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Pharma companies want to promote their own, rather than hiring senior people away from competitors or other industries. But given the narrow backgrounds of the coming generation, fewer and fewer managers have the coordination and foresight needed to succeed in a general management job.
Today, a senior pharmaceutical executive must be the corporate equivalent of a Renaissance Man. Like Leonardo da Vinci, whose work at the dawn of the 16th century married divergent disciplines from painting to mechanics, pharma's next generation of renaissance men and women must foresee connections between the commercial and clinical sides of the business—from global marketing strategy to regulation, R&D, and clinical trials. They must be comfortable with several styles of management and motivated by watching people in far-flung sectors of the company succeed. Unfortunately, today's top performers frequently are confined to one sector of their company. Rising through silos, they manage best by focusing down into their organization instead of up and across the enterprise.
As baby boomers retire, the pharmaceutical industry faces a leadership shortage. Not because tomorrow's leaders are less bright than today's, but because our increasingly compartmentalized corporations tend to reward specialists. To meet the growing need for people who can shoulder the heavy burdens that pharma places on general managers, companies must broaden the horizons of coming generations. By exploring talent management strategies—practical methods for seasoning executives by shepherding them through a carefully orchestrated career progression—a company can exploit the talents of high performers while tailoring their development to meet the company's needs.
The next generation of pharmaceutical managers has not just been trained in a narrower range of disciplines—it also is smaller. There just aren't enough good minds to go around. This problem has been a few years in the making. As early as 1997, McKinsey & Company commented on the "war for talent." They reported in 2000 that 20 percent of the corporate officers surveyed agreed they did not have enough talented leaders to pursue their companies' business objectives.
Given the demographic trends, the situation hardly could have improved in the intervening years. The US Bureau of Labor Statistics reports that between 2002 and 2012, the annual growth rate of the country's workers over age 55 will increase at nearly four times the rate of the overall population, while the number of workers aged 35 to 44 will decline by 15 percent. Data from the Rand Corporation indicates that the growth of the US labor force has been slowing for the past 20 years.
The Inevitable Failure of a Silo Star
To compound the problem, some senior managers are leaving before they retire, creating even more top vacancies in large pharmaceutical companies. Incumbents flee the politics and impersonal scale of large organizations for small pharmaceutical and biotech companies.
Pharma's long tradition of promoting from within magnifies the overall demographic trends. Companies want to promote their own, rather than hiring senior people away from competitors or other industries. But given the narrow backgrounds of the coming generation, where 18 years of experience can sometimes seem like one year of experience 18 times over, fewer and fewer managers have the kind of coordination, foresight, and complex problem-solving ability needed to succeed in a general management job.
Finally, sheer love of science—and sometimes hubris—can keep a company's best minds off the general manager track. Many clinicians want to stay close to their science, and decline to report to people who have lesser scientific credentials. This is unfortunate, because the combination of a medical background and business experience is among the most powerful within the industry. If the talent shortage cannot be turned around, companies will try—at least in the short term—to draw on experienced leaders from other international industries. But given the demographics of the workforce, the wellspring of experienced candidates in other Fortune 500 companies also will run dry.
The Primary Obstacles to Managing Talent Strategically
Talent management begins with identifying employees who have the potential to succeed in general management jobs. The best practice is to assess people early and often. At least by the time employees have moved one step up from that of individual contributor (at the level of a regional manager, for example), managers should have a solid idea of their potential and aspirations. This is the time to forge a plan for the employee's development needs. The company must begin reshaping the employee's future before it reinforces behaviors that undermine the traits required in senior management. It is easier to mold the thinking of someone five years, rather than fifteen years, into a career, particularly if the employee already has been rewarded for the traits management hopes to change.
Assessment elements It is clear what qualities the budding general manager needs:
Feedback and managing expectations Employees deserve an early reading on the gaps in their competencies. They have a right to understand what job experiences, training, and coaching their employer will provide to enhance their careers.
