Adapting the pharma talent model
By Mia Burns (firstname.lastname@example.org)
As the pharma industry tackles global economic and demographic pressures, rising customer expectations, and obsolete cultural models, changes resulting from necessity are now occurring. PwC’s Health Research Institute issued a report in February 2013, New Chemistry: Getting the biopharmaceutical talent formula right, detailing how the evolving R&D organizational models are transforming the talent requirements within pharmaceutical companies. Exclusively scientific expertise is no longer the most necessary skill set, as companies now seek regulatory knowledge and relationship skills. New models alone won’t be enough to face these challenges. Companies need to have effective HR strategies in place. A previous PwC global study found that CEOs identify talent gaps as the second largest threat to growth prospects, which is behind worry about corporate tax burdens. HR should be at the forefront of bringing in the correct mix of staff. Associate Web Editor Mia Burns spoke to Mike Mentesana, U.S. pharmaceuticals and life sciences R&D Advisory services leader, PwC about the talent formula report.
Q: Could you elaborate on the type of HR strategies needed?
A: Pharmaceutical companies are reassessing the way they conduct R&D, and at least one in three already has significantly revamped their R&D structure and processes. Whenever there is significant change in an organization, it’s likely to affect the culture. We’re saying that human resources needs to be involved on the front end of R&D transformation, working alongside R&D and senior management to develop workforce design strategies to retool and redeploy resources to meet the needs of the business, not as it is today, but as it will be tomorrow.
Specifically that means identifying roles, responsibilities and relationships, and any gaps in skill sets. Through our research and experience, we know that some pharmaceutical companies are restructuring internally, changing incentive structures and investing in workforce and career development to retool existing talent. Others are looking outside their own organizations to fill gaps in talent or extend their capabilities. They are collaborating with contract research organizations or academic medical centers or in some cases competitors. This new external focus requires that management enable researchers to share experience across different organizational cultures, distance, and competing loyalties. It requires new skills that the existing workforce may not have.
PwC’s Health Research Institute found that 70 of senior executives on the management team are now actively involved in R&D workforce design. That tells you the importance they place on human capital in their organizations. But many see HR as a tactical function and underutilizing HR as a necessary and strategic part of the business planning process, organizational effectiveness, talent management, and helping to shape talent goals.
Q: What are some of the characteristics of the new R&D model?
A: The new R&D model is becoming more externally collaborative. The pharmaceutical industry recognizes that the R&D model needs to shift in order to spur innovation and productivity, and external collaboration is a way to spur innovation in science, manufacturing and development.
Technology has played a huge role in transforming the R&D organization -- from a better understanding of genomics and proteomics to more scientists focused on pathophysiology to understand the underlying conditions for a disease.
The two largest chunks of R&D budget for drug discovery and development are at opposite ends of the development timeline: lead optimization (at the beginning) and Phase III clinical trials (near the end). These two areas also happen to be periods when outside partnerships are most likely to occur during a drug’s development, whether it’s collaborating with academic medical centers for drug discovery or looking at outsourcing and CRO collaborations in later stages of testing.
Pharmaceutical companies are making business model changes with a growing understanding that scientific innovation will no longer be driven solely inside their walls. Science is going to be everywhere. And as more of the R&D focus becomes external and collaborative, there is a greater need to manage a network of alliances and partnership.
R&D is getting into many different areas through collaboration with other pharmas in peer-to-peer scientific relationships, or through joint ventures or by contracting out manufacturing or client trials. And why are they doing that? They are doing that so that can spark innovation wherever it takes place. They’re doing it so that they can truly meet unmet medical need, which is the ultimate goal. And they are doing it out of necessity given the pressures on the business model.
Q: How would you define traditional competitors? What could be done to lead a shift from relying on traditional bonuses to adopting innovative incentive programs such as intellectual property sharing or sales royalties?
