Managing the Innovator

Innovative products, and the research and development teams that produce them, are pharma's life blood. So it's no surprise that, according to PE's 2003 Top 50 Pharma, the largest 20 pharma companies alone spent $45.5 billion on R&D.

Few would argue that the key to pipeline success is the researchers whose ideas generate new products. But leaders of the world's most successful pharma, high-tech, and consumer product companies confirm that R&D pros are some of the most challenging to manage.

They are unusual in several respects:

They have a high level of education and a scientific mindset. Most researchers hold advanced degrees (typically PhDs), have a high regard for the scientific method and empirical observation, and place a high value on independence in thought and action.

They strongly identify with their scientific discipline. Many R&D employees consider themselves scientists first and corporate workers a distant second.

They may be torn between scientific imperatives and corporate goals. Not all innovative ideas are commercially viable-at least initially-and many of the most promising may be some of the least interesting from a scientific point of view. Developing an alternative formula to enhance an existing drug, for example, may be an important corporate objective, but researchers are unlikely to see that as a scientific breakthrough.

To manage R&D employees effectively, one must understand their unique attitudes and perspectives. To foster that understanding, this article details the key areas in which R&D employees' opinions differ substantially from those of employees across all other job functions as well as the implications of those differences for working with and managing them. The findings are based on the aggregated results of employee opinion surveys conducted by ISR on behalf of its client companies. The areas of greatest contrast relate to supervision, senior management, empowerment, performance appraisals, employment security, work–life balance, and working relationships. (See "Benchmarks.")

Senior Managers Get Poor Marks

US national norm data show that most employees have a more favorable view of their immediate supervisor than they do of company senior management. Only 57 percent of employees say they have confidence in decisions made by senior management, and less than half believe top management is doing a good job in such key areas as stating objectives clearly, establishing priorities, making decisions promptly, and providing leadership.

In contrast, when asked about their immediate supervisors, employees in general respond much more favorably. The overwhelming majority believe that their supervisor is receptive and responsive to suggestions for change, is competent in the job's technical aspects, is available when needed, and communicates effectively.

Yet that tendency to rate supervisors more positively than upper management is substantially more pronounced for R&D employees. (See "The View from Below," page 52.) Compared with those in the US national norm, employees in the R&D norm hold significantly less favorable opinions regarding the competence of senior managers and significantly more favorable opinions of supervisors. Experience in working with R&D pros suggests that the higher the senior-level position, the more negative their views toward it-and to the person who holds it.

The reason for that difference seems clear: R&D employees tend to believe that only those with whom they interact daily and who have similar training and experience-their supervisors-can truly understand and appreciate the unique nature of their jobs. They tend to respect R&D supervisors in particular, given that they are often principal investigators (PIs) on important projects and are often considered thought leaders in their field.

R&D employees likely aspire to their PIs' position and identify closely with their values. In fact, many R&D employees may have been drawn to work for their companies precisely for the opportunity to work under the supervision of world-class scientists, a reality noted by Jeff Peris, a 30-year Big Pharma veteran and Wyeth's chief learning officer. That is not to say that R&D employees have an inherent dislike for senior management but that, in general, they value technical expertise over managerial ability.

The implication of those findings is that immediate supervisor input and direction are needed to effectively manage researchers, and that managing through directives from "on high," without local-level support, is likely to be ineffective. What is apt to work better is leveraging the positive PI–employee relationship by including PIs visibly in companywide initiatives and teams.

Supervisors Are Also Suspect

Yet, both R&D employees and those in the US national norm are hard on their supervisors. Only 68 percent of employees in both groups agree with the statement, "My supervisor manages people well," clearly allowing room for improvement. For the R&D group, a common complaint is that researchers are often promoted to supervisory positions based on their scientific accomplishments regardless of their people skills, which are often inferior.

That frustration is evident. One R&D employee said, "We need more dynamic leaders, individuals who are technically competent but also adept at dealing with people and inspiring the work force. The organization promotes technically competent people to leadership positions, but some of them have little to no real leadership skills. Sometimes, the appointees don't really want the job other than the pay raise it brings."

