Managing Operational Change Unit 1
Deliverable Length: 10-12 slides, with presenter notes
Details: You are an OD consultant for the Working Better Group. The President of a firm, BARTH Inc., requested a meeting with you to explore how you can help him.There have been several exchanges between you and the President so far, and you need to report to your partners about the prospects for this assignment.
Download and review the following documents:
•History of BARTH
•Memo One: from you, as the OD consultant, to Ken Martin, President
•Memo Two: from Ken Martin to you
•Summary notes from your first meeting
Create a 10–12 slide PowerPoint presentation for the other members of your consulting group outlining the following:
1.The presenting problem or specific request for help
2.Any other problems or concerns that might need to be addressed if an ongoing relationship were to occur
3.The primary focus for an “executive team off-site meeting
4.Your recommendations for who you would include in this meeting (review and refer to the organizational chart document in background materials)
5.The deliverables you plan to prepare for Ken and/or the executive team to review
A Short History of BARTH, Inc.
BARTH first began business in 1970 as Biologics and Analgesics Resources, LLC. It was the brain child of two cousins, Dr. John Babcock, a Harvard educatedbiochemist, and James Haworth, MD. Dr. Haworth, an expert in pain management and osteoarthritis, is credited with the discovery of a class of compounds known fortheir potency in treating arthritis and inflammation. The patents from his discovery generated the resources for these two visionaries to start their own researchlaboratory.
Drs. Haworth and Babcock wanted to apply the work being done on human DNA. They recognized a need to overcome a major hurdle; there was no robust process formatching molecules of potential therapeutic compounds to specific receptor sites. The process they developed succeeded beyond their wildest dreams. As the wealthof information being generated from the human genome project grew, they led all companies in creating products that block pain and inflammation. With over 24 newproducts discovered and launched in a 15-year period, they enlisted the help of pharmaceutical marketing genius Roy Shutte to create their own sales and marketinggroup. Shortly thereafter, James McDermott joined the executive team to start-up manufacturing operations. By 1995, they had transformed the company from aresearch firm into one of the most innovative proprietary pharmaceutical companies in the United States. All of which was funded from their own discoveries andproduct introductions. To help maintain their growth they recruited a diverse and highly experienced board of directors, and appointed Roy Shutte Chairman.
In 1999, they decided to go public to generate funds to expand their U.S.-based manufacturing and marketing operations overseas. Under the leadership of RoyShutte, they formed strategic alliances with key partners in Europe, Latin America, and Asia to build a global presence. BARTH currently has sales operations in 72countries world-wide, promoting its extensive line of anti-inflammatory compounds, along with a few novel molecules for fighting infectious diseases. They now havemanufacturing operations in Puerto Rico, Ireland, India, Brazil, and Singapore.
Dr. Haworth decided to retire from the rigors of being President and CEO at the age of 75 in 2002, turning over the reins of the company to one of the mostrespected sales and marketing executives in the pharmaceutical industry Kenneth Martin. Dr. Babcock is on the Board and is active in the company as head ofResearch and Development. James McDermott remains as executive Vice President of Operations. Tragically, Roy Shutte died in December of 2003, with Dr. Jean PaulDupres moving from CFO to take the chairmanship. In 2005, the company expected to integrate all its subsidiaries and strategic alliances into a truly globalcorporation: one that will lead the pharmaceutical industry in its category.
Informational Memo 1
Date: December 6, 2009
To: Mr. Kenneth Martin President, Barth Inc.
From: Torrence Meadows
Principle, Working Better Group
Re:Request for service
Dear Mr. Martin:
Thanks for your inquiry. I am pleased that Don Jones of McKenzie LTD spoke highly of our firm. I understand the need for confidentiality andassure you I will not speak of our upcoming meeting with him or any other client. Our approach is to have a principal or senior consultant talk with a client tounderstand their request, describe our capabilities, and determine if we should proceed into preliminary data collection or diagnosis of the situation. Thispreliminary data collection phase of our work together might be free or can be conducted for a set fee (which would be deducted from the overall cost of theengagement if you decide to proceed).
After analyzing the situation, we typically present our findings and recommend approaches. Only then would we develop a full consulting contractand action plan. My understanding is that we will have one hour on the 15th to get acquainted and explore working together. Before we meet on the 15th, it would behelpful to know the following:
What caused you to contact our firm at this time?
How you expect to proceed?
The goal for this meeting or any specific outcomes I should be ready to achieve.
Do you have a specific agenda, or would you want me to develop one?
Have you worked with external consulting groups before?
If so, what was positive about that experience? What would you change about it (specifically what would you have liked the consulting company todo differently)? What would you do differently to make it more productive?
If not, what, ideally, would be the result of working with us? How do you see our firm being of help?
Will other executives from your company attend this meeting?
As we are having difficulty connecting by phone, and you have suggested the matter is urgent, I would like to set a specific time for us to coverthese general items so we can get the most from our face-to-face meeting.
Please let me know by e-mail several times you would be available to talk (15 or 20 minutes should be adequate) so we can make sure yourexpectations will be met.
Informational Memo II
Date: December 6,2009
Principle, Working Better Group.
