Executive Summary
GlaxoSmithKline (GSK) has been facing numerous management challenges since its inception in 2000. This has culminated in huge court fines and a reputation on the verge on destruction. Additionally, the company faces huge operational challenges despite vast resources spread across the globe. Many pundits attribute this crisis at GSK to weak leadership.
This paper looks into management structure at GSK with the aim of dissecting the type of leadership style employed. In light of this dissection, the author recommends the most effective leadership style to steer GSK to the next level and to enable it to handle previous management misjudgements.
The author finds that Transactional Leadership style has been prevalent at GSK for quite some time. This leadership style is attributed to managerial pitfalls at GSK. The author recommends use of transformational style of leadership. Transformational leaders are dynamic, creative, proactive, and have the ability to save the company from itself.
While Transformational Leaders show sensitivity to people’s needs, develop visionary objectives, and take risks after taking the right precautions, transactional leaders shy away from risks and employ short cuts to amass short-term gains. Transformational leaders, the author finds out, are agents of change and have exceptional skills for winning the support of their followers. Experts recommend that companies that are on the verge of collapse should employ transformational leaders to help the situation.
While the author concedes this is the best style, he takes note of the need to use all styles interchangeably in the management’s structure of GSK. Katz model is one such interview tool that the author recommends. The company should also revise the process of identifying immeasurable leadership qualities. This will improve the image of GSK and put the company in the path of reputational and managerial health.
Introduction
GlaxoSmithKline (GSK) is a British multinational pharmaceutical company headquartered in Brentford, London, with operations in USA’s Research Triangle Park, North Carolina. GSK has been implementing different leadership strategies to overcome the impact of competition in the global pharmaceutical industry.
This has been imperative to the company since it has considerably optimized the population of its global clients. Nevertheless, GSK’s inability to implement leadership strategies appropriately has resulted in a series of operational challenges.
Formation and Global Expansion
GlaxoSmithKline was founded in the year 2000, following the merger of SmithKline Beecham and GlaxoWellcome. The following year, GSK purchased Block Drug for US$1.24 Billion. In 2006, the company acquired CNS Inc. a US-based consumer healthcare company, for US$566. Following the CNS Inc. acquisition, GSK increased its range of products and realized extra sales of £81 million. Additionally, in the same year, GSK invested £8 million in a joint venture with Shionogi & Co., Ltd (GSK Annual Report, 2008).
Thereafter, GSK opened its first research centre in China affirming its commitment to invest globally. This centre majorly focused on producing drugs for treatment of neurodegenerative diseases at first. In other global investments, GSK has focussed massively on malaria research. It has specifically been carrying out clinical trials of a new malaria vaccine, RTS, since 2008. It intends to continue with the trials until 2014 and test more than 15,000 children (Our History, n. d.).
Mission and Corporate Social Responsibility
GSK’s vision is to help the less privileged members of the society. In 2009, it announced plans to cut drug prices in at least 50 of the poorest nations, invest part of its profits from the undeveloped nations in improving medical infrastructure, and encourage new drug development in those nations. During the same period, the company acquired an Argentine pharmaceuticals company Laboratories Phoenix. This centre specializes in the development and sales of generic products.
GSK entered into a joint venture with Pfizer and created ViiV Healthcare. Subsequently, the company announced its acquisition of Maxi nutrition in 2010. Moreover, it announced plans to invest in manufacturing plants in Ulverston in Northern England. According to official reports, GSK employs over 97,000 people globally to handle research and development projects. The company sells its products in about 70 countries (Our Mission and Strategy, n. d.). GSK is committed to offer medical products to its global clients more conveniently.
GSK has outstanding Corporate Social Responsibility initiatives. According to the company’s CEO, GSK plans to get rid of a disease that has been afflicting humanity for centuries. Hence, the company plans to donate Albendazole drugs, as much as needed. GSK has been short-listed for the Worldaware Award. It received this award because of its efforts to eradicate malaria in Kenya. Apart from this achievement, UK Corporate Citizenship Index ranked the company as a leading donator in 2006 (Our Mission and Strategy, n. d.). GSK, notably, endeavours to give back part of its profits to the society.
