You Can't Hurry Change: How Not to Burn Through Billions

In 2003, Schering-Plough was burning through cash at the rate of a billion dollars a year. Profits were down 72%. And the company’s problems went deeper than productivity: exclusive patents on revenue-driving drugs such as Claritin were about to expire, while legal battles – including the largest fine in FDA history – had left the pharmaceutical giant in need of life support.

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That year, Fred Hassan was hired as CEO. Hassan had a reputation for producing dramatic turn-arounds from ailing corporations in the health care industry, having successfully resuscitated and sold Pharmacia to Pfizer in 2002. The change of course at Schering-Plough was no less sensational, culminating in a $41 billion acquisition by Merck.

A rarity in the era of the rockstar CEO, Hassan’s success seems to be more attributable to his skill at putting out fires than igniting them. His strategy for restoring Schering-Plough was based on two principles:

planning from the bottom-up

engaging managers in his vision to create front-line advocates for change

Instead of forcing an agenda on employees dictatorially, “if one can get them to be a part of the change, if one can get them to start to understand the strategy so they can repeat it without a PowerPoint, they can internalize it and become ambassadors of it to their people.”

This process takes both time – 3 to 5 years – and trust, neither of which are plentiful in the post-2008 environment. But it pays off in the end. Once momentum has been built organically, “it is amazing how quickly productive energy gets released and the change process occurs.”

What’s the Significance?

The bottom line is, you can’t force growth from the top. “You have to get the whole system to be a part of the change process and you have to make the case for change,” says Hassan. That happens by showing, not telling. Communicate your observations and make your actions a model that people can aspire to. Most importantly, “Do not over-promise about what you’re going to do. Just get in there and listen to people.”

Whatever the goals, says Hassan, a good leader ensures that everyone contributes to coming up with a plan for achieving them. Compensation is an important part of reinforcing a company’s culture, but it’s not everything. Even more essential than financial rewards is recognition – giving employees that sense that their perspectives have been heard and that no success has gone unnoticed.

Frontline managers can play a major part in seeing that this happens on a day-to-day basis, as well as in the long-term. “There may be many ways you can reward people, but it’s a cycle of motivation. It’s showing the way. It’s going the way. It’s being fair on compensation, differentiating among those who are the locomotives versus those who are valued team players, and then reinforcing that whole process all over again.”

That means hiring people who are “very good in their own areas, but who also believe in the team succeeding together, who root for the person next to them.” Hassan’s challenge: “You cannot have passive resisters. You must have culture carriers as you go forward.”

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