Fixing Big Pharma Research: Two Things about Restructuring

For a pharmaceutical company restructuring to be successful, senior management has to get two things right:

1)  Restructuring is a forward-looking process.  Management has to plan the new organization so that it is successful in the future. People, processes, organizations, buildings, or entire sites are retained on the basis of what they can accomplish going forward.  Such decisions are not made on the basis of past performance (except insofar as past performance is relevant to predict future performance).

2) The new organization has to become significantly more efficient, to achieve the same or better overall level of productivity.  Cutting expenditures by 20% means a new organization has to be at least 25% more efficient than the old one.  Cutting a unit’s headcount by 33% requires 50% more productivity from the remaining staff.

Bottom line:  A successful restructuring has to look forward, and it must create large increases in efficiency.  Sounds straightforward, but it is not easy.  As history shows…

 

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