Blueprint for a Great Leader

Is there a formula for the perfect biotech or pharmaceutical executive? As a candidate to be the next CEO of Pfizer or Amgen, it is better to have a PhD in microbiology or an MBA combined with a medical degree? Does a lifetime in the lab beat out a decade of sales and marketing experience?

To answer these questions, Harvard Business School analyzed 20 senior executives, two from each of the top five US pharma companies and the top five US biotechs. In most cases, those surveyed were CEOs or vice-presidents of commercial operations. (See "Best of the Best.") To ensure a homogeneous sample with enduring industry success, the researchers chose companies that ranked as the top five in market capitalization in either pharma or biotech from 1998 to 2003 and earned more than 50 percent of their sales from prescription drugs. (See "Who's Who in Companies.")

In short, the analysis says Ivy League degrees aren't necessary, but international experience and at least one graduate degree seem to help.

The Survey

To best compare data, an identical questionnaire was used to interview all executives. It included the following seven questions:

• What experiences were pivotal to reaching your position in the industry?

• What experiences are most critical for other successful CEOs and senior managers in the industry?

• What experiences were most influential to your professional development?

• What are the most important characteristics a senior manager must possess in the biotech or pharma industries?

• Why do you believe you were initially selected for your position?

• How important is a scientific or technical background for senior managers and CEOs?

• What are the most successful characteristics of a CEO?

In addition, the survey's authors analyzed executives' biographies for comparisons of education, specialization, and career path, and supplemented interview responses with excerpts from lectures the executives had given and from statements made in the media and at Harvard Business School. To provide an external perspective, the researchers also interviewed academicians, consultants, and investment bankers who focus on the industry.

The study does have limitations. It suffers from subject bias (some subjects offered much longer interviews than others), reporting bias (it presents selective executives' opinions rather than a synthesis of objective views), and scope limitations (only 20 executives were targeted). And the researchers were unable to get an interview with each executive—Art Levinson, CEO of Genentech, for instance, does not give interviews as a matter of policy. But by incorporating information from various sources, they were able to ascertain answers to nearly every question for every executive. Despite the limitations, the results yielded a fairly consistent picture of management trends in the biotech and pharma industries.

Who's Who in Companies

Comparing Resumes

To find out what top leaders are made of, the survey looked at various aspects of executives' backgrounds: education, areas of specialization, career progression, and international experience.

Education. The executives in the survey tended to be highly educated: 18 of the 20 executives held at least one graduate degree, and, the group held an average 1.2 graduate degrees per executive. The level of education was almost identical for pharma and biotech executives.

But the types of degrees differed between the two industry sectors. Eight of 10 pharma executives held MBAs, while only six biotech executives had such a degree. Additionally, four of the pharma executives attended Ivy League universities, and only two of the biotech executives did.

Biotech leaders are sometimes stereotyped as being more science focused than pharma managers, and this study substantiated that thesis: six of the biotech executives completed undergraduate degrees, and five completed graduate degrees, in a scientific or engineering discipline. Half of the pharma execs held undergraduate science or engineering degrees, and only three earned graduate degrees in either of these study areas. (See "Does Science Matter?")

Areas of Specialization. Early career focus for the executives fell into four general categories: sales and/or marketing, research (or scientific), engineering and/or consulting, and finance. The large majority in both pharma and biotech had a sales/marketing background, and the biotech leaders were more specialized in technical areas. (See "Functional Expertise.")

Even some of the biotech executives categorized as sales and marketing were educated or trained in a scientific discipline. For example, Kevin Sharer, CEO of Amgen, received a Bachelor in Engineering from the US Naval Academy. He was grouped as a sales and marketing specialist, however, because his early civilian careers and managerial specialty were more commercial than technical.

Best of the Best

In the pharma industry, only Henry McKinnell, chairman and CEO of Pfizer, Raymond Gilmartin, chairman and CEO of Merck, and Bradley Shears, president of US Human Health at Merck, were not classified as sales and marketing specialists. McKinnell and Shears both hold doctoral degrees and spent time in R&D, but they soon transferred to sales or marketing roles.

The importance of a technical background to managerial success was the most hotly debated issue among executives. (See "Another Point of View.") Those who earned graduate degrees in a scientific discipline tended to feel that their scientific training was their most, or one of their most, pivotal experiences. For example, Dennis Fenton, an executive vice-president (EVP) at Amgen, commented that his bench science and scientific training allowed him to think critically about key issues.