A recent survey of an R&D facility with more than 5,000 employees reinforces that view. "Leading/inspiring people" and "dealing with people" topped the list of things those employees said their supervisors need to improve. (See "Supervisors Can Improve, Too," page 54.)

To address that issue, companies can provide training in people skills to current R&D supervisors and reconsider the weight given to such skills when making promotion decisions. They could also give potential thought leaders opportunities early in their career that will prepare them to lead technical teams later on.

Jeff Hanke, vice-president for cancer research at AstraZeneca, sees the development of leadership and management skills among research scientists as a critical challenge within the pharma industry. Although Hanke recognizes the vital role companies must continue to play in developing those skills, he also suggests that academic institutions should provide opportunities for students to acquire those competencies, so that by the time scientists enter the corporate world, they have a head start.

The Empowerment Equation

Another area in which R&D employees differ from others is empowerment.

Although employees who are authorized to make their own decisions are vital to innovation, on four fundamental empowerment questions, R&D employees respond less favorably than the general population. A smaller percentage of

R&D employees report they

• have sufficient authority to do their job well (78 vs 81 percent)

• are satisfied with their involvement in decisions that affect their work (62 vs 65 percent)

• believe management trusts the judgment of people at their level in the company (52 vs 60 percent)

• believe their company has a culture that allows people to challenge traditional ways of doing things (46 vs. 53 percent).

R&D employees may respond less favorably to those questions because they expect to have more autonomy than the company allows. Most R&D employees are trained in highly empowering environments, such as a university, where the emphasis is on the quality of one's ideas and where one's judgment is respected.

In the corporate world, however, researchers find that completely different standards-namely, marketability and profit potential-are used to evaluate their contribution. Most researchers are not conversant in such areas and, because management's primary concern is a venture's profitability, there are bound to be conflicts with R&D staff over what projects are worthwhile.

As Jim Blosser, associate director in central nervous system (CNS) drug discovery at AstraZeneca, has seen firsthand, the transition from the academic world can be challenging: "Scientists who move from academia to a commercial setting need to recognize the fundamental differences between the two environments. In a commercial lab, they need to work as part of a team and to meet clearly defined goals. For some, that could be perceived as a loss of autonomy."

One researcher's comment illustrates the tension that can arise between scientists and business leaders: "Research projects are dictated by senior management. It is impossible to have good scientific ideas and plans that are generated by the bench scientists come to fruition. Resources are not allocated based on scientific merit and unmet medical need but rather by the whims of senior management. This company will never be successful unless lab heads and division heads are empowered to allocate resources as they see fit."

R&D employees may perceive such conflicts as unempowering because senior management is overriding the researchers' own judgment. Indeed, during the last 25 years, corporate America's willingness to finance basic research with little foreseeable marketability in the near term has declined substantially. A case in point is the situation at Bell Laboratories, where headcount has been reduced by 50 percent since 1997.

Thus, R&D managers may need to work harder than other types of managers to help their employees feel empowered. That may include taking time to explain the important risk/reward contingencies that guide research in a for-profit environment and the relative value of scientific versus business contributions. That effort is likely to help scientists understand the justifications required to warrant further work in a particular area. That, in turn, should foster agreement between R&D employees and managers on risk/reward estimates, thereby reducing micromanagement and enhancing employee trust and feelings of empowerment.

Managers can also benefit from listening to researchers' perspectives. Scientists may see long-term market potential in areas management overlooks, perhaps because of the latter's focus on short-term results and lack of scientific training. Managers' failure to listen may result in a failure to produce potential blockbusters. Being diligent in allowing employees to present the scientific basis for their belief in the long-term market potential of their projects will likely be valuable to both groups. Formally designating a minimum amount of resources, such as 5 percent of researchers' time, for exploration into areas with non-obvious near-term market potential may both enhance researchers' feeling of empowerment and lead to discoveries with surprisingly large market potential.