President, Barth Inc.
Re:Times for phone contact
I do apologize for not being available to take your calls. We are in the midst of preparing our 2010 budget and goals to present to the Board.This will be over on the 10th, and we can speak any time on the morning of the 11th, over the weekend, or on Monday the 14th. Let me know when you wish to call,and I will have my assistant block out 30 minutes (and give her the authority to interrupt whatever I am doing so we can connect).
There is some urgency to my request. While we are very successful, the process we used to create our goals and related financial forecasts fornext year and the following 3 years has brought to light some major issues and concerns. The quality of our earnings is at jeopardy. Our move to integrate ourcountry markets into a worldwide operation is going more slowly than I would like. Our regions are competing for resources and complaining about the high overheadcosts “imposed” by headquarters. Many of these issues indicate we do not have a clear operating strategy, nor do we understand how to measure our performanceconsistently across all regions and functions.
To complicate matters further, I have been approached by several firms interested in forming alliances (some want us to buy them; others want tomerge with us). Our Board wants to finish the 2010 plan and critique the 3-year, long-term plan before proceeding with any investigation of these possibilities. NOONE IN THE COMPANY OTHER THAN THE EXECUTIVE COMMITTEE AND THE BOARD KNOWS OF THESE PRELIMINARY OFFERS. We know most large-scale acquisitions and mergers do notachieve their goals and want to make our own operation as strong as possible before we evaluate making such a major change.
It is not likely that any of these potential alliances will move quickly, especially as I do not believe we have anywhere close to full internalalignment. Before this recent business planning cycle, I would have said our prospects were terrific. Now I think they are still good but am worried we will not donearly as well as we should.
I came to you because Don Jones mentioned how well you created a common vision, mission, and objectives for his unit. While I believe we havethat, I no longer believe all our regions (nor our corporate functional departments) have the same clarity or commitment to it.
Our Chairman, Dr. Jean Paul Dupres, might also call you. He has convinced me there is urgency in getting our executive team working in a morecoordinated and focused fashion
OPD650 Unit 1 Individual Project INFORMATIONAL DOCUMENT 2
SUMMARY NOTES FROM FIRST MEETING:
Ken has not worked with outside consultants in this firm but has worked with internal OD staff at previous companies and at BARTH Inc. He came inas president two years ago. This is his first time as COO and his first experience in growing a relatively new or emerging company. He has run larger units ofseveral multi-nationals. There is no formal CEO. Ken reports to an external board, and the chairman represents the main investors: a group of three venture capitalfirms—two of which were started by the founders, Babcock and Haworth. The company was taken public five years previously. Ken was hired to replace the founder, wholeft after his 3-year contract expired. While a major shareholder, the founder declined to be a board member. He was not offered the position of chairman nor wouldthe board give him the title of CEO, as he was spending too much time on other interests and did not want to give them up. Dr. Haworth’s close relationship withmany of the executives has caused problems for Ken, especially with the board. Often the board asks questions of an operating nature indicating a problemexists
before Ken knows of the situation from hisexecutives. He feels his leadership is being questioned—unjustly.
Many of the staff has worked with outside consultants, especially during the creation of the corporate culture initiative (which was linked to thecompany going public). While that had a positive impact, it was time consuming, and its value was not captured by specific measurable outcomes. The company hasgrown by an average of 12% a year, and its stock has leveled off. The trading has been between $35 and $40 a share for the last year after hitting $49 a share atits high, approximately nine months after Ken took over, coinciding with their third worldwide product launch, which was their most successful launch to date.Their research pipeline for products is strong (according to industry analysts), but cracks in their operational performance are showing. Their first two worldwideproduct launches were not profitable in all markets. While they propelled the company to a top three ranking in most markets, this is now slipping. Older productsmake up a majority of the sales, and the margins on these are not as high as the margins on the new products. The new generation of products offers great promise.They are truly innovative, but country managers are concerned they are too highly priced and will cannibalize their current product sales, forcing customers to usecompetitor products or opting for the generic versions of their current offerings. When these versions have been launched locally, they gained over 40% of themarket share in year one—solely competing on price—and continued to make significant inroads each year thereafter. Within two years, patents for the 15 largestmarkets that the company has will expire, and it is expected that generics will be introduced at significant price discounts.
The internal OD unit is strong and has a good record of improving teams, instituting total quality within manufacturing, and reengineering workprocesses within major functions. They have just begun working at a country level, and you expect they may have problems being successful with these teams.
They have been less effective pulling together the regional business efforts and have failed whenever cross-functional efforts were implemented.(This is Ken’s assessment, not the assessment of the functional heads involved.) It is also clear from Ken’s discussions with his company’s internal OD consultantsthat they are frustrated by the lack of top down OPD650 Unit 1 Individual Project INFORMATIONAL DOCUMENT 2
Ken strongly believes he has the support of the board to realign the operations and resolve the conflicts that are inherent in the goals andbudgets submitted for approval. They have agreed with Ken’s suggestion to hold an off-site planning meeting. What Ken specifically wants from me is a proposal forthat meeting.
Some questions Ken raised and wanted addressed were as follows:
• What should the team prepare before coming to the session?
