At the Bioprocess International Conference in Long Beach, California last week, one highlight of the November 2 plenary program was an overview of the Roche-Genentech merger by Tim Moore, Roche's senior vice president of pharm tech operations for biologics.
One of his team mates had presented earlier that day on one of the company's operational excellence initiatives. Moore's comments were interesting and often quite funny, but underscore the fact that "people" issues are what make or break corporate mergers.
One of his slides quoted a story on the integration, likening the merger to the joining of love beads and lederhosen. Roche brought over 120 years of history to the merger, where Genentech's history was arguably equally as rich, but compressed into only 35 years.
"The companies' structures were very different," he said. "On the surface, nothing would suggest that they would ever come together."
The transition team studied the root causes of merger failure quite closely he said. Typical reasons were culture clashes, loss of top talent, weak leadership, poor communication and unrealistic expectations.
In contrast, 39% of successful mergers work because their teams have a strong focus, relentlessly communicate, identify and exploit strengths, continually, always assume the other partner's good intentions, and adopt a winning attitude. In the end, he said, "mergers succeed or fail because of the people, especially the leaders, involved."
Generally, he says, it takes two to three years for real integration to take place.
The merger left the need to integrate oprations for 24 biopharma plants, 19 sites and 12,500 employees. As he noted, "the odds were not in our favor. Failure is far more common than success in corporate cultural integration."
All mergers promise cost savings, he said. The question for the new tech ops team was how to drive risk taking and innovation, yet continue to be efficient and effective.
Moore recalled when he started working in Genentech's engineering department, overseeing a new flexible cell culture facility, a $400-million project. During his first week there, he met the engineer who had completely automated that plant. He was wearing flip flops, a sweatshirt and a beachcomber tee shirt, Moore recalled. What he learned, he said, was that, at Genentech "it wasn't about what you looked like but who you are."
The idea of assuming the other partner's good intent is easy to overlook when you're used to operating in a certain way, he noted. "When you hear things that seem different [from the way you think or do business] you tend to judge," Moore said. "Assuming good intent, asking why they think the way they think makes a big difference."
One small but important difference between the two companies was the degree to which they communicated, especially by email. At Genentech, Moore said, emails were very frequent, as issues came up. "At times, they almost seemed 'needy'," he quipped, where at Roche, the idea was to communicate by email only when important to close a loop.
At Roche, he said, people preferred to communicate the answers when they had the answers, rather than during the process of getting the answers. This simple difference led to a few misunderstandings in the early days, he said.
Communication during weekends was also an issue. Although both groups were driven by strong work ethics, some inidividuals believed in communication during weekends, where others saw that time as sacred family time, and would only communicate when the issue was extremely important. Those of the "24/7" mindset would then ask, he said, 'Why isn't someone getting back to me? It's been 10 minutes already.' A conscious decision was made by both partners to share information as soon as it was available, and to err on the overcommunication side. This occasionally resulted in cases where some divisions received more information than others, but eventually reached equilibrium.
Other micro issues became important as well he said. Genentech employees could show confidence in a way that Roche colleagues interpreted as arrogance.This issue was resolved as well, with the goal of driving patience and resilience, and giving feedback and sharing concerns.
Transformation, Not Assimilation
Moore divided pharma's recent consolidations into three categories:
- Coexisting cultures, for example J&J's relationship with Centocor
- Assimilation, as with Wy-Pfi
He described Roche-Genentech as being a transformation. ( Of course, one wonders whether Pfizer and J&J wouldn't, publicly, describe their hookups the same way.)
However, Moore emphasized that true transformation was the goal, from the start, because both partners believed it would create new and greater value for the combined organization. He said that the management team looked at four key criteria: culture, quality, innovation and process.
Transforming tech ops involved more than process and structure, but a mindset shift, he noted.Like all corporations, the new Roche Genentech had to respect diversity, but, Moore said, diversity had to encompass diversity of thought. "We wanted to create an environment that allowed the best thought to flourish," he noted.
As the merger progressed, other differences between the partners became more obvious, Moore noted. Roche's culture was more traditional, where Genentech's motto was "work hard, play hard."
The U.S. company encouraged entrepreneurial thinking via such things as stock options, where Roche was more conservative. Genentech's structure was decentralized, and more of a network, where Roche's was centralized. In addition, Genentech's decisions were made through single decisionmakers. "We'd get people together to discuss issues, but, generally, one person would make the decision, where Roche was a consensual decisionmaker, where decisions were made by groups, after debate," Moore said.
Complicating the integration, he noted, was the fact that each plant in each network could be said to have its own culture. It was important to create a new culture that respected country cultures and legacy company cultures, Moore said.
But the new company also needed to drive innovation, which meant tolerating some level of risk taking. Management had to ask: "How are our reward systems set up?"
Both companies had been in the process of rolling out global quality standards when the merger took place. Moore said the top goals initially were to:
- Keep our promises
- Make good decisions
- Engage all employees
- Be efficient and effective
Risk management and global standards were engrained into the new company's quality systems, he said, and the goal was to continuously keep employees engaged, and to attract and motivate people.
There was a need to focus on strategy, people, intent and delivery, and to make sure that everyone in the organization understood what the merger was trying to accomplish.It was important not to overwhelm individuals or divisions with too much change at one time. "Overloading causes people to 'check out' and make mistakes," Moore noted. Hiring more people wouldn’t move integration forward. Instead, Moore said, they had to slow down to speed up the pace of change.
At tech ops, he said, work streams and decision points were shared with the entire organization. Manufacturing was organized based on technology platform. This was possible since the technologies were sufficiently different, Moore said, and strong global functions were set up to support network success.
He discussed the new company's decreased footprint and downsizing, but said that the new vision placed the ultimate end user, the patient, at the center of all things.
Moore described Roche-Genentech's tech ops' key values as follows, in this order, ensuring:
The company's right to operate – compliance and quality
Supply of product to patients
Contribution to financial targets
Five strategic imperatives drive Roche-Genentech's tech operations, he said:
- Reliability, planned predictable performance. ("Did I do what I said I was going to do?")
- Agility, and the ability to see around corners and anticipate change. ("Are operations flexible enough to adapt before environemtnt changes?")
Passion, intensity and courage. All taglines from Roche's corporate mission statement.
His goal is to drive a proactive approach, and to highlight accountability, Moore said.
In the end, he said, success in any merger is all about science people and patients. In this regard, the two companies had more in common than their employees may have thought, initially. Moore quoted an employee who was originally from Genentech, "If people who stay with the company remain true to the core values we had at Genentech, it won't matter whose name is on the front door."