Dear Colleagues! This is Asrar Qureshi’s Blog Post #943 for Pharma Veterans. Pharma Veterans Blogs are published by Asrar Qureshi on its dedicated site https://pharmaveterans.com. Please email to aq.pharmaveterans@gmail.com for publishing your contributions here.
Brief History of Bayer
Bayer is a German chemical and pharmaceutical company which was founded in 1863 by Friedrich Bayer, who was a chemical salesman, and Johann Friedrich, who owned a dye company. The company enjoyed rapid growth, and it was transformed into a joint stock company in 1881. Between 1881 and 1914, Bayer developed into a company with international operations. By 1913, over 80 percent revenues came from exports. Pharmaceutical department and more production sites were added. And then World War I started causing major disruption in exports. After WWI ended, German companies could not regain their previous markets and therefore six companies formed a community of interest. Then came World War II and Germany was conquered by Allied Forces, who confiscated all assets of these companies and put them under their own control.
Bayer became independent and began to reestablish its sales activities abroad in 1946. Bayer underwent many events since then. Presently, Bayer is ranked #4 within World Benchmarking Alliance.
Bayer engages in the development, manufacture, and distribution of products in the areas of healthcare, nutrition, and high-tech materials. It operates through the segments of Pharmaceuticals, Consumer Health, Crop Science, Animal Health, and Covestro. The Covestro segment provides raw materials for polyurethanes, polycarbonate granules and sheets, raw materials for coatings, adhesives, and sealants, and by-products of polyether production and of chlorine production.
Bayer employs about 100,000 staff worldwide. Current Chief Executive Officer is Bill Anderson since June 2023.
Bayer saw its stock value decrease more than 50% in the last year. This is a matter of concern for investors and shareholders.
Hierarchy Shakeup
CEO Bill Anderson want to turn things around by transforming the corporate hierarchy. His plan involves reducing bureaucracy and giving employees more choice. He even has a fancy name for his un-corporate plan: “Dynamic Shared Ownership”.
The idea involves slashing the corporate bureaucracy, and giving employees more control, and hopefully as a result, allowing the company to innovate efficiently. In an interview with Business Insider, Anderson said, “We hire highly educated, trained people, and then we put them under eight layers of hierarchy. Then we wonder why big companies are so lame most of the time.” He added, “People love the company; they love the sort of culture and the science and the commitment to patients, but they basically said: ‘Increasingly, we cannot get anything done’” It is just too hard to get ideas approved, or you have to consult with so many people to make anything happen.
Anderson has said the plan involves cutting the literal corporate rulebook – Bayer regulations that run more than 1300 pages – by 99%. “That’s actually longer than ‘War and Peace’ and a lot less exciting. A key part of his proposal is to cut a big chunk of the middle managers and let employees choose the projects they want to pursue.
Plan Preview
During a company training session in New Jersey, employees pf Bayer Consumer Health Division got a preview of the new structure, The Wall Street Journal reported.
According to their report, employees were seated in a circle and were given an opportunity to stand in the middle to share an idea. If fellow employees were interested in the concept, they could join their colleagues in the middle of the circle. “You are going to self-organize”, the corporate trainer said.
In a March 2024 press release, the company said that Anderson’s plan will cut organizational costs by about 2 billion euros.
Bayer Global Statement
March 20, 2024, posting on Bayer Global website reads as follows. (Edited)
Berlin, March 20, 2024 – Bayer’s Pharmaceutical Division is set to embark on its next phase of growth, reshaping its executive Leadership Team to become more mission-centric and value focused.
The company has been making important strides in strengthening its development portfolio and extending its capabilities through collaborations and acquisitions into breakthrough therapeutic fields such as gene therapies and cell therapies. As a next step, Bayer’s Pharmaceutical Division is focusing on renewing its top line, growing its portfolio value, and leveraging a new operating model with a clear ambition of becoming a critical growth driver for Bayer.
Effective April 1, 2024, Sebastian Guth will assume the new role of Chief Operating Officer (COO) with responsibility for the commercial operations of all markets in which the company is active. In this role, Guth will work with teams across countries and regions to drive the commercial strategy to enhance customer value, maximize market opportunities, and generate revenue growth and profitability for Bayer pharmaceuticals around the world. He will report to the Member of the Board of Management, Stefan Oelrich.
A newly formed “Global Commercialization” organization will encompass major parts of the company’s former strategic business unit Oncology, Global Marketing and Digital & Commercial Innovation as well as parts of Medical Affairs & Pharmacovigilance.
This organization will be led by Christine Roth effective June 1, 2024. Roth, who is currently leading the company’s strategic business unit Oncology, will continue to report to Stefan Oelrich.
“Research & Development” will continue to be led by Christian Rommel while “Product Supply” will continue to be led by Holger Weintritt. Both individuals will continue to report to Stefan Oelrich as well.
“We have decided to dismantle our traditional model with functional silos and many layers of hierarchy. We are replacing it with our new operating model, which has Product and Customer Teams at its center,” said Stefan Oelrich, Member of the Board of Management, Bayer AG and President of Bayer’s Pharmaceuticals Division. “These changes within our Leadership Team reflect this new approach to realize the full potential of our growth opportunities.”
What Could be the Challenges?
HR Reporter comments are as follows:
Bayer’s move to decentralization is based on the “holacracy” theory of management, which was brought to the mainstream by online shoe company Zappos, later purchased by Amazon. The model features self-management at its center and is seen as a way to encourage innovation and empowerment of employees through collaboration.
But will it work for a large company like Bayer? Perhaps, says Rafael Gomez, professor of employment at the University of Toronto. But implementing such a measure at scale will present almost insurmountable challenges.
“For this case, which is a well-established, very old, mature company, large, bureaucratic, it has pre-existing norms and culture, it has workers who were hired under one rule, and presumably those hiring decisions were kind of a two-way street,” he says.
“People who apply to Bayer, or who work for companies that they’ve acquired, which are also big and bureaucratic, didn’t accidentally end up there.”
Employees self-select into the systems that work for them, Gomez says, and in instances like Bayer, where there have been decades of this selection, there are going to be uncomfortable disruptions as a result of drastic systemic changes.
“Part of the reason these systems work, it’s not because the systems are working, it’s because they’ve self-selected and separated out the people who don’t like to work in the wholly autonomous ‘I’m responsible for my outcomes’ world,” he says.
“It might work, but in the short run, it’s going to cause huge disruptions. So, if you’re prepared for the huge disruption, and you have this end goal of recreating a company that’s less bureaucratic, it’s going to be more autonomous – it will attract people eventually.”
Implementing decentralization strategies is no small task for HR, Gomez says, as such a fundamental shift requires creating new compensation structures, new performance management metrics, and plenty of clear communication.
Additionally, dealing with constructive dismissal and other claims will likely be a reality as the employee base adjusts. And it will mean a lot of work for HR, he says.
“My thinking from the economic side is you do nothing, you just implement the policy — be prepared for people not liking it, and therefore quitting. And you now have at least a signal of what this is going to take if this is a true commitment of people who do want to work in those kinds of structures, they don’t want to work in bureaucratic structures.
“So, they’ll start applying to Bayer, the new Bayer, and they’ll eventually have the kind of worker that matches the kind of organization.”
Concluded.
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References:
https://www.businessinsider.com/bayer-bill-anderson-ceo-corporate-hierarchy-get-rid-of-bosses-2024-4
https://www.bayer.com/en/history/history
