1. 1. HEALTHCARE AND LIFE SCIENCES PRACTICE Cultures critical role in pharma leadership Skilled biopharma leaders are in high demand. But skills are only part of the story. Even the most accomplished candidates on paper will struggle if they arentcloselyalignedwiththecultureoftheircompanies.
2. 2. The level of complexity in global business continues to rise, driven by an increasingly competitive landscape in which known and unforeseen factors can affirm or undermine strategic decisions at a moments notice. Consequently, senior executives are under pressure to navigate pitfalls, identify and pursue opportunities, and through it all continue to provide strong leadership. Among the more challenging industries for leaders today is biopharmaceuticals, where executives must balance multiple and sometimes colliding forces, lead through transitions such as M&A, and makebet the companydecisions on R&D investments. Tested leaders have never been at a greater premium. Moreover, these leaders increasingly require new skills, including the ability to envision how trends and contexts may intersect and change direction what we callripple intelligence.(For more on the skills that senior leaders need, drawn from our research with the University of Oxfords Sad Business School, see sidebar,Key findings from The CEO Report.) But skills are only part of the story, as even the most accomplished candidates on paper will struggle if they arent closely aligned with the culture of their companies. Companies that have a quantifiable appreciation of their organizations underlying culture, including a detailed understanding of its strengths and weaknesses, are better prepared to attract and retain candidates who will help the company achieve and exceed its business objectives. Key findings from TheCEOReport Todays global CEOs need to manage through unprecedented uncertainty, times that are characterized by a combination of political, economic, social, and environmental unrest and disruptive technological innovations. Heidrick & Struggles, in partnership with the University of Oxfords Sad Business School, recently interviewed 150 CEOs across six sectors from around the world. Our findings were published in The CEO Report: Embracing the Paradoxes of Leadership and the Power of Doubt, which underscored the need for current and future CEOs to be flexible, systemic thinkers who are comfortable with uncertainty, complexity, and constant change. The ability to predict how trends and contexts may intersect, interact, and change direction to form new opportunities or threats requires a step change in CEO and C-level behavior. Our analysis found that executives must be able to lead in ambiguous situations, harness the power of doubt, remain authentic, and connect seemingly unrelated events through a skill we callripple intelligence all essential qualities for harnessing competitive opportunities in todays global economy. Download the full report at www.heidrick.com/ theceoreport 2 Cultures critical role in pharma leadership
3. 3. Distinctive leadership in uncertain times Biopharma companies have been pursuing several paths to boost revenues and improve shareholder value. Each path increases the complexity for executives, who must balance a diverse array of often competing factors to meet the companys aspirations. Following are some of the paths that biopharma companies are taking. The urge to merge Acquisitions in biopharma have been on the rise, with total M&A activity exceeding $200 billion in 2014 (see figure). Thus far, 2015 appears likely to be a year of robust and highly competitive M&A as well, as companies seek to jump-start growth and innovation. Executives are using M&A either to develop franchises in new therapeutic areas or to bolster their presence to become market leaders. Of course, capturing postmerger value is a daunting task that requires savvy leadership: executives must be authentic and adaptable to lead effectively and unify the company around a shared vision. High-stakes R&D The global biopharmaceutical industry has among the highest R&D spending of all industries. These outlays also generate the greatest rewards, as measured by patient outcomes and financial returns for shareholders. According to the Tufts Center for the Study of Drug Development, developing a new medicine and gaining market approval can take as long as a decade and cost as much as $2.6 billion. Gaining market approval is only the beginning; biopharma companies must then secure appropriate reimbursement for treatments in different healthcare systems around the world. CEOs who can develop and use ripple intelligence to identify the most promising therapies can deliver the greatest returns over the long term. New therapy areas Companies often move into different disease categories in search of competitive advantage. The fields of oncology and immuno-oncology, for example, have attracted the most new competitors and the most uncertainty. This particular therapy area has benefited from increased knowledge of the underlying disease pathways, which enables better disease classification and the development Biopharma M&A transaction volumes, United States and Europe, 20122014 Completed deals, up-front transaction volume, $ billion Up-front deal volume of announced deals, $ billion, 2014 2012 43.0 2013 48.5 2014 81.8 10.4 21.3 13.4 32.6 27.2 68.4 Acquisitions in rest of the world Purchase of assets/divisions, US and Europe US companies acquired European companies acquired Announced acquisitions, US and Europe 78.8 Total 219.4 45.6 13.3 Source: HBM Pharma/BiotechM&AReport2014 Figure Heidrick & Struggles 3