Appraising Innovators

For any manager, providing a high-quality performance review is extremely challenging. Ideally, they should accurately assess and candidly share employees' strengths and weaknesses and guide them to use that information to improve their job performance and help them with career planning. Unfortunately, the process often takes more time and energy than most managers are able or willing to expend.

The discouraging responses to survey questions that address performance appraisals bear that out. (See "Demanding Critics, page 56.") Only 35 percent of employees believe their last performance review helped them in their career development and planning, only 48 percent believe it helped them improve their job performance, and only 51 percent believe it helped them identify their strengths and weaknesses. This issue is particularly critical because performance appraisals can determine employees' perceptions of their development and career opportunities, which play a key role in employee engagement and commitment.

On all three performance review questions, R&D employees score even lower than other employees by a margin of at least five points, suggesting that R&D employees are more demanding critics of their own performance evaluations. That is not surprising, given that many performance systems require that reviews be scored-or even downgraded-to fit seemingly arbitrary rating and forced-ranking schemes or performance quotas. Scientists, because of their disposition and training, are inclined to examine, understand the limitations of, and criticize such a system.

Furthermore, receiving a poor review in a forced-ranking system is particularly galling for people who, having earned advanced degrees, consider themselves highly qualified. They will often reject a system that rates them low and be comfortable doing so on scientific grounds. They may also bristle at the irony that many companies claim to hire only "the best of the best," then rely on an evaluation system that requires 50 percent of employees to be labeled as "in need of improvement." An additional drawback of using forced-ranking systems in R&D settings is that employees see them as designed to foster a competitive environment among co-workers, whereas they believe a collegial environment is key to innovation.

Clearly, the type of performance review system used to evaluate an R&D population is critical, as is the need to develop and refine the system over time. Yet many companies resign themselves to the idea that because every system has flaws, it is not worthwhile to improve their own. Instead, they try to convince employees of the current system's merits-no matter how limited-and the value in maintaining it for historical comparison.

R&D employees' frustration with performance appraisals is evidence that such arguments don't work. Said one, "I understand the theory behind the ranking; however, the system is useless and artificial. Reviewers try to justify their ranking of employees rather than focusing on their growth and development. Even though an employee can ask for ranking information, how that ranking is determined in the larger group is next to impossible to assess. The current system is cloaked in mystery.

The openness of the review process is of particular importance to R&D employees. Hanke points out, "I've seen many different systems across two companies, and there is no perfect system. I've found it helps, though, to keep the process as transparent and involving for employees as possible."

Of course, R&D employees may be no more critical than others of their reviews but may simply receive lower-quality evaluations-or the quality of work within their function may be fundamentally more difficult to assess. In many industries, commercially applicable breakthroughs may be few and far between and related to employee performance in a complicated and unclear way. Much R&D work is also often done by small teams whose performance can be especially challenging to appraise. Furthermore, because much R&D work is highly specialized, some senior-level managers may have no real understanding of how to evaluate performance in the employee's area.

That is not lost on those being reviewed. One scientist commented: "Upper management should have little or no input into job evaluations since they have no idea what an R&D employee does every day or how that employee performs on the job. Only supervisors who actually see the employee know what kind of job performance is given."

This last problem is not as easily solved as it is understood. Clearly, the involvement of senior-level managers in an individual's review comes from the need to compare and adjust reviews across separate departments to keep the system fair throughout the company. That is, they need to reconcile the reviews of the weakest member of a strong team with the strongest member of a weak team, or of equally strong performers under supervisors with different standards.

The use of standard measurement instruments across different R&D departments and projects, as well as more frequent measurements, will help make adjustments to ratings based on senior management review less necessary. Including peer evaluations in performance reviews, in the form of 360- or 180-degree surveys, can also help to increase review quality and combat the researchers' criticism that "people who don't understand what I do are evaluating me."

The message regarding performance appraisals is clear: companies should spend more time and effort designing and implementing employee reviews, and those charged with completing R&D performance reviews need more training. Even with those efforts, managers should expect that R&D employees will continue to be skeptical about promotions and salary increases based on performance reviews.