At the same time, managers must use great sensitivity and diplomacy when deciding just how candid to be with employees. While it is unfair and often premature to write off a young performer as one who never will make it to the top, it also is unwise to lead employees on with false hopes. Giving people early and realistic previews of various senior jobs helps employees self select. Some individuals may not desire the tricky balance of work and life, the heavy responsibilities and occasional headaches that accompany senior management status.
Seasoning executives Talent management programs aim to guide those with the highest potential along an accelerated path. But the company cannot merely create a development plan, provide a coach, and arrange some training. Again, in the example of Mark, he lacked a foundation of experiences that prepared him to operate in the senior management environment. Managers must move people around the organization consciously to give them the necessary breadth of experience.
At each stage along the way, as managers develop their high-potential performers, they must consider carefully the match between an individual's talents and his or her next role in the organization. Before moving someone into a new role, it is important to understand what, beyond the technical skills, is required for success in the new job. How much accountability is required? Is it strategic or tactical? How does it affect business results? Equally important, what is the context of the job within the organization? How will the new role interact with other areas? What formal and informal relationships are needed? How are results achieved?
Even as they assess roles, managers must learn more about the people they are developing. Have they served in operational leadership roles? Advisory roles? Collaborative roles in a matrixed organization? What competencies have they relied on to be successful? Which ones do they lack?
Before people are promoted into positions as institutional managers, they should master 50 to 75 percent of the competencies required in such a position. First, they need to succeed in roles where they are accountable for basic building blocks in the management skill-set, such as:
The best jobs for providing these experiences cut across the organization and force people to leave their functional silos. Unless they are moved through roles that require this skill set, people come to senior management positions with depth—but no breadth. They are unable to add value outside of familiar terrain. Jobs in product development, global marketing, branding, and franchise/portfolio management are all examples of positions that can provide cross-functional experience and broad business perspective.
Consider, for example, how a person responsible for a therapeutic area is required to run it like a small business—from managing the P&L on a daily basis to coordinating input from clinical, medical, and regulatory departments. The area manager must develop a long-term strategy, present and sell that strategy, and be accountable for global results. People in such roles learn what questions they should be asking in order to make sound decisions and set new directions. From there, they can move to managing larger therapeutic or geographic areas with a broader scope.
The catch is, in most pharmaceutical companies there aren't enough of these positions to go around. Companies must either cycle people through them fairly quickly, perhaps in two-year rotations, or they must manufacture other similar experiences. Assigning people to special task forces or internal initiatives can give high-potentials the opportunity to forge relationships with people in a wide variety of functions across the company. For example, twice each year one of the major pharmaceutical companies assigns 18 high-potential employees to spend six weeks addressing a strategic business issue.
Pharmaceutical employers have created a talent gap by relying too heavily on coaching and training. To nurture the next generation of leaders, companies must shift their focus to providing the foundational experiences that future general managers need. Once they begin to view talent development in terms of actively accelerating and auditing an individual's experience, the mission changes from training the next generation to finding the right position to foster future growth. The question on every manager's mind should be: "Who are my high potentials, and how am I going to prepare them for the next big role?"
Finally, closing the talent gap requires pharma to alter a mindset that pervades all of corporate culture. When an employee fails at any point along the way, managers usually are not viewed as personally responsible. Companies blame the poor performer rather than the bosses who hired him and were expected to assess, train, and develop him. When managers begin to be held accountable for the success of their top hires, organizations will enjoy much more management continuity. But top leaders will have to add yet another layer of responsibilities: assessing potential, socializing newcomers, setting expectations, rewarding desired behaviors, and advancing people successfully.
The pharma industry has the knowledge to make and carry out long-term strategic plans. Every company in the industry can plan the launch of a product 15 years into the future. In fact, any failed launch would spark an investigation into its planning and preparations. Ironically, the same industry has been unable to plan its own leadership a decade in advance. Pharma finds itself unprepared in one of the most crucial aspects of the business. But if the same thoroughness, resourcefulness, and innovation that shapes product operations is brought to bear on pharma's management talent gap, future generations will be in good hands.
Ian Wilcox is vice president and pharmaceutical sector leader at the Hay Group. He can be reached at firstname.lastname@example.org