Wyeth Pharmaceuticals Performance Case Study

Summary Report from Mike Kamarck to Wendy Kouba

Summary

The “bread and butter” so to speak of our company’s operations are the various patents that our various departments have developed which have brought in billions of dollars in revenue over the years. Ranging from human to animal healthcare, the company’s products have diversified over the years, which have helped us to penetrate various markets resulting in multiple sources of possible revenue.

However, our operational platform has always been a race against time given the limitations associated with pharmaceutical patents which enable rival companies to create their own generic versions after a set number of years. It is due to this that the company is experiencing several setbacks in our major markets as it deals with the emergence of cheaper generic rivals.

This has affected the revenue streams of the company resulting in the need to cut costs in order to remain viable. So far, the company has been successful in reducing operating expenses by an estimated $40 million through the development of “mini-T’s” in the 16 first wave sites of the company.

While this can be considered as a victory for implementing cost-effective operations, the fact remains that the reduction was only 20% of the target of the company. In order to continue to remain viable in the face of an increasingly competitive market, the cost of company operations needs to be reduced by at least $200 million over the next year.

The current operational strategy of the company focuses on leveraging economies of scale by having multiple product factories located in various global regions (25 factories in total). Due to differences in local taxation, minimum wage as well as the general business environment, this has enabled Wyeth to operate at a far lower rate of expenditure as compared to focusing operations in a single western economy.

Furthermore, the diversified locations are advantageous for the company from a supply chain standpoint since this prevents the entirety of operations from being affected should a particular natural disaster impact a particular location (ex: the 2011 tsunami that impacted the factories of Toyota and Mitsubishi in Japan).

However, despite lower operational costs and a sufficiently diversified supply chain, this is still insufficient in enabling the company to reduce operating costs by $200 million. In order to determine what can be done to reduce the operating costs of the company, an outside consulting firm was brought in to evaluate current operations to determine what we may have missed when it came to reducing costs.

Based on the analysis of the consultants, it was determined that while the current operations of the company itself are efficient, there is room for improvement when it comes to the human resources of the company. It was determined that a re-evaluation of the current HR practices of the company was necessary in order to reduce costs.

The consultancy firm elaborated more on the proposed methods by explaining that there are several strategies that Wyeth can employ in order to reduce operational expenses and even increase efficiency at the same time. The activities include, but are not limited to, the following:

Incentivised employee operations

The concept of incentivised employee operations focuses on the use of extrinsic rewards in order to bring about greater employee efficiency and performance while at the same time removing “stumbling blocks” to operations that would normally go unnoticed (Finn, 2005).

Intrinsic rewards in this particular case come in the form of monetary bonuses or promotions that the company would give based on the employee’s level of performance.

Performance in this case can be measured through the use of a variety of metrics whereby the company creates a set of operational goals that employees have to meet and creates stretch goals that they could possibly accomplish which would result in the aforementioned rewards.

Stretch goals in this instance come in the form of the employee exceeding their sales quota, finishing a set amount of reports or evaluations within a certain span of time as well as other similar operations that are common within the company.

Through the use of a metric based system of evaluation and reward, employees would have a greater level of incentive to work harder and this would improve company operations without having to hire more employees to increase the amount of work being done (Finn, 2005).

Furthermore, another aspect of the metric system is that this would allow the company to monitor the performance of each employee resulting in better evaluation practices which would result in the termination of inefficient and unproductive employees that would be nothing more than “deadweight” to the company.

It should also be noted that the same system of metrics can also be applied to the upper management of the company wherein the performance of managers and executives of the company would be based on a series of set performance goals.

While the same rewards and promotion system would exist, putting this system in place should help the HR department in evaluating the performance of managers and executives where previous methods of evaluation would be left up to personal interviews and outside performance evaluations which could be misleading.

This would help tremendously in streamlining the operations of the company in such a way that the company could save money by retaining employees that are able to meet the performance goals of the company while terminating those who are simply a drain in resources.

It is expected that through the implementation of such a system, the company could save as much as $50 million in operational expenses that normally go towards inefficient and ineffective work practices.

CARE System for appropriate problem escalation

Another of the potential performance applications that would enable the company to save money and increase efficiency comes in the form of the CARE trouble ticket and escalation system.

