This month, GlaxoSmithKline's CEO Jean-Pierre Garnier discusses his views on management motivation, the challenge from the emerging economies, the development of GSK's innovation pipeline and leadership development.
Frank Brown (FB): I'm interested in the millennial generation, what motivates them. I have seen lots of young people in their 20s and 30s join the organisation at PricewaterhouseCoopers, and INSEAD too for that matter, and it strikes me that they are very different in their career aspirations and in the breadth of what they want to learn. They have a better world view than our generation did.
Jean-Pierre Garnier (J-PG): Yes, we see big differences of attitude and aspirations in various parts of the world. Young Asian candidates from China and India are often very motivated in what it takes to be successful in a large organisation. In many ways, they embrace the agenda of the company with no reservations. In Europe, and to a lesser extent in the US, they are looking for a contract that involves more give and take.
It will need to take into account their lifestyle needs and the social aspects. They are less focused on what they can do for the company and more focused sometimes on what the company can do for them.
FB: One of the problems we have at INSEAD is that the MBAs who are exiting think their next stop should be the CEO chair. They get so motivated and so focused, they seem to want to run before they can walk.
J-PG: I don't mind people having their eye on the CEO prize, so long as they understand they have to learn the craft first. That they have the ambition to be the best in their chosen field is fine with me. I look for people who are aggressive and ambitious. The people I am less interested in are the ones who equate the profession and job with money. I think they are missing the point. The money will come if you are successful; you don't have to look for it. You see people wanting to go into private equity, hedge funds, VCs, and you find that they have no experience of an industrial sector and they pretend to become investors and entrepreneurs. This kind of attitude is a recipe for disaster, but schools like INSEAD can advise students on this before they leave.
FB: I think most people want to join an organisation that cares about the world at large. So at INSEAD we try to push people in the direction of where their dreams and interests lie, but I hope it's not strictly economic. I agree with you; if you go somewhere strictly for money, you are less likely to have a rewarding career and it detracts from the need to embrace the agenda of the company.
J-PG: On the social front, I find this generation is more focused on making sure they join a company that's trying to do more than just meet the financial projections of the investors. GSK is big in philanthropic undertakings; we spend a lot of money with a very specific goal in mind, such as eradicating a disease. We give away $550 million a year and have the biggest public donation programme in the world for elephantiasis, which affects millions of people (also known as lymphatic filariasis, this tropical disease is transmitted by mosquito and affects some 120 million people in the developing world). In 2005, GSK donated $26 million worth of the preventative drug Albendazole to 36 countries. It's interesting, because our scientists, who are often very idealistic, follow this like an adventure. It can make the difference when they have to choose companies - they might pick us because of the effort we make to provide drugs to the greatest number of people regardless of their economic status.
FB: Do you feel that you get the credit you deserve for these programmes?
J-PG: It's a great motivating factor for our employees - we have 120,000 people and that's an important constituency. Also, there is no doubt that opinion leaders place GSK in a different field. I remember Ted Kennedy, who is not exactly fond of the pharmaceutical industry, telling me that there is GSK and then there's the rest of the pack because of the work we've done with HIV/Aids in Africa. So they know precisely what we're doing and we make sure we inform them. The part that doesn't work very well in terms of getting recognition is the media. Journalists tell me that they won't write about our philanthropy because their editor isn't interested. So therefore the public at large has no clue about the tremendous programmes undertaken by GSK and others.
FB: I'm glad you feel many of the important constituencies do focus on the fact that you have a good reputation.
J-PG: Well, I think also that in society today, particularly in the developed world, there is less and less trust in large institutions, whether they're government, international agencies or multinational companies.
It's very important to take the high ground because you cannot assume that the public is always on your side. Again, this is something that MBA students need to understand. As executives in any firm, they will need to be ahead of the curve. We received a lot of credit when we put our clinical trials on the website, so everyone could see what we were doing. But if we'd put them on the web after we'd been asked, it would have been seen as a defensive posture. You have to constantly anticipate what society wants from you and try to take the high ground early. I think that transforms the reputation and image of the company more than anything else.
