Organizational polygamy

January 1, 2009
Paul Gardiner, Andrea Sobrio
Pharmaceutical Technology Europe

Volume 21, Issue 1

Paul Gardiner and Andrea Sobrio explain why most companies need 'organizational polygamy' to maximize profit and best serve their customers.

Traditionally, pharmaceutical organizations consist of small global and regional organizations and large, autonomous affiliate organizations. While this can be the best model, for many products, therapeutic areas or business units, it is less effective and more costly than centralized structures. Also, with the emergence of new technological innovations, particularly in connectivity and communication, the relevance of country borders as the main drivers of clinical decision making is diminishing considerably.

The three organizational models

For our purposes, the three organizational models are:

  • traditional affiliate

  • hybrid

  • global/regional.

In the traditional affiliate model, the majority of headcounts and budget is allocated to the affiliates. This model is geared to offering services highly customized to local needs, and is very effective in covering large local general practitioner (GP) communities. However, this will always be the highestcost option because of the inefficiencies inherent in replicating efforts and organizational structures in each country. Effectiveness is hampered by suboptimal dissemination of scientific knowledge, nonaligned messages across geographies and different approaches to identifying and managing key opinion leaders.

The hybrid model sees strong regional marketing and medical teams working closely with local brand teams. Affiliate activities are reduced to localization and local implementation.

The global/regional model has all commercial operations personnel reporting into a single centralized organization with profit and loss responsibility. A regional backoffice support group (HR, finance, etc.) supports the global/regional organization.

Table 1 indicates the impact of the different organizations on key functions.

Table 1: The impact of different organizations on key functions.

Finding the right model

There are two factors that need to be considered when deciding on the optimal organizational models for products/portfolio(s)/therapeutic areas. The first is the complexity of the products (mode of action and administration) and the therapeutic area (diagnosis and treatment). Highly specialized customer groups, working with complex therapeutic areas and products, have specific needs, such as:

  • Ad hoc, sometimes urgent, discussions of patient cases with leading global or regional centres that have extensive product usage experience.

  • The sharing of clinical experience across geographical boundaries, (i.e., leading countries sharing with less experienced countries).

  • Informal networks of expert peers in which patient cases can be discussed.

  • The sharing of detailed diagnosis, treatment and product expertise from the world's or region's top centres through detailed and formalized classbased or bed-side (live) seminars.

The second factor is the size of the customer base, which requires the following to be considered:

  • Proving the level of support irequired by specialists to a GP customer base would be prohibitively expensive.

  • At the same time, a GP customer base typically needs to be covered by a large sales force in each country needing the support of an affiliate organisation.

  • Peer-to-peer networking across geographical boundaries becomes more and more important as the size of the customer group decreases.

  • For very small customer groups, critical mass can only be achieved regionally or globally.

Figure 1 combines the two factors discussed above.

Figure 1

In small or focused companies, all products/therapeutic areas can fit into the same quadrant. However, for mid-size and larger companies, 'organizational polygamy' is probably the best option.

From monogamy to polygamy

Let's look at a hypothetical scenario. ACME Pharmaceuticals had a traditional affiliate structure with the big five EU general managers, and the cluster leaders of mid-size and eastern EU countries, reporting into the European operations president.

However, ACME's customer equity surveys were showing an alarming trend. While GPs were very happy with their interactions with ACME, specialist customer groups were far less content, with oncology and intensive care performing worst.

Based on competitor research and a thorough business review, the EU operations president prepared a proposed new EU organizational structure to share with his leadership team. He titled his presentation 'Organizational Polygamy: Why having three models is better than one'

His proposed structure had three components:

  • The successful affiliate model would be retained, with the big five general managers and the cluster leaders reporting directly into him. This model was clearly very effective for GPs.

  • As oncology and intensive care focused exclusively on specialists, and the products were a mix of complex mode of action and complex administration, each would become a pan-European business unit. The heads of these business units would have profit and loss responsibility and would report into him.

  • The pain and cardiovascular therapeutic areas had specialists and GPs as customer groups. He proposed new regional pain and cardiovascular medicalmarketing teams. They would report into the regional marketing and medical directors and would work closely with local brand teams to ensure that they were meeting the specific needs of its specialized and retail customer constituencies. (His presentation of the polygamous organization can be seen in Figure 2.)

Figure 2

The European leadership team accepted the proposal, and the transformation programme was launched. After 3 months of design, and 6 months of preparation, the polygamous organization was successfully launched.

The polygamous organization's metrics continuously improved after launch. Three years after the launch, the European operations president presented organizational improvement metrics. The company chairman was particularly interested in the following metrics for oncology and intensive care combined:

  • sales/rep: 30% increase

  • income/rep: 40% increase

  • opex/sales: 15% reduction

  • sales/sales expenses: 40% increase

  • sales/marketing expenses: 30% increase

  • overall headcount: 40% reduction.

Despite this decrease in headcount, the intensive care and oncology business units experienced unprecedented improvements in customer equity.

Conclusion

Europe comprises more than 20 countries, each with their own approval, regulatory and legal processes. This diverse yet fast converging domain is ideal for centralized or panEuropean organizations, allowing the EU to become a showcase for the rest of the world.

However, while this is a successful trend in Europe, some organizations have tried polygamy, only to fail and revert to their monogamous ways. Identifying and exploiting the benefits, whilst avoiding the pitfalls, will be critical to your success.

We've seen in the past and present how organization models are often fashions that come and go. However, like it or not, organizational polygamy is a clear trend that will continue, and that if managed correctly, can provide a much needed boost to your brand(s). Is it time for your organization to start behaving in a polygamous manner?

About the authors

Paul Gardiner is an associate, and Andrea Sobrio is a partner, at Executive Insight, a professional services firm focusing on the healthcare industry.