Utilised by companies such as AT&T, Sprint, Verizon and T-mobile, CARE is an internal trouble ticket system that would enable employees to call an employee care hotline or utilise an employee trouble ticket system in order to immediately escalate identified problems within the company.

As explained by Kubota & Da Rosa (2013), one of the main “financial drains” in a company often comes as a direct result of certain problems remaining unsolved that result in a backlog of operations that continues to escalate until it becomes a major problem.

Problems with equipment, delivery system, supply chains as well as assortment of other possible concerns are only some of the problems that arise in major corporations. In order to resolve such an issue and to take the pressure off of the shoulders of managers, an internal problem ticket system can be implemented wherein employees can immediately point out a problem based on a series of options given (Whittington, 2000).

They can elaborate on the type of problem, how this impacts company operations and the urgency needed in order to resolve it. It is at this point that a ticket number is generated within the company after the problem has been submitted which is then subsequently sent to the appropriate department for it to be resolved.

Before a ticket can be “closed” the department in question must write a short description on the ticket indicating what was done to resolve the problem with the employee who sent the ticket confirming that the problem has been resolved prior to the ticket being closed.

A problem ticket that has not been resolved for a specific portion of time is immediately flagged by the system and escalated to the higher ups in the company in order for an explanation to be demanded from the department whose role is to resolve the issue as to why the problem has not been fixed.

If the department where the ticket was sent cannot resolve the issue with the tools that they have at their disposal, the ticket is then escalated to the next department in the corporate ladder where they have more tools at their disposal. It is through such a process of problem tracking and escalation that potential issues within the company can be immediately resolved resulting in lower operating expenses.

Shift to Contractual Workers

Another of the proposed changes comes in the form of shifting some of the blue collar staff within the various global factories of the company to contractual workers. The reasoning behind this suggestion is to lower expenses related to healthcare, taxes, as well as assorted benefits that are normally given to long term employees of the company.

The problem with the current setup is that the company needs to be more flexible in its operations in relation to how the market changes based on consumer demand. Since one of the main issues that the company has to deal with is waning sales of some of our drugs under patent, it goes without saying that it is illogical to continue to produce the same amount of a product when the demand has been cut considerably.

It is due to this that shifting the factory workers from permanent to contractual employment will enable the company to reduce or increase resources as need be while at the same time maintaining a sufficient workforce to continue to produce its products. While such a decision may not be taken well by the various workers’ unions, the fact remains that it is a necessity given the current circumstances of the company.

The following proposed activities have not yet been implemented within the current operational structure since they are to be vetted, examined and then subsequently approved by the new VP operations manager.

Do note though that they are merely recommendations from an outside firm and are not necessarily absolutes when it come to the potential strategies that can be implemented by the company in order to meet its target goal of an additional $200 million in savings.

However, based on an examination of the needs of the company and the current methodologies that have been recommended, they seem to be plausible means of resolving the company’s current issues.

Recommendation report form Site MD to Wendy Kouba

Summary

Taking into consideration the current state of the company, one possible means of resolving the current issues surrounding the need to save money in the case of the company’s Montreal site is to lessen the current employee churn rate for highly valued workers. Employee churn rates refer to the amount of employees that enter the company versus the number of employees that leave due to an assortment of reason.

The inherent problem with employee churn rates is that the company winds up spending a significant amount of money when it comes to having to train new employees to replace the ones the left.

It should also be noted that there is a distinct drop in operational effectiveness once an employee leaves and there is also the potential that all the time and effort that the company placed in training such an individual would go to waste if they are hired by one of their competitors.

As such, through the implementation of better employee engagement strategies that focus on retaining company employees, Wyeth will be able to reduce its employee churn rate and would thus contribute towards reducing the amount of money wasted.

Objectives

The objectives of this proposed project are quite simple:

1. Implement a method of employee engagement that satisfies employees to such an extent that they would want to stay with the company.
2. Reduce employee churn rates.
3. Lower costs associated with training new employees.

Mini-transformation Plan for Employee Engagement

Implementation of Intrinsic Strategies for Employees

Intrinsic strategies for employees focus are somewhat different from the rewards based extrinsic strategies that were previously advocated in the earlier message. Instead of rewarding employees via financial means, intrinsic strategies focus on creating a means of satisfaction for employees wherein they enjoy working for the company.