A: Traditional competitors have typically been within a tight-knit scientific community within commercial R&D. Unlike in academia, where a scientist may spend years focused on one disease or mechanism, the commercial R&D workforce must work every day to confront fundamental business questions such as whether to go forward with a particular molecule candidate or eliminate it and identify areas of unmet medical needs. Their focus must be on practical business challenges and the total cost of drug development.
The compensation model needs to reflect that, and for R&D staff, the connection to revenue can be distant, stretching several years. Some companies are rethinking their compensation approach, such as shifting away from using stock incentives as performance compensation. Instead, they’re using cash incentives more closely tied with real R&D metrics, paid out over time. They are using both hard, quantitative measures of productivity and softer measures of accomplishments with greater emphasis on team contributions in additional to individual accomplishments.
The challenge lies in creating the right incentives for performers at all levels of the organization. Performance metrics need to be appropriately identified and there needs to be a balance of financial and non-financial incentives. Scientists are motivated by unique factors. They want autonomy. They want appreciation. They are motivated by the thrill of discovery. And they want a career path. In new R&D models, non-financial incentives will be increasingly important. For example, you might see a return to sabbaticals to help satisfy that need for autonomy.
So much of our society is driven by money and the acquisition of wealth. But in the scientific community, there also is a higher purpose that permeates the entire culture -- a desire to meet unmet medical need, to extend health and improve quality of life. Pharmaceutical companies have done this. Diseases that were once death sentences are now treatable illnesses. That’s a powerful motivation to go to work everyday, and is not necessarily that same as in other industries.
The cultural mindset within pharmaceutical R&D is quite amazing. I have spent a lot of time in R&D organizations and found that when you ask “why are you here?” to anyone on staff – whether it’s the lead scientists or the custodian –the answer is similar; it’s “I’m here to help drive development” or “I’m here to get products to patients.” HR’s role is to help preserve that culture of accountability, a culture where innovative can thrive but within the context of the total cost.
Competing for talent is becoming a harder job. In the past, pharmaceutical company A may have plucked top talent from pharmaceutical company B. While that’s still happening, pharmaceutical companies are seeing increasing competition for top talent from non-traditional market participants, such as high technology and biochemical engineering companies. So now they are not only competing for top talent with other pharmaceutical companies, but with companies offering different financial and non-financial incentives. To remain relevant, pharmaceutical HR strategies need to keep pace by exploring new and non-traditional incentive structures that are working in other industries, such as profit-sharing, risk-sharing, and intellectual property sharing.
Q: Why would HR, R&D, and senior management have worked separately regarding this issue as opposed to collaborating?
A: The role of HR is evolving just as the R&D model is evolving. It’s not so much that HR has worked separately in the past, but rather that it has not been involved as strategically as it could. Now, the partnership between HR, R&D, and senior management is getting tighter and more strategic. Seventy percent of the clients that we talk to report that that leadership is getting extremely involved in workforce planning. And that just shows a tighter alignment where senior leadership is more engaged. Over the past five or 10 years, much of the focus of R&D restructuring has been cost-driven, or more specifically, a focus on cost take-out. Now, much of the cost has been taken out, but it has left talent gaps, and doing more with less is not a strategic response. The partnership between HR, R&D, and senior management is evolving into a strategic play in business planning and growth.
Q: Besides academic medical centers and third parties such as CROs, what are some other industries and alliances that HR leaders could consider?
A: Pharmaceutical companies can learn a lot from other industries, particularly non-traditional market participants that are increasingly vying for talent. They need to collaborate with academia to identify and develop the future workforce. We are seeing increased prevalence of scientific peer-to-peer networks, scientist-to-scientist collaboration, scientist to hospital collaboration, and doctor-to-doctor collaborations.
Pharmaceutical companies need to hunt for talent in non-traditional places. It’s no longer just going to the PhD programs. There is top talent coming out of MBA programs, with people who have dual degrees in science and business or technology. Where are those people going in high-tech industries and how are they being incented? How can the Pharma R&D attract them? HR needs to understand this dynamic to help close the talent gaps we’re seeing in R&D.
Posted: October 2013