GSK’s Operational Challenges
Despite the company’s outstanding operations and management systems, it has faced several controversies over the past ten years. Most of the challenges resulted from managerial mistakes. The major mistake was the mismanagement of an advertisement regarding Ribena production components.
GSK has been producing Ribena, a popular black currant fruit drink, for a long time. The company misadvised consumers to believe that the juice is a rich source of vitamin C. However, two 14-year old students, Anna Devathsan and Jenny Suo, while engaging in a science assignment, discovered that the drink contained almost no traces of vitamin C. The matter was made public on Fair Go, a consumer fair trade show.
Following the controversy, the Commerce Commission took over the case and confirmed that the pupil’s findings were accurate. GSK was sued and pleaded guilty to 15 charges relating to the case, which resulted in fines amounting NZ$217,000. However, the company maintained that it did not harbour ill motives and that the advertisement claim was based on certain testing procedures that had since been corrected (Outterson, 2012).
In 2012, GSK grappled with yet another controversy relating to a health care fraud settlement in the U.S. The company was apparently engaging in illegal promotion of prescription drugs. In addition, GSK could not provide adequate safety for private data. It was also accused of giving doctors bribes and promoting the use of medicines for treatments for which they were not approved.
The government had launched investigations after learning of the illegal acts from whistleblowers (Thomas, n. d.). The company was found guilty and repaid a $3 billion settlement. This incident had a severe negative impact on the company and its management.
GSK has also been facing criticism from animal rights activists. The activists believe that the company is a consumer of services from Huntingdon Life Sciences, a controversial animal testing company. Reports indicate that in 2005, some of the activists donated a bomb containing explosives on the doorstep of Paul Blackburn, the corporate controller of GSK, and caused damages (Lang Chu, 2006). The extremists were not pleased with GSK for collaborating with Huntingdon Life Sciences.
Management of the Operational Challenges
Consequences of the Challenges
GSK has faced monumental operational challenges over the past 10 years. The pharmaceutical company has paid the highest amount of court fines relating to trade misconduct in the last few years (Thomas, n. d.). The controversies portray the company in bad light (Field, Holden, and Lawlor, 2002).
Its vision, objectives and mission statements are positive and obliging in helping the world to improve health and education standards. Additionally, the company is committed to bettering the quality of human life by enabling people to live longer and feel better (Our Mission and Strategy, n. d.).
GSK is working with partners such as Pfizer to provide financial aid and reduce drug price for the poor. The company’s mission is to reach out to the global population and serve them more effectively and efficiently. However, the numerous court cases and accusations against the company have a negative impact on its overall operations. The cases, in addition, have a negative effect on the consumer’s perception about the company’s products.
They (consumers) might concentrate more on the company’s unethical strategies rather than the benefits of the products. If the management fails to take urgent action, the company might soon begin to operate on credit, ultimately collapse, and go bankrupt. Owing to the ineffective team of leaders, the former scenario is possible.
Effective Management of the Operational Challenges
GSK ought to take action and reform its leadership styles. Research has shown that effectiveness is measured depending on the people’s achievements and their skills and behaviour. The measurement is done by comparing the actual results and behaviours with the expectations relating to the achievements and behaviours of participants (Field, Holden, and Lawlor, 2002).
GSK has vast resources at its disposal. By contrast, GSK has been losing billions of dollars in paying fines arising from careless management. The amount of loses can be reduced if the company employs a management team that exercises visionary leadership, do things the way they are expected, understand the business and its key drivers, and locate resources according to appropriately laid down procedures.
The new management should be able to undertake innovation duties accurately, adapt and respond to market changes appropriately, and anticipate problems before they happen. Moreover, it should handle problems that arise unexpectedly with sufficient care. Leaders that use these techniques are transformational (Bass and Riggio, 2006). They are the best group of leaders to save GSK from collapsing. The company pleaded guilty to almost 15 charges since it depended on transactional managers.
