transparency on our financials, and they recognized that not everyone could understand the financials, they brought in a professor from North Carolina to teach us about cash flow, inventory management and expenses over a two day session. Change process is always challenging especially when it comes to change resistance. Jim Mullen started the process of change by planning and preparing. He hired people who had the same vision of the organization. He empowered new leaders to bring change to all levels of the organization. Finally, he made people participate in change and showed that change started from each employee. Perhaps, these steps helped Mr. Mullen to prevent resistance to changed and explained people why change was needed at Pantheon. What is more important, Mr. Muller promoted new values and ethics that were liked by his followers. Quality, honesty, respect and helping other people to recover were stronger than classical rewards used by old CEO. Jim managed to create a great corporate culture that saved the company from failure. His example can stand in one line with Lego executive Jørgen Vig Knudstorp who joined the company at the right time and saved it with his philosophy. Success The measures of success for Patheon can be measured in a number of ways, one of them and the most important is that we want to be considered the preminent supplier of Contract Pharmacutical Manufacturing by our clients. One measure of success is having our customers tells us we are the best. One of the flaws in our previous metric system based on our own definitions, we which can be manifpulated. For example, if a client wants a product delivered April 5th and we tell them we can deliver it April 7th, and do deliver it on April 7th, we would have 100% based on the previous regime. In the current climate, if the client didn’t get it when they wanted it, then it was a miss. This is a major challenge, however we have been moving towards meeting these, and it has provided the client with “Wow” moments on a number of occasions. One measure of success is from our clients. We now collect surveys on a regular basis from our clients. Another measure of success is revenue and profit, we’ve doubled our business in the less than a year from when our current CEO took office, and we’ve since acquired three additional companies further increasing our capabilities and revenue. Conversion of revenue to profit is another measure, which is being worked on through our Patheon Advantage program. Our conversion of revenue to profit has steadily been increasing and is currently around 30%. Another measure is organizational health, are our employees happy with high morale. A number of initiatives have been going on to improve our organization health, by changing reward programs, performance reviews, and celebrating successes. Patheon regularly measures the organizational health through anonymous surveys. The organization that learns from success is always ready to change. This appreciative inquiry approach is considered to be effective because it inspires people to think positively and promotes customer-friendly image of the organization. Also, keeping employees happy and satisfied is also really important. If Pantheon wants to have extraordinary commitment, it has to provide extraordinary support to employees and motivate their satisfaction level. This simple truth was first loudly promoted by Google where people were given everything that helped them work more effectively and stay motivated. Read More