FB: GSK is a huge, complex organisation with 120,000 people, but it is dependent on innovation, research and development. What have you focused on in terms of creating a more innovative organisation?
J-PG: In a big organisation like this, you have to focus on the core process of a company. What is the raison d'etre? If you're trying to discover new drugs, even though it's complex, you have to make it as simple as possible. The way we've done that is unique: we decided that size was the enemy in some parts of the process. We had to define which parts of the process require size and which parts can be done pretty much in a small environment.
During the process, the scientist chooses a target for drug discovery and then picks a chemical or a biological approach for that particular target. That is the job of one single brain and some of those people create or waste billions of dollars of value, depending on whether they have guessed correctly. This moment should happen in the most supportive environment.
But with a big pyramid of 20,000 scientists, this moment can be lost.
So we broke down the classic organisational pyramid and created small centres per disease: we have one for asthma, one for certain cancers, and so forth. And within that group we have a couple of hundred scientists, chemists and microbiologists, and they are responsible for the creation of those drugs. There is no interference, no bureaucracy, no layers; there's one CEO who has full power. They try to make that moment happen often and happen right. If we are lucky enough to discover a drug, we have to test it on 5,000 patients across the world. There we will need the bulldozer approach, because drug testing is a regulated activity and it's right to have a big organisational pyramid for that part of the task.
So it's not about centralising or decentralising. It is about the activity we are trying to engineer and the best scenario for this activity to take place successfully. We have to follow the key processes and organise accordingly.
Five years ago, we were at the back of the pack. Now everybody will tell you the we have the best pipeline of new drugs. It is about energising and empowering people, and making them totally transparent and accountable. I think that that's the lesson for INSEAD MBAs.
FB: I believe very strongly that companies are way too complex; processes get built up over time and need to be looked at periodically to see how they can be simplified.
J-PG: I think in the past we've tried to align people with policies and processes. During the Roman Empire they would train key governors hard by incorporating their set of values into them and then send them out to the various provinces, without the benefit of faxes or phones, and rely on them totally. You've got to do that in a big company. You can't tell a Vietnamese general manager which policies he should put in place, but many companies still try to. You have to make sure his value system is your value system, and then he'll do the right thing. You audit it thoroughly, though, as a precaution.
But I think that alignment is a key issue in big companies, and you have to create it with communication and empowerment rather than undue control.
I'm sure you've had in your professional life a chance to check the books of some of those sophisticated companies and more regulation didn't necessarily help.
FB: I think that is what we found with Sarbanes-Oxley. When companies had to apply internal control provisions, they found their control systems were way too complicated and the only way to comply was to simplify them.
Going back to these centres for drugs to fight particular diseases, I assume they're decentralised and that a centre might be anywhere in the world. Do you have a main focus on some of the major emerging economies - Brazil, Russia, India and China, for example?
J-PG: We have a couple of centres each in the US, the UK, Italy, Japan and China. We set them up in different places based on the availability of top-notch scientists and often they have satellites, so they're not necessarily in one single location, although that's always preferable.
We are moving some of our key processes, as everyone has done. In terms of basic fundamental research, I think that India and China are still behind Europe and the US because of their lack of infrastructure.
FB: But the infrastructures are improving fast; if you look at Shanghai today, compared with five years ago, it's just amazing, and there's good improvement in India as well.
J-PG: This raises an issue for Europe - I'm concerned about how it will compete with these new economies. Innovation is the only area where we can stay ahead of the pack. Are your students concerned about this, the centre of the world moving to China and India? Are they going to go there?
FB: We tend to get the pioneering mentality at INSEAD. Our Asian campus at Singapore has taken off and we have 400 MBAs who want to study there.
I think that the average student at INSEAD is generally a bit more adventurous.
The European ones are concerned about European competitiveness, but are open to working elsewhere. European competitiveness is a critical issue.
I think much more has to be done on a collective basis; there should be centres of excellence. I also think that labour competitiveness issues are a lightening rod - some European economies are really putting companies at a big disadvantage.
