Flat Hierarchy

Growing the Culture at Novartis

joerg reinhardt by nic hunger for HB
Jörg Reinhardt: Crossing the border, changing the culture.
  • Why it matters

    Why it matters

    Novartis, one of the largest pharma companies in the world, is working to improve its culture, so it operates more responsibly in the future, protecting patients’ health while making profits.

  • Facts

    Facts

    • Jörg Reinhardt became chairman of the supervisory board in 2013, after having left the company to work at Bayer.
    • Novartis has started focusing on pharma, ophthalmology and generic drugs after getting rid of veterinary medical products and vaccines.
    • Novartis made net revenue of $58 billion in 2014, the second-highest result among pharma companies.
  • Audio

    Audio

  • Pdf

Jörg Reinhardt, a German manager who heads the pharma company’s non-executive supervisory board, talked about competition, diversity, and how, as a manager living in Germany, he can keep working at Novartis since Switzerland introduced entry quotes affecting workers from across the borders.

 

Mr. Reinhardt, have you enlarged your office in your home near Freiburg in Germany?

No, why?

Because as a cross-border commuter, in the future you will probably have to work from home more often if you aren’t allowed into Switzerland because of the entry quota.

I’ve been commuting to my office in Basel for a long time, and since the new law will only apply to future cross-border commuters, it will probably not affect me.

But the provision has consequences for Novartis.

Yes. We are concerned that it will greatly limit our flexibility in bringing foreign workers into Switzerland. Two-thirds of our Swiss workforce are foreign workers. We want to continue to attract the best talent in the world. But we’re optimistic, however, and assume a practical solution will be found.

You returned to Novartis almost two years ago and right away focused on the change in strategy with a concentration on the divisions of pharmaceuticals, generic drugs and ophthalmology. How difficult was it at that time to convince CEO Joe Jimenez of the move?

First of all, I was at Novartis for 27 years before I went to Bayer. As a result, I knew the company and the players very well when I returned to Novartis after three years. I also knew Joe Jimenez very well. In an earlier capacity he reported to me. As such, we could quickly get involved in fruitful dialogue. I had thought in advance about where things would be headed.

Joe Jimenez was chosen as CEO over you in 2010. Didn’t that hurt your relationship?

We have a very good relationship. It wasn’t Joe’s decision, but rather the decision of the board. I don’t have any negative feelings toward Joe in this situation. We always worked well together, and we continue to do so.

A few weeks after the new Novartis strategy was made public, your predecessor Daniel Vasella warned about the strategy of a focusing on some particular areas, and suggested it was only a passing fad. What do you think?

In the old Novartis there was a certain aversion to concentration and a greater openness to take on broader risk. That was naturally shaped substantially by Mr. Vasella. I think it’s not just a fashion to concentrate on areas where you’re a leader and play an important role globally. That is something others have done too – and it’s something that other industries are doing too.

The business unit swap with GlaxoSmithKline was wrapped up three months ago. GSK has your vaccines, and Novartis the cancer medications. What are now the next challenges?

The deal has been contractually agreed to, but the integration is still continuing of course. We can take on 2,000 GSK employees. And parallel to this deal we’ve introduced a restructuring in which we have started a business service unit. We have taken and bundled IT, some duties of the personnel department, functions of the finance departments and other internal services from the divisions. Currently, Novartis is experiencing the greatest upheaval that has taken place in the past 20 years. That’ll need time to digest.

 

Novartis-01 (2)

 

What else do you want to change?

The culture at the company. We have introduced a new value system and it includes a few which are particularly close to my heart: team work, courage and integrity. It is important that Novartis becomes more than the sum of its individual parts.

Do you therefore see the potential for more synergies between Novartis’ business units?

Yes, for example with biosimilars, the copied versions of biotechnology drugs. In this area, our pharmaceutical organization can help provide expertise for the clinical trials undertaken by the generic division Sandoz. I can also imagine collaboration when it comes to marketing. These are areas in which we could profit much more from synergies within the corporation than we have done so far.

Did you also bring ideas from Bayer?

Among other things, I brought the idea to establish a business service organization. When it came to cultural orientation, Novartis had more of an aggressive top-down culture and Bayer had more of a consensus-oriented, loyal one. I personally think that a middle ground between the two is right. We are working on that.

Integrity is also a quality you named. What about the legal cases in Japan, in which Novartis kept side effects secret? What are you doing to prevent something like that from happening again?

In Japan we had two very different problems. In one case, one of our employees reportedly was involved in manipulating a clinical study. We found no indications of that internally. This trial is ongoing, and we expect a decision some time this year. In the second case, employees didn’t sufficiently report side effects that occurred in cancer studies to the authorities. We really made mistakes there. But we have corrected them since then.

These kinds of cases only confirm the poor image the public already has of the pharmaceutical industry. What can you do about that?

Basically, I think the industry has done a lot in recent years to create transparency. Whether it is with the results of clinical studies, or when it comes to compliance. It is true that the industry has destroyed trust in the past. But if you look at the contributions we have made to the well-being of many people, then I think our industry’s bad reputation is undeserved.

 


Video: Chief executive Joseph Jimenez on Novartis’ 2015 results.

 

Novartis recently created the role of chief ethics officer. What has he done so far?

At the moment, he’s bringing a project to the entire organization that revises the rules that shape the way we run our business. He’s also helping us support our employees in abiding by these rules and at the same time being successful. That includes what benefits may be given to doctors in the future, for example. That’s a change from two years ago.

How do you judge the wave of takeovers in the market?

The fact that the pharmaceutical industry is consolidating has been expected for years and is not surprising in and of itself. There’s a revival of the biotech industry, but that also has to do with the fact that there have generally been advancements made in research in the industry. The technological progress drives the wave of mergers and acquisitions. I see this trend continuing, although the prices currently being paid for biotech firms are very, very high. As a buyer, it’s important to think carefully about taking on that risk.

You founded a joint venture with GSK for over-the-counter medicines, in which you hold a minority share of 36.5 percent. Do you have plans to sell that?

We are happy with the collaboration with GSK and still consider this over-the-counter business an attractive business. As such, we have no plans to part with it in the foreseeable future.

What are your personal plans? Have you given thought to how long you want to do this job?

No. I’m very comfortable in my current role. As the chairman of the supervisory board, my work is more strategic than operational, and that work is fun for me. I haven’t been thinking about my mid- and long-term future.

 

This interview was conducted by Maike Telgheder. To contact the author: telgheder@handelsblatt.com

We hope you enjoyed this article

Make sure to sign up for our free newsletters too!