4. 4. of biomarkers and diagnostic tools, resulting in more competitive interest and better clinical outcomes. However, recent spending has moderated due to fewer breakthrough therapies for large groups of patients, patent expiries, the reduction in the use of supportive care medicines, and better payor management. Each of these strategies can deliver significant returns over a period of years if biopharma companies have the right leaders at the helm to execute them as well as strong organizational cultures that encourage the mind-sets and behaviors required to succeed. Biopharmasmust- haveskills To get a deeper understanding of the biopharma industry and its talent needs, we interviewed executives and non-executives from about 30 large-cap pharmaceutical and biotechnology companies to understand their views on how to successfully implement company strategy. Respondents acknowledged that understanding their own company cultures first would enable them to make more informed decisions about external hires and internal development opportunities for future C-suite leaders. Participants also agreed that better differentiation of executives who can adapt and lead in volatile, uncertain, complex, and ambiguous (VUCA) situations would provide enduring advantages.1 Executives in the biopharma industry must manage a wide range of internal and external factors, many of which for example, regulatory approvals are well beyond their control. We have found that successful leaders view these factors along a spectrum and assess their positive and negative qualities to get a sense of their value or risk to the organization. The best executives work to maximize the positive while minimizing the negative characteristics at both ends of the spectrum. All embrace a personal and professional mind- set of continuous learning.1 1 For more about leading in VUCA environments, see Sculpting tomorrows borderless leaders, on heidrick.com. Cultures critical role Companies pursuing growth strategies often hire a leader to catalyze change or reorient the organization. Each situation calls for a leader with a particular set of skills and experiences to rally employees around a common vision. Given the pace and continued acceleration of deal-making in the sector, the difficulty in finding the right leader will only increase. The difference between a good and a great biopharma executive placement is often determined by cultural fit. Therefore, its critical to take into account the unique culture that an executive will join and how the new executive will respond to it. Since biopharmaceutical companies are by nature created by experts working together in a tightly woven culture to translate intellectual property into clinically viable products and services, the culture of these organizations can be either a driver or an impediment to execution and success. After all, biopharma companies may have vastly different cultures depending on their size and maturity: smaller businesses, we find, often exhibit a strong sense of purpose, embrace an entrepreneurial spirit, and have close-knit teams that serve to amplify diverse (and sometimes difficult) personalities. By contrast, larger companies tend to have a morecommand and control culture as well as more defined organizational structures and departments that operate independently sometimes to a fault. Employees in these firms tend to enjoy more job security, although they often report trading this benefit off against the frustrations of executing in large and generally unwieldy corporate environments. As these examples suggest, having a better appreciation of different leadership styles and cultural orientations helps companies understand the sorts of environments in which a given executive might thrive. Indeed, finding the right leader isnt just about experience or an impressive track record but an executives ability to adapt to or shape the culture of a given company. For example, taking a command-and-control approach 4 Cultures critical role in pharma leadership
5. 5. at a smaller company could be met with indifference or, worse, outright mutiny. Therefore, strong direction and communication from the top is required to implement large changes. In any environment, successful leaders must be able to connect mosaics of information in order to create a compelling vision of the future and galvanize their teams around a common sense of purpose. Matching leaders to the companys culture In our experience as leadership advisers, we know that senior executives can fail to perform for a variety of reasons. Understanding leaderspersonalderailing factors and providing external coaching to accelerate their integration and long-term retention greatly increase the chances of success. By taking three steps, companies can improve the odds of attracting and retaining leaders with the right skills to achieve business goals. 1. Understand the companys culture. The organizations cultural DNA and business strategy can be used to help identify the attributes that are unique to the company. This assessment will help identify people with the right skills to develop the culture or, in the case of a merger or other growth strategy, constructively challenge entrenched attitudes. 2. Look to the hows of leadership. Candidates can look very impressive on paper (the whats of leadership), but, as noted above, the type and size of the organizations they served can elevate the importance of certain job experiences while negating the impact of others. A review of each company and its strategy during the candidates tenure can shine a light on his or her results and leadership style and better predict how he or she will behave in the new environment. 