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Age of the all-powerful executive has ended

BS Strategist Team | July 15, 2008

In Followership, Barbara Kellerman asserts the age of the all-powerful executive has ended.

Followers the world over are getting bolder and more strategic -- which is why leaders who dismiss or discount them do so at their peril. An extract from the book.

By and large, leaders want followers who are Participants. Assuming they are in support, rather than in opposition, Participants are the fuel that drives the engine. They provide the everyday energy that makes for a good group or organization, which in turn enables leaders to do what they want and intend. The opposite is true as well.

There are Participants who, because they were distanced or became dissatisfied, undermine their leaders, in small but potentially significant ways.

Finally, there are Participants such as those described here who, while generally supportive of their leader and of the organization of which they are members, nevertheless go their own way. At Merck the Participants who mattered most were those Peter Drucker called "knowledge workers."

They were experts who, as a result of their expertise, worked independently and, ultimately, without sufficient oversight from the man supposedly in charge.

On April 5, 2006, a New Jersey jury found that Merck's arthritis drug, Vioxx, had caused John McDarby, a seventy-seven-year-old retired insurance agent, to suffer a heart attack.

The jury further found Merck guilty of consumer fraud for failing to warn the public of the drug's cardio-vascular risks. The court ordered Merck to pay McDarby and his wife $4.5 million, plus another $9 million in punitive damages for misleading, presumably deliberately, the US Food and Drug Administration (FDA).

More than anything else, the saga of Vioxx accounts for the fact that Merck, which a decade earlier was an exemplar of corporate virtue, became an exemplar of corporate greed. For failing to carefully caution its customers -- its patients if you will -- that Vioxx could be deadly, Merck lost in every way.

How did this happen? How did a company that was held in such high esteem fall so far so fast? The most conventional of several explanations is leadership -- and no doubt it played a role.

Roy Vagelos, who was Merck's chief executive officer from 1985 to 1994, was credited with its strong ascent. Similarly, Raymond V Gilmartin, chief executive officer from 1995 to 2004, was blamed for presiding over the company's decline.

Vagelos was outstanding, "the undisputed king of the pharmaceutical industry." Under his leadership and for years running, Merck was anointed by Fortune the "most admired company in America."

He had a long string of successes that included a revamped research organization and expanded global marketing, and a leadership style that was enormously appealing. A highly accomplished scientist as well as a much-heralded chief executive, he nevertheless drove his own Honda to work, ate regularly in the company cafeteria, and solicited feedback from anyone at Merck who would give it, including those down the corporate ladder.

Vagelos retired when he had to, at the mandatory retirement age of sixty-five. But even then it was considered a loss, for under his leadership Merck had thrived, in the economic marketplace as well as in the court of public opinion.

Vagelos's immediate successor, Gilmartin, thus had the unenviable task of filling some very big shoes. To be sure, he had background and experience that Vagelos lacked. Above all, he understood the increasingly important role of managed care, which was considered by the board that selected him to be a major asset.

But he was not a scientist, nor did he have experience in the pharmaceutical industry, nor was he familiar with Merck's corporate culture. Again, this was in direct contrast to Vagelos, whose own long years as a medical researcher had made him an expert in pharmaceuticals in his own right.

And so it was that under Vagelos's leadership, his followers, his fellow researchers, produced a veritable string of lifesaving drugs, and this "in large part because of the inspiration" they drew from his "passion and sense of purpose."

The first five years with Gilmartin at the helm went well enough. Although never as highly respected as his predecessor, he had his own successes, including new drugs to replace those whose patents were expiring, and a steady rise in the company's annual sales and net income. But by the new millennium, the good times were over. In 2001 Merck's shares went down fully 38 percent.

Moreover, the company that only recently was the largest drug producer in the world fell behind its two largest competitors, Pfizer [Get Quote] and GlaxoSmithKline [Get Quote].

Gilmartin never really recovered his footing. Several of Merck's most profitable products became vulnerable to competition. Late-stage testing on some promising new drugs had to be stopped.

And in 2003 the company was obliged to announce that because of a critical drop in earnings, thousands of jobs had to be cut. Of course, the blame for Merck's misfortunes fell primarily on Gilmartin.

Industry analysts charged that under his leadership Merck had developed problems it had never had before -- for example, a misplaced rise in the number of middle managers and a drop in the number of new drugs, especially "blockbuster" drugs that work wonders for the bottom line.

This, though, is not in the main a tale about a leader. Rather, it is about his followers. From day one Gilmartin was focused on strategic decision making, leaving day-to-day management issues, including those pertaining to research, in the hands of his subordinates. As a result, whatever the mistakes and misjudgments with regard to Vioxx, they were made mainly by those who were not at the top of the corporate ladder.

This is not to say that Merck's chief executive officer abdicated responsibility. He did not. Instead, it is to point out that it was those who worked under him -- especially the knowledge workers, the experts, the scientists and physicians -- who developed the drug and then ran with it until they were permitted to do so no longer.

When Merck finally decided in September 2004 that it had no choice but to take Vioxx off the market, Gilmartin was left holding the bag. No surprise. Leaders are ac-countable for what happens on their watch. But it was the Participants working under him who drove the drug from day one -- and so it was they who were directly responsible for one of the great fiascos in the history of American business.

Not every chief executive who joins a company from the outside, and who is not fully familiar with the product the company produces, runs into trouble. Louis Gerstner, for example, came to IBM from Nabisco and managed brilliantly to transform his skills at running a company that makes cookies into running a company that makes computers.

But what happened to Gilmartin at Merck is a caution: when inexpert leaders lead expert followers, the former must closely monitor the latter. For knowledge workers are decision makers.While formally subordinate to the chief executive, their expertise bestows on them power and influence.

As Drucker put it, "Every knowledge worker in modern organization is an 'executive' if, by virtue of his position or knowledge, he is responsible for a contribution that materially affects the capacity of the organization to perform and to obtain results." Moreover, when knowledge workers join forces, to push a particular idea or a particular product, the person in charge has to be hypervigilant, again, especially when he or she has no more than modest knowledge about the matter at hand.

Knowledge workers, in turn, do not benefit from having leaders who are weak, or from developing a fortress mentality that pits them against others who are critical. Nor should they ever benefit from putting the health and welfare of themselves or their organizations ahead of the health and welfare of those on the outside.

A final note: experts everywhere and at every level of every organization are more vulnerable now than they used to be. However brilliant the research team at Merck, the product they developed was bound to be closely scrutinized by other researchers based in other organizations.


Followership: How Followers Are Creating Change And Changing Leaders
Author: Barbara Kellerman
Publisher: Harvard Business Press
Price: $29
Pages: 305
ISBN: 9781422103685

Printed with permission from Harvard Business Press. Excerpted from Followership: How followers are creating change and changing leaders by Barbara Kellerman. Copyright � 2008, All Rights Reserved.



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