But even those who did not receive graduate training in science all clearly stated that they sought indoctrination to the technical aspects and relied heavily on others in their companies. For example, Sharer said he took a year-and-a-half sabbatical inside the company, read graduate level textbooks, and worked with all of the heads of R&D to get up to speed. This training was critical he says, because "I couldn't have just walked in and been credible. But being in the company and on the board for seven years, I picked up a number of things and became credible."

Pharma executives shared this sentiment. According to Donald J. Hayden, Jr., EVP and president of the Americas for Bristol-Myers Squibb, senior executives are actually business people who have "scientific savvy with the desire to expand their scientific knowledge base." Hayden, a government major during his undergraduate days at Harvard, added: "Pharmaceutical executives must build a strong scientific foundation and continuously focus on translating the science into what it means in terms of our customers' needs." Hayden's counterpart at Lilly, Gerhard Mayr, EVP of pharmaceutical operations, echoed this sentiment, while noting that a formal degree in science was not critical for the executive track.

Does Science Matter?

Jim Mullen, Biogen-Idec's CEO, articulated the concept somewhat differently. Although Mullen has a technical background, he says, "The aptitude and the curiosity to reach in and learn new spaces is far more valuable than a formal training." He believes that executives must be able to "lead people in areas that you are not the technical expert and do not necessarily have a technical aptitude." He concluded, "Successful executives must be people who can integrate and be comfortable with all of the different business and technical issues. Because hallmarks of the biopharmaceutical industry are a lack of definition and lack of data, executives must be able to process a lot of information from a lot of different sources, including financial as well as technical data, and create meaning."

Career Progression

As a group, those surveyed spent the vast majority of their careers in the industry as well as at their particular company. Pharma executives spent on average 91 percent of their career in the healthcare industry and 78 percent with their current employer. In contrast, biotech leaders spent an even greater percentage of their career in the industry (96 percent) but far less time at their current company (50 percent). (For a comparison in absolute years, see "Experience Counts.")

Another Point of View

Although the study did not control for executives' ages, the data may suggest that biotech CEOs are more mobile than their pharma counterparts. Mobility could be a result of multiple factors, such as the size of the respective organizations. Therefore, the variety of jobs an executive might assume or a biotech leader's degree of scientific expertise may qualify him or her for senior roles at different companies.

The finding closely reflects data about general managers from other disciplines, in which 91 percent of careers were "spent in the industry," and 81 percent were "spent at the company."

International Experience. Those surveyed were also screened for international general management experience. A greater percentage of pharma leaders (seven out of 10) managed an international business or business unit than did biotech executives (five of 10). This number is perhaps understated. Only two of the biotech executives managed international businesses for biotech companies. Two reasons that biotech executives may have less international experience : (1) their companies globalized years later than their pharma counterparts, and (2) some biotech firms rely exclusively on alliances to distribute products internationally.

Functional Expertise

International general management experience seemed to be a seminal event in the executives' training. Several identified the skills they learned and the challenges they faced during their international assignments as key experiences that ultimately led to their success and prepared them for executive leadership.

Sydney Taurel, chairman and CEO of Lilly, argued that international general management assignments provide greater managerial breadth than local ones. In essence, an international general manager (GM) becomes an "ambassador" and mimics the role of a CEO in the United States. Genzyme EVP Jan van Heek agreed, observing that he was most likely selected for his position because of his "experience in a multicultural environment, success in a global environment, and experiences in different cultures."

BMS's Hayden added that his international experience forced him to "succeed with minimal infrastructure or support and within a diverse cultural set, yet to create one context for success." Bernard Poussot, Wyeth EVP and president of Wyeth Pharmaceuticals—who early in his career was sent from France to Chicago to lead a team of 60 people—said: "No matter where you start, go overseas. It broadens your perspective on how to conduct business."

Early Exposure. Fenton commented that his exposure to various areas in Amgen's business uniquely qualified him to be an effective senior manager. As one of the original bench scientists who worked on Epogen (epoetin alfa) and Neupogen (filgrastim), he says, "Amgen was a very small company at the time; being on the team, I got to see each part of the process." Now as an EVP, Fenton said his command of development process fundamentals is invaluable for decision making. Like Fenton, Hayden is convinced that his post-MBA rotational program permitted him access to all aspects of the firm early in his career and gave him a competitive advantage.