• What information should we collect before planning the session?
• Who should attend? Only direct reports? The Executive Committee and their direct reports?
• How can improvements to the business planning and goal setting process be made? (Previously, it took too much time and the quality of thecountry plans varied from excellent to “horrendous”
plus none of the consolidated regional plans metrequired strategic aims even after two or three revisions.) I can appreciate how frustrated the whole team was. During plan reviews, finance, regional managers,and executive staff repeatedly asked themselves such questions as “Why don’t they give us what we requested?” and “Doesn’t anybody understand our strategy and whatwe are trying to do?”
• What can be done to upgrade the leadership at the country level?
• How should the functions and country operations interface with one another? Can some guidelines be set so they understand when and how they needto share information as well as when they should work together?
• Finally, how and who should assess potential acquisitions or strategic alliances in terms of cultural fit and synergistic matching ofcapabilities?
• Can confidentiality be kept by the executive team? Will the board “take over” the process if they find out what is going on?
Additional information –document 3
Phone call with Chairman, Dr. Jean Paul Dupres (December 10, 2009):
empowered to develop a written support contract detailing what he will change and specifying what he needs or desires from the board to accomplish thosechanges. This will be discussed before the executive off-site meeting and revised based on the events at the off-site meeting. It will remain a living document tobe discussed or changed as necessary whenever either party has concerns about the progress of the company and the overall efforts at improving the executive teamas well as the total operation throughout our firm’s engagement.
Received call from JP requesting time to discuss the Board’s concerns about Ken Martin, his leadership style, and the functioning of the executiveteam.
According to Jean Paul, the board requested that Ken find a consultant to help him better address getting the top group of executives tocoordinate their efforts. They do not act like a team—they each run their own areas as if there is no impact of their actions on the other functions.
Both John Babcock and James McDermott are on the Board (a legacy from when there was only an internal board), but the president, Ken Martin, isnot formally a member; although, he attends all meetings and is intimately involved in all the Board’s affairs as an ex-officio corporate officer. This was done asa favor to James Haworth so he would not feel replaced and forced out. It may have worked a little, but Dr. Haworth was upset at not being offered the Chairmanshipeven though it is his health that prevents him from taking on such a major role—he agreed! He rejected being any part of the Board. However, he maintains asignificant amount of control being the major individual share holder (controls about 25% of the company).
It is public knowledge that Dr. Babcock and Mr. McDermott will step down from the Board at the next election.
It is not public knowledge that the Board is wavering on making Ken Martin a formal member and having both Dr. Babcock and Mr. McDermott report tohim during a transition phase as the company reorganizes operations assimilating the far flung partners and wholly owned subsidiaries into a truly globalmultinational.
The Board likes what Ken Martin has done with the sales, marketing, and administrative functions but wonders if he can lead the company into thefuture.
It was clear from the recent business planning process that there is a need for a CFO to coordinate and direct the divisional finance executivesand create a unified financial operation. Both the Board and the executive team agree on this. All the finance units will report directly to this individual, butthey operate in a matrix arrangement within their current functional areas. A new corporate financial staff will be recruited once the CFO is chosen. The currentplan is to have the CFO report to the president and potentially become a board member. Ken did a great job trying to fill this gap but had neither the time nor theresources to pull it off. (Listening to what was said, it appears the lack of infrastructure and no corporate staff prevented Ken from accomplishing what he wantedto do and what the Board demanded.)
Dr. Dupres expressed regret that he had tried to continue to function as CFO when he became Board chairman, and it caused great conflict andconfusion at all levels of the organization. He suspects this undercut the functioning of the Executive Group but denied any affect on Ken Martin’s leadership. (―fhe were a real leader, he would have overcome this problem.‖
At the end of the discussion, Dr. Dupres asked that I keep all this information confidential. I politely refused pointing out I could not do myjob by ignoring the information and felt it was critical that the Board’s assessment of the
Additional information –document 3
organizational needs be shared with the executive team so all efforts were aligned. He reluctantly agreed but demanded that I not share thisinformation yet. He wants me to work with the team first and provide an overall assessment of their strengths and weaknesses (especially Ken Martin). He assured methe Board is in agreement with this and that it was discussed openly so Ken, John Babcock, and James McDermott all know the Board wants an assessment from me afterthe team meeting. I think this is possible, but I want to discuss it fully with my partners to make sure I am not missing something. I extracted a promise that hewould speak directly to Ken and share all of this information with him in the next few days. To ensure this, I asked that both Ken and he send me a notesummarizing the key points. I told them I need this before the 15th when I would be presenting the request to my firm at which point we would decide whether wecould be of help and how we would like to proceed. Dr. Dupres agreed that this made sense. In addition…
1. Only if all these conditions are met will I present the proposal at the team off-site meeting.
2. He further agreed that for the off-site meeting, the client group would be the whole team!
3. He declined my offer of facilitating his discussion with Ken—his point was that if Ken so desires, I, or another person from our firm, shouldbecome an executive coach and advisor to help him grow. The Board wants him to succeed and will give him every chance to develop into the role of COO and laterexpect he will be CEO.
4. Finally he took the suggestion that Ken be