GSK’s management failed to be responsible following inadequate appreciation of past mistakes. After pleading guilty to the initial charges, it met other numerous controversies that caused the company billions of dollars. Transformational leaders are good at learning from the past. To solve the challenges sufficiently, the company should employ transformational leaders (Pierce and Gardner, 2002).
The frequent rate at which suits are filed against GSK demonstrates the inability of the current leaders to take charge of the company’s operations. GSK’s reaction to the actions of the advertising team also depicted the management as incapable of conveying its vision appropriately. The company argued in court that the error regarding the inaccurate contents of Ribena was based on a miscommunication from the advertising department.
According to prominent leadership theories, an effective leadership must have control over its followers and develop proper communication channels. The leader must be able to share his/her vision with the entire team efficiently. Moreover, effective managers need to have the ability to switch flexibly from one model of management to another, depending on the needs of different people and the situation.
Besides, effective leadership requires understanding of exceptional methods of influencing employees to operate according to laid down policies and regulations. The leader should earn the respect of other employees because of the effective ways of performing tasks (Thomas, n. d.). Notably, GSK’s management does not possess these qualities.
The current leaders have failed to ensure that all internal processes of the company operate efficiently. There are several miscommunication cases from within. In addition, the leadership has failed to enhance external stability and efficiency in achievement of goals.
GSK has not succeeded in meeting its financial goals, providing quality services, and addressing customer’s needs effectively. These are the roles of effective leaders (Field, Holden, and Lawlor, 2002). Additionally, GSK has failed to meet its key objectives due to the frequent settlement of heavy court fines. It has been using a lot of money to settle cases rather than initiate major developments and innovations.
Apart from failure to meet financial objectives, the company has failed to make use of its global resources to satisfy the tastes and preferences of its customers. The misinformation regarding the contents of Ribena shows that the company cannot satisfy the needs of its customers and therefore uses unfair means to make profits.
The case depicted a picture that the company uses unfair trade mechanisms to take cash from the public. The cases, moreover, threatened to destroy the reputation of the company. Losing the trust of the public is one of the key factors that may lead to the closure of a company indefinitely. GSK ought to maintain cohesion with clientele and evolve successfully.
Notably, the organisation uses the transactional model of leadership. The leadership has shown interest in maintaining stability by entering into joint ventures with other global companies. It has also invested heavily in acquisitions of new and improved facilities in the last ten years.
Moreover, it has developed policies that take care of the interests of poor patients. The ventures and programs help the company to remain competitive globally. However, it has developed policies to promote changes within the organization. Despite providing cheap drugs to the poor and financing medical infrastructure in those regions, the culture of the company seem to remain targeted at making profits.
It has impressive corporate missions, but it is at risk of falling prey to social evils. The shortcomings demonstrate lack of transformation qualities in the leaders. It is notable that the leaders take risk without taking adequate care (Ferran, and Salim, 2008). This has resulted into the erosion of the culture of respect for human rights. The company therefore needs a leader that possesses the appropriate skills and behavioural mannerism to correct the mistakes done in the past.
Recommendations and Justification
A Change in Leadership
GSK’s new leaders should adopt appropriate leadership styles to eliminate a number of operational problems. The new leadership should have the quality to motivate followers to transcend self-interest and serve a higher level of ideals (Heizer and Render, 2004). This management should practise servant leadership in the company. This will strategically place the company to achieve its goals. Nevertheless, to be assured of the success, the company should employ leaders with the passion of transformation. Transformational leaders are commonly hired to revive companies that are at the verge of collapsing. They possess the ability to articulate compelling vision and influence others to sacrifice their interest for the sake of the society (Bass and Riggio, 2006).
Justification for the Call for Change in Leadership
Transformational leaders see themselves as agents of change. In addition, they believe in themselves. By employing such effective leaders, GSK will get the opportunity to improve its eroded culture. The recommended leadership will not maintain the status quo as commonly done by transactional leader. Commonly, they encourage innovation and develop original ideas that can solve the current evolving trade challenges that the company is facing. These leaders have high trust for their intuition.
