China: Big Pharma's Long March to End? - Pharmaceutical Executive


China: Big Pharma's Long March to End?

Pharmaceutical Executive

Many Strategies for Waging the Talent War

Dan Zhang (FMD)
China has been called the pharmaceutical battleground of the future, and understanding this market will be at least as important as understanding the US or Europe, if not more so. Executives who understand China are already in hot demand at the headquarters of multinational firms and thus GM positions in China are highly coveted. At the same time the prospect of such a vast, rapidly changing and high stakes market can be daunting. One of the primary challenges that GMs face in China is extremely high turnover. Howard Sui, GM of Merck Serono, refers to an "ongoing talent war." He says, "Every company is committed to China and is expanding here. The competition for talent is quite intense." Training at Western firms is highly prized and some employees are looking to eventually 'cash out.' However, firms employ a wide array of strategies to retain top talent. As in any market, focusing on career development and providing opportunities for advancement is crucial. While salaries have gone up, many MNCs avoid bidding up salaries, instead offering training and frequent promotions in fast growing organizations. Perks can help as well. Mr. Mithen advises on the benefits of social events, noting, "We look after our staff and coordinate social activities such as company conferences, barbeques and the like. Interestingly, 10 to 15 years ago these kinds of perks were something most Chinese would not care about, but today these benefits are becoming more attractive." While MNCs offer, on average, better pay than local firms, local players find ways to adapt. For example, Mr. Zhang has built a relationship with the local government that allows the director of his central lab to have a position and publish through a local university. Mr. Zhang describes this as "a huge golden handcuff. This is a non-cash reward that allows me to be competitive with Quintiles but at a lower cost."

Eric Zwisler (Zuellig)
A distinct genre of China oriented business literature has emerged, advising foreign managers on how to avoid cultural pitfalls in the Chinese workplace. There is certainly a Chinese management style that is often discussed. Mr. Grapow encapsulates this advice as "ensure employees get respect and recognition for their work. Praise in public, criticize in private." On the other hand, some firms have managed to build more of a hybrid culture, which prize outspokenness and minimize hierarchy. Bioduro exemplifies this mixed company culture, as an R&D outsourcing company founded by serial entrepreneur John Oyler. Oyler relates an anecdote that occurred during a visit from a French scientist. "He was asking where people on the team are from and they were telling him the names of some cities that he didn't recognize. I drew a rough map of China on the white board, and pointed out Beijing and Shanghai. The first team member said he was from Chengdu and I drew a star on the map where that was, and the next team member said Xian and I drew a dot for that city. This young scientist who had worked at our company for less than one year jumped up, ran to the board saying, "no, no, you're completely wrong," and grabbed the pen out of my hand and drew it a little further South on the map." Afterwards the French scientist remarked that even at his company, a first year team member wouldn't tell the CEO that he's wrong and grab the pen out of his hand.

Howard Sui (Merck Serono)
However, beyond communication, the principle cultural barrier that newly arrived executives are cautioned on is 'Guanxi.' Often translated as relationships, many local executives claim they have it, while foreigners struggle to build it. Eric Zwisler, CEO of Zuellig Pharma, has over 20 years experience in China and seeks to debunk some of Guanxi's mystique. "When markets are inefficient, relationships are important. When markets are more efficient, relationships become less important because the markets become more systematic, professional, and objective in the way they operate." Mr Zwisler continues, "It may be a bit controversial, but I think the importance of relationships in this market is overstated. Relationships are a protective barrier to avoid change and a method of maintaining control in the market. If local companies use 70% relationship and 30% content, we use 70% content and 30% relationship, and we are just as successful."


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