Experience Counts

Overall, the executives asserted that managing turnarounds and receiving early "stretch" assignments were critical for their career success, because these situations gave them an opportunity to demonstrate leadership and be identified with success. Genzyme CEO Henri Termeer's view of how executives ascend the corporate ladder was also revealing. At Baxter International, he took on tremendous responsibility at a relatively young age because the company was in a rapid growth phase. In his words: "It was fundamental for me to have a situation where there was an opportunity for me to take early risks."

Mayr concurs with Termeer, commenting, "When I led Lilly's efforts in Asia and Eastern Europe during times of slow growth, credit crunches, and inflation, I was required to innovate and devise new approaches." His superior at Lilly, Taurel, offers a similar story. "As the GM for Brazil, my team had to turn around an operation experiencing inflation, devaluation, and slow growth. My boss lived 1,000 miles away, and I had to develop the necessary skill set to succeed." Merck's Gilmartin claimed that his management of multiple aspects of the company was crucial to his development, specifically in strategic planning and operations.

Hans Peter Hasler of Biogen-Idec depicted the significance of his leading the turnaround of Wyeth's German generics business: "I had to release a large number of people, change the management team, and redirect the sales force." His experiences were pivotal in teaching him to "step up to new challenges." But Hasler's experience indicates that early management is insufficient by itself. He reported that Biogen-Idec "wanted someone with global experience, firm knowledge of research and development, and a commercial flair."

Leadership Qualities

The significant percentage of executives who came from sales and marketing indicates that customer focus and contact are critical to advancing in the industry. Hayden and Mayr both identified their time in sales as a crucial part of their career development. Specifically, they described how the sales experience provided an invaluable customer perspective, and Poussot commented that executives in the industry must maintain a commitment to the end user.

Paradigm Shift?

Gilmartin described five specific characteristics that a senior executive must possess—the same five characteristics that Merck highlights in its leadership development program:

• character (and corresponding ethics)

• competence (the ability to get the job done and to delegate)

• the ability to develop others (such as selecting people and giving them opportunities)

• good communication skills

• the ability to inspire confidence and trust.

Gilmartin also spoke of the need for all the managers at Merck to act with the utmost integrity. He likened their actions (and his own) to that of a military officer standing in front of the troops. "Employees must believe that you have their best interest in mind and that you will do what you say you will do."

Poussot observed, "We create products that the customer can't identify as defective by just looking at them, we therefore must maintain a level of integrity second to none." Hayden supported Poussot's perspective with the comment: "We have to be out front when it comes to issues of behavioral standards. There are not many second chances."

The Genzyme executives described much more visceral essential characteristics for successful executives—"purpose" and "passion" for the industry. For them, these concepts were best defined as the desire to "innovate, create step-function improvements in healthcare, and make a difference." Poussot added that one must have a passion both for the science and its inherent risks.

In a speech, Sharer described the paradigm of leadership as "establishing direction and developing a vision of the future (often in the distant future) and the strategies needed to achieve this vision." Poussot picked up on this theme when he stated that the most important characteristics for any industry executive included, "creating a strategic vision and having a strategic sense."

Hayden and Taurel both identify with the notion of mobilizing through communication. They concurred with Sharer on the need for senior executives to formulate strategy but argued that more was needed. Hayden posited that a senior executive must be able to get his or her idea across to the organization, and Taurel felt that it is equally important to be able to "communicate at all levels and with various constituencies."

External Perspectives

Some experts from investment banking, academia, and consulting had slightly contradictory perspectives on the ideal biotech or pharma executive. Many highlighted the need to understand industry economics, master the intricacies of their products, and demonstrate robust scientific knowledge. A banker who headed the healthcare practice for a leading investment bank (and preferred not to be named) indicated that the best executives are those who "have strong business managerial skills like the folks at Johnson & Johnson or great scientific acumen like those at Genentech." Implicit in that remark is an "either/or" mentality; someone is either a science expert or a business maven, but not both. (See "Paradigm Shift?") The investment banker and other senior consultants were surprised at the number of senior industry leaders who had a poor understanding of the underlying science.

Building the "perfect" industry executive is no more feasible than building the "perfect" molecule. In many ways, the former is an even more daunting task than the latter, as it is often more "art" than "science." Although the aim of the study was not to offer specific advice for ambitious up-and-coming managers, considering the time top executives invest in the industry and their companies, it is clear that the race is won not by the swift, but by the patient.