3. Learn how to spot the right traits in a candidate. Given the complexity of the industry, an ability to deal with ambiguity and balance multiple factors can be an important indicator of future success. Companies should seek to get an idea of how candidates would lead in unfamiliar situations to better select those who can harness uncertainty and use it to the organizations advantage. Quantifying culture and leadership Even the most rigorous hiring processes can fail to determine whether a candidate is a good fit along intangible factors such as leadership and culture. Therefore, to help organizations increase the odds of success, HeidrickStruggles has developed a suite of practical tools to help senior executives to quantify a Understanding leaders personal derailing factors greatly increases the chances of success. HeidrickStruggles 5
6. 6. prospects capabilities in these areas as well as understand their organizations culture. For example: Corporate Culture Profile is a diagnostic instrument developed by Senn Delaney, a HeidrickStruggles company and the leader in corporate culture shaping. It is used with clients to measure the culture of an organization or a specific team across five indicators essential values, strategic alignment, committed engagement, internal drivers, and strengths and challenges in culture. This online survey, along with guidance and insight on the findings from culture-shaping experts, helps executives understand key attributes of their culture as well as how the culture is perceived throughout the organization. Leadership Signature is an executive assessment tool designed to provide companies with a better idea of a candidates leadership style in three main categories of attributes: potential, mind-set, and essential values. This detailed survey places executives in one of eight leadership patterns (such as collaborator or harmonizer), giving companies a more holistic view of prospects to better predict how candidates might execute specific strategies or thrive in varying degrees of uncertainty or complexity. For more, see our recent article in Harvard Business Review:Assessment:WhatsYour Leadership Style? Executive Culture Profile allows companies to profile executive candidates for culture fit and impact. It does so by identifying two dimensions values and leadership behavior styles in the cultural relationship between candidates and the team they will join. The resulting profiles offer insights into the teams cultural attributes, as well as an objective means of discussing the likelihood that various candidates will align with, or shift, the culture and drive desired performance and results. The tool also offers useful information for incoming CEOs and corporate directors to help them avoid cultural landmines in their new roles. Regardless of the growth strategies that biopharma companies are pursuing, its a fact that different strategies call for different types of leaders. Companies that seek executives to catalyze change, for example, should proactively use this criterion to identify candidates who will challenge cultural norms. The trick for companies is to recognize the attributes they are looking for in a candidate and ensure that prospects are a good fit for their culture. Without this alignment, even executives with a proven track record may not be able to deliver. 6 Cultures critical role in pharma leadership
7. 7. HealthcareLife Sciences Practice HeidrickStrugglesHealthcare and Life Sciences Practice helps leading organizations in these sectors align their talent strategies and business objectives to foster innovation and enable growth in a fast-moving, rapidly changing world. Companies in the healthcare and life sciences sectors contend with ever-changing technology, patient populations, markets, pricing, and regulatory environments. Their leaders must have the competencies required to lead all aspects of the business, while understanding the value of innovation and the relevance of science. With more than 80 professionals in major cities around the world, our Healthcare and Life Sciences Practice team combines unparalleled search resources with a deeply consultative approach to help clients boost their leadership capabilities. We have expertise across all sectors in the healthcare and life sciences sectors, including biotechnology, healthcare services, managed care, medical devices and diagnostics, pharmaceuticals, research and development, and contract research. Working closely with a broad range of clients ranging from start-ups to global public companies and healthcare organizations, HeidrickStruggles identifies succession issues, considers team composition, and taps nontraditional talent pools. We advise and recruit in the context of an organizations culture. We partner with our clients to find leaders who can align and integrate the interests of complex stakeholder groups, build their organizations, and demonstrate shareholder value year after year. P/HLS/15/01
8. 8. HeidrickStruggles is the premier provider of senior-level executive search, culture shaping, and leadership consulting services. For more than 60 years we have focused on quality service and built strong relationships with clients and individuals worldwide. Today, HeidrickStruggles leadership experts operate from principal business centers globally. www.heidrick.com WE HELP OUR CLIENTS CHANGE THE WORLD, ONE LEADERSHIP TEAM AT A TIME Copyright 2015 HeidrickStruggles International, Inc. All rights reserved. Reproduction without permission is prohibited. Trademarks and logos are copyrights of their respective owners. Cover illustration: kmlmtz66/iStock/Thinkstock