Employment Uncertainty

Sixty-three percent of US employees say they can be sure of having a job with their current company as long as they perform well. For employees within the R&D function, that percentage drops 20 points, to 43 percent. That R&D employees feel insecure in their jobs is unsurprising. Several large multinational companies that collectively employ thousands of researchers and were long thought to be bastions of security for researchers in the private sector, including Lucent Technologies, Agilent, Hewlett-Packard, and Xerox, have recently initiated hiring freezes and large-scale layoffs. In the pharma industry mergers and acquisitions have taken their toll in layoffs as well, though the number of researchers involved is unknown. And federal funding for basic research has been scaled back.

Reassuring R&D employees of their job security is difficult, especially in the current economy. Major organizational changes, such as new management teams, mergers, acquisitions, and downsizings, raise researchers' concerns about their future with the company. The more employees fear being laid off, the more probable it is they may embark on a defensive job search and the less time and energy they are likely to devote to discovering the "next big thing" for their current employer. As always, honest and frequent communication is the best remedy. Although insecurity about future employment is difficult to fix, managers should be aware that job security is a top concern for many of their key innovators.

Satisfaction Elsewhere

Nevertheless, R&D employees don't view every aspect of their work lives in a negative light. They hold favorable opinions, somewhat higher than the norm, in two areas:

Working relationships. Of R&D employees, 89 versus 86 percent of others say the people they work with get along well and 85 versus 80 percent are willing to help each other to get the job done, even if it means doing something outside their usual activities Work/family balance. Eighty percent of R&D employees (versus 75 percent of other employees) believe their work schedule allows sufficient flexibility to meet their personal/family needs, and less than 20 percent say the amount of job stress they experience seriously reduces their effectiveness.

Management should consider opportunities to share some of R&D's strengths with other areas of the company by transferring some policies and procedures, along with other aspects of the R&D subculture, to employees in other job functions. For instance, researchers use colloquia or brown-bag seminars to informally learn and exchange ideas as well as take sabbaticals to learn something new that will benefit the company, a practice borrowed from academia.

Despite their many concerns, in overall satisfaction, R&D employees resemble the broader US national employee population. A similar percentage of R&D employees say their work gives them a sense of personal accomplishment and that they would recommend their company as a good place to work.

What might be the cause of R&D employees' surprisingly strong overall satisfaction scores? For many scientists, research is a calling and a central component of their identity. The strength of that connection may offset R&D employees' lower perceptions of senior management and empowerment, creating a degree of job satisfaction comparable to that of the average employee, most of whom consider their position only a job.

Another contributing factor may be the opportunity cost of working elsewhere. Compared with university research positions, corporate America typically offers the latest and most sophisticated equipment and resources, as well as better pay. Many researchers don't even have to forgo at least the appearance of the academic atmosphere, as corporations often successfully mimic campus-like settings.

Thus, while addressing the areas in need of improvement, it's important that managers avoid compromising the strongest components of the bond between R&D employees and the company. How they accomplish that will vary case by case, according to the specific drivers of satisfaction. The key is to learn the aspects of the working environment that R&D employees value and to preserve those as much as possible.

Companies can gather that information simply by talking with employees, conducting in-depth interviews, focus groups, or employee opinion surveys tailored to the R&D environment. The understanding they gain thereby, coupled with awareness of how R&D employees see supervisors and senior managers and how they view their own empowerment and performance reviews, are critical to managing them to meet the company's objectives.

The differences in workplace attitudes between R&D employees and others in general naturally provoke speculation about the motivations of R&D employees that underpin their views. The findings, together with other recent research and everyday experiences in R&D work environments, suggest four key motivators:

• the opportunity to work on challenging problems

• the experience of working with world-class scientists

• the potential to receive peer recognition for superior work

• freedom to explore new ideas.

The examination and understanding of those and other motivations among R&D professionals, and how they influence both attitudes and behavior, would serve as fruitful areas for future investigation. But the current findings suggest that managers who supervise their companies' innovators would do well to build a framework to engage, excite, and retain this very important and unique population. For the many companies whose competitive edge depends on the output of R&D professionals, that is critical intelligence.