J-PG: I sense a lot of discouragement in Europe with people thinking that governments do not govern much. And that's probably right. But I haven't heard an articulate counter-proposal from an economic standpoint to maintain Europe in the flow and prevent economic stagnation. It would be interesting to study this area because we know what's wrong, but let's focus on what's right and what we can do about what's wrong.
FB: I want INSEAD to become known as a leadership institution and one of the things I always ask is: how does a large organisation identify the next generation of leaders? It's more than succession planning, but a lot of it is to do with the innovation that we talked about before.
What is GSK's philosophy in respect to leadership development?
J-PG: There is no substitute for time and effort. We do the usual stuff, such as self-evaluation and training options, but we also have our forums.
They operate at different levels in the company. I run the CEO forum; it is a three-day affair, where I invite 50 to 60 people who I would not meet in the normal course of business. Their typical profile is that they are in their early to mid-30s; they probably have one or two promotions, so they've made a mark, but they are still in the bowels of the organisation.
I get them together and give them a real-life problem. We deal with five to six issues at a time. We also have a session where they can ask me anything they want.
I form a network with those people and I keep an eye out for them; this is a list of up-and-comers. The retention rate of this group is fantastic: because they're good, they get promoted faster. I think it is very important to tell people how they stand. So within the company we probably know where the top 10% of people are. Certain jobs open and we have this wealth of information about the people that should be competing for that job.
We avoid provincial succession planning: if you're number two in a country, you cannot become number one in that country. You have to go somewhere else first.
To make a career with GSK, you have to experience three different dimensions.
The first is different fields; you cannot be just all about marketing, or all about finance. You have to move around. Second, you have to have worked in at least two different countries; that's the geographic dimension.
The third is you must work in more than one of the different divisions - consumer, vaccine and pharmaceutical. So the ideal person for us is someone who has been forced to adapt to something with which they're not familiar. For this, you need to be resilient, a quick learner, and those are qualities that are essential in running significant pieces of the business. We force our managers to give very blunt feedback. If someone is not invited to one of these forums, it means they're not in the top echelon of the class and they should be told that.
FB: You said before you want people to aspire to that level.
J-PG: Absolutely. They need two recommendations to get invited to a forum - from their direct boss and the boss of their boss. So there is a mentoring system that takes on a life of its own and that's very helpful.
That's why we have very good people everywhere. The exception is Asia, especially China, because it's harder there to get good people - demand exceeds supply.
FB: Well, we've covered a lot of ground. I was most interested in the areas that touched on leadership, an area I want to focus on at INSEAD.
We both agree that we need to educate a generation not to focus solely on the economic rewards. They need to learn the craft of management and be able to operate globally.
J-PG: Thanks for the opportunity to discuss these issues.
FRANK BROWN - Frank Brown's appointment as dean of INSEAD in July of this year is unusual in two respects: his experience in international business as global head of PricewaterhouseCoopers' $3.5bn advisory services makes him the first non-academic to be appointed; and he is only the second American to hold the post in the school's 45-year history.
JEAN-PIERRE GARNIER - A PhD in Pharmacology and a Masters in Pharmaceutical Science, Jean-Pierre Garnier first joined SmithKlineBeecham as president of its pharmaceutical business in North America in 1990, rising to COO by 1995 and CEO by 2000. He became CEO of GSK a year later. He is a recipient of the prestigious French award, the Chevalier de la Legion d'Honneur.
THE INNOVATION PIPELINE
GSK's turnover reached $40bn in the last fiscal year, employs 120,000 people and operates in 116 countries. Its biggest commercial challenge is having a fast, creative innovation pipeline to create a stream of commercially successful therapeutic drugs. Garnier recruited the former Japanese academic Tachi Yamada at the time of the merger between SmithKlineBeecham and Glaxo Wellcome in 2000 to become the new combine's head of research. Garnier told him to "think boldly about what you want to do". The result is a much admired system of units called CEDDs (Centres for Excellence for Drug Discovery). These have the advantages of being small and flexible, and researchers are judged on how many successful drugs they pump through the pipeline.