A New Game Plan for Pharma HR

New dynamics are forcing the industry's human resource departments to rethink their operational game plans. The drivers-consolidation, globalization, scientific advances, public policy, and competition-have pushed HR leaders into new territory to address business needs. As a result, they have implemented new initiatives for management development, competency modeling, cultural development, performance management, and compensation. Traditional HR management processes are no longer adequate to prioritize activities and align resources for those efforts. Pharma companies need a more systematic approach, and, fortunately, they can find a new operational paradigm for HR in a somewhat unlikely place: research and development.

Terms such as customer focused, demand driven, and systematic have always been a part of new product development. Those elements are crucial to ensuring that companies properly allocate people, time, and capital to the highest priority initiatives. To minimize risk and maximize opportunity, many pharma R&D departments have partnered with marketing and manufacturing to create collaborative approaches that include techniques such as cross-functional reviews, portfolio management, and gating-decision points for moving a project forward.

This article shows pharma companies how they can apply that approach to HR management by viewing HR initiatives as products. As with any new product, HR services must be innovative, "manufactured" to customer specifications, distributed effectively, and have a buyer-all in the context of meeting current or near-term customer needs. The article also outlines how Pharmacia's HR department faced the challenge of reducing infrastructure costs while implementing new, best-in-class programs.

HR specialist groups, such as compensation and benefits, organizational effectiveness, recruiting or staffing, diversity, and human resource information systems, can function as discovery, development, and manufacturing, while generalist groups, such as business unit HR teams, will operate as marketing, sales, and distribution for HR products. By incorporating key principles from R&D-knowledge sharing, gating, portfolio reviews, resource management, and basic marketing concepts-HR can better position itself to deliver timely and cost-effective products that its internal customers will value and adopt.

Cultural Shift

As the industry undergoes significant changes, pharma companies' responses have been dramatic, ranging from a growth in collaboration and alliances to increased merger and acquisition activity to reengineering, cost-cutting, and corporate restructuring. Those responses carry significant HR implications and provide HR with a tremendous opportunity to become a strategic partner at the company's highest levels. To succeed in the new environment, HR must:

• develop products and services-management development programs, cultural initiatives, and compensation planning-that are closely aligned with the true business needs of the company and its subsidiaries

• develop consistent messages and global processes while remaining responsive to local issues

• create scalable, flexible roll-out processes and systems to facilitate rapid integration of HR programs

• help top management create a culture that improves productivity and rewards superior performance

• develop new incentive programs that reward right behaviors such as collaboration and innovation

• perform all of the above under tight budget and headcount constraints.

The reinvention need not be revolutionary. HR can create its own product development process as an analog of that used by drug development. (See "In Parallel.") By applying concepts developed and optimized in R&D, HR can quickly transform itself into a function capable of creating cost-effective products that its internal customers-the business managers, line staff, and employees-will readily adopt. To manage the new product development process, HR needs to become more adept in several areas: gating and aligning development efforts, managing project portfolios, marketing products, and managing performance.

Gating and alignment. As in drug development, the new HR product development process consists of an established set of gates and milestones for regular review of HR projects on a regular basis. By objectively determining which projects warrant continued development, mediocre ones will be discontinued before they burn significant resources.

The gating process begins with HR validating an identified business need or problem-such as competitors aggressively recruiting the company's sales reps-and turns it into a project proposal: design and test a retention scheme for key sales reps. The process ends with senior leadership making a final go/no-go decision. In between, an HR project goes through several phases, each marked with its own set of pre-defined deliverables and approval requirements. Throughout the process, HR and business unit leaders must challenge project leaders with the question, "How does the project align with the company's operational and strategic business objectives?"

Rather than apply the gating process rigidly, HR must customize it to fit the organization. The further along a project moves and the more resources it requires, the more formal the review process must become. But not all projects need to pass through the gating process; HR should establish criteria for determining which projects to managed that way.

Portfolio and project management. Another key theme borrowed from R&D is the ability to look across all initiatives and their specialist units to make go/no-go decisions based on an understanding of business needs and priorities. Project management requires HR to re-allocate functional resources, including people and money, to alter departmental plans and objectives and to reset priorities and commitments.

It also requires the ability to effectively plan work, manage issues, control quality, mitigate risks, and measure success. Good project management requires strong governance mechanisms to track progress and take corrective actions when necessary. Additionally, using a suite of tools and templates improves the standardization and transparency of project information and, ultimately, the quality of the end product.

Marketing. R&D has learned a couple of valuable lessons that will also benefit HR. First, if there is no customer, there may be little reason to discover and develop a product. Second, every initiative must have a well defined project plan, including an assessment of market potential. HR must learn to operate with a similar customer focus, aligning new products with an identified customer need. To do so, HR must:

• provide opportunities for design teams to gather input from HR customers

• incorporate "marketers"-business executives, line staff, and HR generalists-early in the development process to ensure a successful launch

• stay in touch with customers to understand changes in issues, needs, and concerns.

