Pharma companies looking for ways to squeeze more productivity from R&D are finding that a decades-old technique called performance management can produce dramatic results without adding costs.
Put very simply, performance management means devising measurable goals with input from the workers themselves, and using them to gauge and, in some cases, reward performance. Introduced to Japan by US business consultant W. Edwards Deming in the 1950s, the technique has since been picked up by industries and governments around the world.
But pharma only jumped on the performance management bandwagon recently, with the approach reaching trend status in the industry in the past two or three years, says David Boath, global managing partner of Accenture's research and development practice.
Part of the reluctance may have been the sheer difficulty of finding ways to measure scientific innovation. But high-throughput techniques and other types of automation have made it a bit easier, while...
NO MORE SCIENCE IN A VACUUM
Far from becoming irked at being treated like any other worker turning out widgets, some scientists say being measured can be liberating and empowering. "I think it was the first time that we really had clearly defined goals and objectives, with some ways to measure how we were doing against these goals," says John Dunlop, director of neuroscience discovery research at Wyeth, which introduced performance management in 2001. Before, he adds, there was "a lot of science going on in a vacuum."
"The fear is that you can't incentivize innovation and creativity, and actually what you can incentivize is activity and behaviors that will give it the maximum chance of succeeding," says Gordon Dawes, vice president with drug discovery human resources at GlaxoSmithKline (GSK). The company introduced performance management across the board in 2001, when it was born from a merger of Glaxo Wellcome and SmithKline Beecham. Internal surveys show that 60% of employees like and approve of the performance management system, while most of the rest are neutral – actually a pretty good score, according to Dawes.
The system has boosted productivity, with an 80% increase in new chemical entities (NCEs) in clinical development since the merger – from 50 NCEs in Phases I, II, and III in October 2001, to 88 in February 2005. While about half of the company's NCEs were in Phase I in 2001, two-thirds are now in Phases II and III.
Wyeth has been extremely open about the introduction of its "new way of working." Spearheaded by R&D president Robert Ruffolo (see "The View from the Top," page 41), the system is based on a simple but ambitious series of goals: 12 compounds entering development each year, with a 70% success rate; eight investigational new drug applications submitted annually, with a 40% success rate; three to four compounds reaching Phase III, with a 60% success rate; and two new drug applications or new medical entities submitted to the US Food and Drug Administration each year. The company has met these goals for these past four years in a row.
The system includes specific criteria a compound must meet to move from hit to lead and lead to predevelopment, established timelines for the process, and governance groups tasked with making the decision on when to kill a project and when to push it forward. For example, a confirmed hit is given 12 to 18 months to move to lead optimization, and two years to go from lead optimization to development. Along the way, compounds must meet standards based on potency, selectivity, bioavailability, p450 profile, and other gauges of drug potential.
"This created a transparent process that everyone, whether you were a chemist or a biologist, knew what was expected, how things worked," says Peter Bodine, associate director of osteoporosis research at Wyeth. Bodine has been with the company 11 years and was part of the first group of team leaders to implement the system.
"In the past, projects would start and they'd go on for a long period of time, and people didn't know what was going on with a project, and teams were reluctant to kill projects," Bodine adds. "We now celebrate failures as much as we celebrate successes. That is just as important, because then those resources are freed up."
Before the new way of working, he notes, teams generally made decisions by consensus. Now a core group of team leaders has decision-making responsibility. "It's particularly helpful when there are some differences of opinion in the larger team," he explains.
LEAVING ROOM FOR CREATIVITY
The top 600 employees at Wyeth have a scorecard of goals that are reviewed every year, and which they have a hand in developing. They include the employee's division's particular share of the overall company's goal, as well as the employee's group's performance, and the performance of his or her team. One example: two peer-reviewed publications per senior scientist per year.
In R&D, if 95% of an employee's goals are met, he or she receives 100% of his or her bonus. Meeting a lower proportion of goals means less money.
While some scientists feared early on that hard-and-fast guidelines would make for an overly "robotic" process, Bodine says, the rules are not completely rigid and leave room for flexibility and creativity.
"Things aren't open-ended, but at the same time we don't shut a project down just because it's April 1," says Jerauld Skotnicki, director in chemical and screening services at Wyeth.
Dawes agrees that leaving key scientists some room for "thinking, playing, looking at things differently," is crucial for supporting innovation. With this in mind, GSK has created "centers of excellence in drug discovery" to foster collaboration in a creative environment. It has also developed "medicine development centers" organized around outcomes, "where the scientific progress and the behaviors are very clearly described," Dawes adds.
Pharma workers and execs interviewed for this article agree that performance management fosters teamwork among diverse groups, both by establishing clear-cut goals and by tying workers' – and managers' – compensation to the performance of their teams and other coworkers.
The approach does promote the sharing of information among people who have traditionally guarded it jealously, Boath notes. "I've seen some amazing things happen."
Wyeth and other companies that have successfully introduced performance management have been able to clearly define what they mean by innovation, Boath points out. It's also key to start with later-stage processes and work backward through the pipeline, he adds, as the work that goes on at the earliest stage is more difficult to define and measure.
Other challenges include collecting and managing the massive amount of information involved with measuring performance for thousands of employees, he adds. Successful companies do it electronically on Web-based systems. Another factor is that most pharma companies are multinational entities, and must adhere to local national rules on compensation and bonuses while remaining fair to employees throughout the company.
But the ideas that scientific innovation is some ineffable quantity that can't be measured – and that scientists don't like money – are becoming a thing of the past, at least in pharma, Boath says. "I think people are beginning to realize that scientists are just like everybody else.... At the end of the day I think they're just as excited about the new Lexus they got in their driveway as a bonus as the guy on the production floor."