Is there an ideal structure for your pharmaceutical company?
By Dr Faiz Kermani, Dr Richard Halliday & Dr Gordon Findlay
Although many studies across industries have attempted to link organisational structure to corporate success, the answer to the above question is a resounding "No"! Not least because what may be suitable for yesterday or today's circumstances is likely to be inappropriate tomorrow.
While certain organisational structures may optimise the realisation of particular corporate goals and strategies, especially in the short term, adopting a particular structure does not automatically result in improved performance. Knowing how to make good use of an existing structure or one in the midst of change may be just as important as having an "ideal" structure, and knowing how to change a structure without short or medium term loss of efficiency may be more important still.
Dynamics in the pharma industry
Textbooks of management theory often classify organisations in a simple framework of structures and models, so it is natural to wonder how your company fits in such schemes and how long the average structure endures.
In reality, there are as many models as there are companies. Each company has distinct strategies, cultures, resources and internal processes that dictate a unique organisational structure. Furthermore, dynamic changes in organisational goals and resources, as well as the business environment, mean that a static structure is not always appropriate.
A recent CMR International survey of pharmaceutical companies identified some of the key issues driving change, and highlighted the dynamic nature of such organizations:
- Nearly 50% of all participants had experienced a change in organisational structure within the last 3 years.
- Around 20% of companies anticipated major structural changes in the near future, despite the current organisational structure having been in place for less than 5 years.
To centralise or to decentralise?
Mega-mergers involving organisations operating on a global basis drive companies to review their managerial structures and the levels of autonomy they are prepared to support.
Managerial structures for R&D can range from absolute centralisation to total freedom. Where to position oneself on this scale is a crucial decision for global R&D management. Whatever the choice, there are important consequences in terms of communication systems, co-ordination and planning.
Therefore, the key question is, what should be the criteria used in guiding firms to develop their management structures and position on this scale? It is likely that this question is being asked in a number of companies because the majority of respondents to the CMR International survey felt that their organisation had a mix of centralised and decentralised management (see Figure 1). However, in over one-third of companies all of R&D, manufacturing and product management policy decisions were centralised. In contrast, project decisions in all of R&D, manufacturing and project management were centralised in less than 20% of surveyed companies.
Communication is key
It is not sufficient to consider organisational structure alone; managerial processes must also be established and developed to suit the growing international nature of a company. Key among these is communication.
Communication flows have a twofold role in international R&D. One readily recognised part is the role of communication in co-ordinating activities. However, perhaps more importantly, communication lies at the core of all R&D activities.
In fact it has been argued that the management of R&D is to a large extent the management of the information flows between researchers, and between research teams and outside sources of information. Establishing appropriate communication mechanisms can therefore be a driving factor in deciding managerial styles and organisational structures.
Conclusion
The increasing internationalisation of pharmaceutical R&D has resulted in management problems, such as cost escalation, loss of economies of scale, difficulties in reaching critical mass in foreign sites, or risk of duplication of research.
This gives companies two key issues to address: how to find the right balance between central control and autonomy, and how to optimise information flows?
Many companies have tried to address these issues by applying organisational measures. However, it is clear that there is no single model than can be applied to all pharmaceutical companies in order to guarantee success.
On the other hand, consideration of various generic organisational models can be valuable in providing ideas which can be adapted to an individual company's circumstances.
The key to success lies in selecting the optimum model to fulfil a firm's strategic intent. The challenge to making it work is leveraging strengths while compensating for weaknesses. To meet this challenge, companies must improve the processes they use to help people work together.
For further information contact:
Dr Richard Halliday, CMR International, Novellus Court, 61 South St., Epsom, Surrey KT18 7PX, UK. Tel: +44-1-372-846-100. Fax: +44-1-372-846-101. Email: rhalliday@cmr.org
Electronic copies of the full report Survey of Structural Models within the Global Pharmaceutical Industry are available for purchase from CMR International's website (www.cmr.org/rptsorder.html).
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