Performance management.

Organizational culture is the nearly intangible mix of operational, infrastructural, and attitudinal "feel" within a company. Employees are highly sensitive to tone and symbol when it comes to assessing their relationship with the organization. Traditionally, leaders set the agenda for culture, but through an increased focus on its customers' needs and a more pragmatic process for managing initiatives, HR can become a catalyst across the organization for building a performance-focused culture. Just as R&D, marketing, and manufacturing are about delivering results, HR can take a more customer-focused, results-oriented approach.

A Case in Point

After its 2000 merger with Monsanto, Pharmacia's HR function faced the challenge of reducing infrastructure costs while also implementing new, best-in-class programs. Like other HR departments operating in a post-merger environment, Pharmacia struggled with some complex issues:

• HR initiative overload

• lack of communication regarding new products and services both within and outside of HR

• limited resources: money, time, people

• quality concerns

• an "if I build it, they will use it" mindset

• lack of global coordination and communication.

Given that environment, Pharmacia's HR department began to quickly gain control of the projects it was pursuing or planning. It wanted to establish a support infrastructure to institutionalize an integrated approach to HR work planning. Moreover, Pharmacia needed to design a customer-focused HR product flow model-one conceptually similar to that used by its R&D staff. The innovative, step-wise approach the company adopted transformed a once sporadic project prioritization approach into a systematic year-round process.

Get Control

At the time, Pharmacia had 85 corporate HR projects in development. Many of them were scheduled to roll out directly to the global business units. The HR generalist teams and their business unit customers were concerned that, without adequate review and input, the initiatives would not be successful. The solution was an HR portfolio review.

In preparation for a two-day review meeting, the leaders of each HR specialist area identified all projects intended for deployment to internal business customers or that required involvement from outside their given specialist area. The inventory was extensive. It included projects related to leadership development, compensation plans, benefits programs, HR technology, HR shared services, recruiting, and diversity. For each project identified, the leaders completed a template with the following information:

• team structure/project owner

• strategic context/objectives

• project plan

• organizational value

• implementation difficulty

• issues/risks/dependencies.

• alignment with customer needs

• fit with Pharmacia's business vision, strategy, and objectives

• fit with HR's vision, strategy, and objectives

• benefit to Pharmacia

• compliance issues.

• HR's capacity to deliver the project

• the organization's capacity to absorb the project

• cost to implement

• time to implement

• complexity and risk.

To no one's surprise, department leaders found they did not have the organizational capacity to develop, deliver, and implement all the projects planned for roll-out. Pharmacia's HR managers decided to cancel, postpone, re-scope, or combine initiatives. In doing so, they allocated resources to the highest-value activities and re-planned them.

Create Infrastructure

Pharmacia next set out to design and implement the infrastructure needed to ensure that the portfolio of HR projects remained manageable. To that end, it created or reinvigorated several monthly HR forums. An operations council consisting of the group vice-president of HR, senior HR leaders, and HR project leaders began meeting to promote consistent communications and timely resolution of operational issues across HR channels; discuss resource management, decision processes, and other operational issues; and conduct detailed project reviews.

Senior HR leaders also met with business managers to form a business advisory board that provided input to project designs, reviewed HR policies and programs, and endorsed project plans.

A third "work planning" group made up of HR generalists, specialists, and the operations manager held forums to provide an infrastructure and consistent standards; gather information about the scope, objectives, resources, and timelines of all projects; and improve communication between specialists and generalists. In addition to those frequent meetings, Pharmacia continued its HR project review meetings on an annual basis. The HR work planning team supported the meeting and designed it to facilitate candid dialogue, negotiation, and prioritization of projects.

The company also implemented a new process for identifying HR-related business needs and developing initiatives to meet those needs. The process, similar to that used in R&D, has four goals:

• establish project prioritization criteria based on business value and resource demands

• integrate customer-focused project development across all functional areas

• implement consistency for the process across all projects

• lensure that it is adhered to, monitored, and recalibrated on a consistent basis.

The speed of change in the pharma industry is accelerating. Pharmacia, on the heels of its merger with Monsanto, is now being acquired by Pfizer. Genomics, proteomics, and other new technologies will also affect pharma companies and their staffs. And more significant changes are surely right down the road. HR cannot keep pace if it continues to operate with traditional techniques. Companies that establish a disciplined approach to managing HR will create and sustain a competitive advantage. If HR can reinvent and manage itself like the company manages its business, it will become a respected change leader and true business partner. The discipline of R&D processes can invigorate HR-if it's up to the challenge.