When Hassan came to Schering-Plough, customer trust had deteriorated beyond recognition. Reps' competitive bonus structure
was one of the underlying issues—it created a hard-sell environment, with reps chasing the sale today instead of the relationship
Hassan set about organizing for long-term value. He changed the salary/bonus split from 60/40 to 80/20, to be more in line
with the industry standard. At the annual sales force meeting, Hassan stood before the reps to talk about trust, concluding
with what would become an iconic moment: He told them that if they had to choose between doing what's right and making a sale,
to walk away from the sale.
The reps, many of whom stood to lose money by heeding Hassan's words, gave the CEO a standing ovation. Soon the sentiment
echoed throughout the company.
"The whole thing is about values, a sense of destination, a sense of direction for the company," says Hassan. "That's a very
powerful method of getting productivity. In particular, if the district managers connect with you, then they know what you're
trying to do and will be on your side, instead of feeling like you are some distant corporate suit."
SP's president of global pharmaceuticals, Carrie Cox, agrees: "In the early days, people weren't sure if these words were
a corporate slogan. Fred took the concept from what could have been rhetoric to something that people could live and understand
3 Invest in the Long-Term
Pharma currently suffers from "short-termism"—the failure to attend to long-term, sustainable results. Hassan blames the focus
that management puts on quarterly numbers. "Even though they all would like to believe that it doesn't create pressure, the
reality is it does," he says. "And if you're chasing quarterly numbers, you may not be paying attention to what's right for
When Hassan got to Schering, he felt he couldn't issue reliable short-term guidance to Wall Street, so dependent was the company
on its Zetia joint-venture partner, Merck. As time went on and SP found its feet again, Hassan realized that he no longer
wanted to provide short-term guidance. Without it, he was freer to do the right things for the business.
How did Hassan manage to skate the Street without getting slaughtered? In some ways, it seems to be all about respect. "Fred
has enough credibility with investors where he can say, 'I don't need to be micromanaged by you guys,'" says Daniel Teper,
who worked for Hassan at Sandoz, and now is the North American managing director of the Bionest Partners.
"The Street likes more transparency, not less," says Les Fundleyder, a healthcare strategist for Miller Tabak. "But Fred does
what he says he is going to do. When someone executes according to plan, that makes the Street happy. Now, more companies
are moving toward the Schering approach and moving away from quarterly numbers."
4 R&D is the CEO's Job
To Hassan, lack of pipeline productivity—by no means limited to SP—is a failure of leadership. "You can't rely on these large
products to keep you going forever," he says. "I'm not sure if too many CEOs understand or internalize that. They hope that
the head of R&D will get the job done—that they'll get, say, $2 billion in new products each year. But that's the central
function of the business."
When Hassan got to SP, he increased the R&D spend. But it was going to take more than R&D dollars to overcome the decade-old
pipeline gap and neglect of the research infrastructure. Hassan went shopping, focusing on the Phase III pipeline. He licensed
prostate cancer drug Asentar from Novacea and acadesine, for preventing ischemia-reperfusion injury, from PeriCor.