Transformational leaders encourage democratic rule but at the same time are well informed. They endeavour to create cohesion and improve quality of service provision. The leaders have the skills for instituting turn-around strategies in organizations that are approaching total collapse.
The change in management will therefore help to eliminate reckless action done under the guise of risk taking management. This is because the leaders believe in taking action after engaging in careful deliberations and considerations. The new style of leadership will work towards using resources economically by making decisions that will bring a positive change within the company. Moreover, it will increase chances of the company to make more profits and increase its social value.
An outstanding characteristic in transformational leaders is having a set of core values that tend to determine their own behaviours. They possess extraordinary cognitive skills. Since leaders’ skills and aspirations are reflected in their management styles, the company would develop exceptional policies to take care of anticipated and unanticipated risks (Bass and Riggio, 2006).
The company’s current leadership does not demonstrate trust and faith in people. Research shows that transformational leaders do not only believe in people but also show sensitivity to their problems. The new style of leadership will therefore develop policies and put them into action (Bass and Riggio, 2006). GSK has attractive corporate mission statements. It manages several charity programs. However, the expected behaviour has nothing in common with the actual actions.
This is because of poor leadership. The company does not show sensitivity to the people’s needs. It constantly gives misleading information and engages in fraud. The occurrences portray the company as ruthless, a brand that is unhealthy for its success. Transformational leaders believe in creating an atmosphere that is conducive for living. The leadership can therefore create a marketable brand for the company.
The leadership has the ability to use negative past experience to improve the company’s future operations. Transformational leaders believe that all past occurrences are useful for further learning. The dark past of the company can therefore become resourceful for improving performance (Cherry, 2002).
Moreover, transformational leadership will help the company to save a lot of money. This is because they perform transactional behaviours, as well. The company needs transactional leaders, especially at lower management levels, and transformational leaders, at higher levels. Since transformational leaders can perform both roles, the company would benefit from the valuable services of the new management and improve efficiency most conveniently (Bass and Riggio, 2006).
GSK cannot succeed if it fails to use the accurate methods of identifying leadership skills. There are several theories on how to identify skills in individual leaders (Fear, 1984). However, Robert Katz’s model that provides the ‘three skills approach is highly recommended for GSK.
Katz suggested that success in leadership depends on technical, human, and conceptual skills. The mode illustrates that skills are measurable, as they are what leaders can accomplish while traits are not. On the other hand, traits represent who leaders are. The company should use this model to evaluate leaders’ skills.
The model identifies technical skills, which help in production of the actual products. It also identifies human skills. Leaders with enhanced human skills have the ability to work with others harmoniously. The company also needs leaders with conceptual skills. The skills make leaders competent.
Katz’s model can help it to identify employee who have these skills, and therefore, have the ability to work with different ideologies and concepts (Northouse, 2013). At the same time, GSK should give priority to identification of exceptional leadership skills, some of which are not measurable using the model. Transformational and charismatic leaders have high levels of emotional intelligence that should be assessed as well.
Conclusion
GlaxoSmithKline has the potential to achieve it global objectives. It began operating in 2000 and about ten years later, it has expanded in all key strategic global markets. This indicates that GSK has sufficient resources at its disposal. The company also has impressive relationship with global companies, such as Pfizer. The warm relationship helped the companies to agree to enter into a joint global relationship. GSK therefore is a viable company.
A management team that has the ability to not only manage the resources effectively but also transform the company can solve its problems. The company should employ a team of transformational leaders. Transactional leaders are also helpful for the companies’ success, especially at lower management levels. These leaders are competent in managing organizations to perfect their current operational standards.
They cannot save a company on the verge of collapse. The company can train them to gain insight on the desirable course of action. It can transfer leaders with innate transactional qualities to Middle Level Management offices (Fear, 1984). GSK should develop methods of identifying transformational leaders preciously. One of the available options it should consider adopting is the Katz model. It is straightforward and easy to use. The model also identifies major management skills in individuals.
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