11 Jul. 2014 | Comments (0)
Too often, any thought of changing a culture, never mind rebuilding it, seems like a Sisyphean task; the weight of the status quo ultimately rolls back and crushes such efforts.
I learned this while leading a turnaround of NPS Pharmaceuticals, a biotechnology company that now specializes in creating treatments for rare diseases. To save the 20-year-old company, I had to get it operating like a start-up. In the process, I came up with six rules that could also help others change their cultures.
First, let me give you a little background. NPS had hit a rough patch in 2006. Our lead drug, upon which the future of the company then hinged, failed to get the U.S. Food and Drug Administration’s approval. With the company in jeopardy, a deep retrenchment followed, including cuts that reduced the workforce by 80%. Not surprising, those who remained were distressed and anxious.
I took over as CEO in 2008 and immediately realized that NPS had to become a different company. My first priority was to execute a new strategy that focused the company on rare diseases by repurposing assets in our pipeline. We could no longer afford to pursue remedies for prevalent big diseases. Accordingly, I transformed the business model − from that of a fully integrated pharmaceutical company into a company that retained key technical expertise (e.g., medical development experts, regulatory affairs and technical operations leadership, quality assurance/control); the project-management function; and contracted, or outsourced, all other operational activities.
The new NPS needed an entrepreneurial, creative, and cooperative culture. I had to guarantee that people worked together with the utmost efficiency. Reflecting on my 25 years of experience at large pharmaceutical companies and private equity firms, I thought of the environments I had enjoyed and wrote down the basic values that were important to me and, I believed, would be crucial to turning around NPS: integrity, respect, excellence, personal ownership, teamwork, and fun.
These core values were instrumental in reviving the company. We’re now growing: We have an approved product (Gattex) for treating adults with short-bowel syndrome who are dependent on parenteral nutrition, a second product under FDA review, and are expanding internationally.
Of course, anyone can write down words, call them values, and incur no change. Something has to be done to turn them into an actual culture. I believe that these rules − which I applied at NPS − can work at other companies, too.
Define the values in simple, sixth-grade language. Words mean different things to different people. Therefore, it is important that the words used to define the values be simple, clear, and easily understood by the constituents and are not jargon. This leaves no room for creative (mis)interpretation of the values and avoids using words that have different meanings or can’t be translated in other languages.
Don’t post plaques on the wall declaring the values. Mounting your values on a wall can trivialize them and give the false impression that they have been already achieved by decree. Values have to be internalized and lived and cannot be an object on a wall. Building a culture with values that everyone embraces requires leading by example, interpersonal communication, and permanent attention.
Teach people what the values mean. This must come from the top. My senior executives and I made our values the language of leadership. They were embedded in how we worked and communicated at every level. Credibility is truly at the core of building a values-driven culture.
Recruit people who naturally are inclined to live your values. This does not mean recruiting clones! It simply means populating the workforce with individuals who naturally embrace the values and become role models. Cultural fit is as significant as technical ability. Again, a company’s culture is a choice, and different people find their fulfillment in different cultures. Just make sure you identify and retain those individuals who will flourish in yours. We integrate the assessment of candidates’ values in our interview process, check references accordingly, and rely significantly on referrals.
Make values a primary filter for performance evaluations. There is no stronger lever for promoting a culture than tying adherence to its values to individual compensation. At NPS, the values evaluation and rating has a direct and significant impact on salary increases and both short- and long-term incentives. While recruitment errors happen, the performance evaluation highlights those shortcomings and gives the manager and the employee a chance to correct the situation. If the improvement plan fails to generate results, swift separation from the company is necessary. Even individuals on NPS’s leadership team who didn’t embrace our values had to go.
Your values must be non-negotiable. Over and over again, I have seen managers tolerate unacceptable behaviors because they believed the individuals’ technical expertise was vital. This shortsightedness is a recipe for disaster. One person’s expertise is not a good trade for negativity, loss of credibility, and the metastases of other unacceptable behaviors throughout the organization. The moment you make one exception, you’re doomed.
This blog first appeared on Harvard Business Review on 05/01/2014.