This is far more effective as compared to a monetary based strategy since not only is it free to implement, but it also enables the company to create a better internal company culture.

Proposed Methods

Allowing social media usage

One of the current problems associated with many company operations is that they dissuade employees from utilizing social media while they are in the workplace.

What these companies fail to realize is that engagement through social media is often one of the primary methods by which people stay connected with each other. By removing this means of communication, this creates resentment among the employees resulting in a greater likelihood of them leaving the company.

Work from home program

One of the experimental programs that has become progressively popular with many Fortune 500 companies as of late has been the implementation of a work from home program for many of a company’s managerial and executive staff.

The basis behind such a program is that various aspects of a manager’s or executive’s job can be done remotely from home and this means that they do not necessarily have to be in the office in order to do their job. By implementing such a program, not only does this increase employee morale, it also helps to reduce costs associated with utility expenses.

Creating an atmosphere of open communication and engagement

Another issue, often cited as the reason why an employee left a company, is the oppressive atmosphere and lack of positive communication between ordinary employees and managers. By addressing such issues through a change in internal business culture, this would go a long way towards retaining employees.

Conclusion

In this report what has been presented is a means by which the company division in Montreal can reduce costs associated with employee churn rates. What is advantageous about the potential changes is that would not take significant amounts of money to be implemented and can be done fairly quickly.

While this would not entirely resolve the $200 million in expected cost reductions, it should be noted that the average cost of training associated with a manager exceeds $10,000 or more with executives in the company requiring HR costs of $120,000 and above per director.

Given the fact that the company has multiple executives and a multitude of managers, these costs add up over time resulting in the need to ensure that the company continues to retain its investments in the various employees that it hires.

Recommendation report from site QH to Wendy Kouba

Summary

In this report, a focus on the use of non-discriminatory approaches in performance appraisal is to be advocated due to present day issues related to discriminatory practices when it comes to differences in evaluating men and women for the same type of job. One of the best methods of performance appraisal that is non-discriminatory to women is the use of metric based methods of evaluation.

The metric approach is actually quite simple, the company sets a series of performance metrics in relation to performance goals and the quality of the work expected by the company out of a particular individual.

For example, in the call centre industry metrics are often used to examine the length of a call (customer service representatives need to address an issue within a certain span of time), whether the issue was resolved and the overall quality of the interaction. These factors are in turn compared to a chart detailing performance levels and where a certain individual falls on them.

Objectives

From the perspective of this report, the following are the main objectives necessary when it comes to proper performance appraisal:

1. Non-discriminatory approach.
2. Fair analysis.

Mini-transformation Plan for Employee Evaluation

Within the context of methods of non-discriminatory evaluation, a metric based system works best since it is not gender biased. It focuses primarily on performance and how well an individual measures up to the needed performance output set forth by the company.

Another way of looking at metric based methods of evaluation and how they would be a more appropriate means of employee appraisal is to examine it from a promotion based perspective. Going back to the example of the call centre industry, it can be seen that in call centres such as Convergys, promotion is based primarily on how well an individual conforms to the set metrics of the company.

There is no discrimination or favouritism, rather, strict guidelines and contractually based promises are given wherein if a particular individual were to adhere to a set performance level over a predetermined level of time, they would be automatically promoted towards the next tier of operations based on availability.

Such a practice would be ideal for women since it eliminates possible issues related to gender biases or politicking within a company.

Conclusion

By putting such a policy in place, this helps to reduce instances of discrimination within the company which could lead to lawsuits or the employee leaving due to the what they perceive as a negative environment for employment.

Reference List

Finn, W. (2005). Resolving the performance problems of companies. Competency & Emotional Intelligence, 13(2), 47-48.

Kubota, F., & da Rosa, L. (2013). Identification and conception of cleaner production opportunities with the Theory of Inventive Problem Solving. Journal Of Cleaner Production, 47199-210.

Whittington, M. (2000). Problems in Comparing Financial Performance Across International Boundaries: A Case Study Approach. International Journal Of Accounting, 35(3), 399-414.