Novartis: Culture is at the heart of performance

The chief executive of Novartis Pharmaceuticals has a clear focus on culture to make a bigger difference for patients and the business, finds Liz Mellon.

Paul Hudson joined Novartis as chief executive of the Novartis Pharmaceuticals business unit on 1 July 2016, having held a variety of regional, global and country roles in other pharmaceutical companies, including AstraZeneca. In his role as business leader, he is very connected with people and has always believed that how an organization works together has a direct link to the success of the business. Hudson explains his career choice and his approach to work: “I made the decision to join healthcare right after I graduated,” he says. “I chose to be in healthcare because I felt a real sense of purpose – every day, I’m reminded of the reasons I’m here and how I can make a difference in people’s lives. During my whole career, I have always focused more on how we do things, than on what we do. I strive to understand how an organization – a large organization – takes on a personality that makes you want to work there, where people feel empowered, trusted and can bring their best self to work. I want to reach a moment where what will differentiate us most beyond the quality of our science will be the organization itself – our character – and its ability to focus on a single mission.”

The biggest opportunity is around how things are done in an organization

Novartis is a global company employing around 120,000 people with an annual turnover of around $50 billion and almost a $200 billion market cap. Hudson leads around 30,000 people in his Novartis Pharmaceuticals business unit, which is a key growth driver for the overall company.

So why did you join Novartis?

“I joined Novartis because of its scale and reach – offering the opportunity to have a greater impact for good. I knew we had a real opportunity to drive better patient outcomes while at the same time running a successful business and creating a great place to work. All the ingredients for success were there. We had wonderful people, clear strategies and great medicines, like Entresto in chronic heart failure and Cosentyx in psoriasis and spondyloarthritis. But I could also see that with so much change in the industry and the business itself, we needed to let go of some of our old habits to become more innovative and agile. I realized we had to focus on how we do things to capture a real competitive advantage and make a bigger difference for patients.”

What were your earliest observations? 

“I have always believed it’s how we work together that will enable us to achieve our mission at Novartis to discover new ways to improve and extend people’s lives. Despite all its excellent attributes, the organization I joined was too internally focused, too complex and risk-averse. Our business focused largely on internal targets instead of being close enough to the changes in the industry and the healthcare environment. We also had some unnecessary bureaucracy, like old processes that had been around for so long, people couldn’t even remember the reason behind their existence anymore. In many of these cases, bureaucracy was more about control than trust and empowerment. Also, in our efforts to be our best, perfectionism was getting in our way. People didn’t have the courage to take smart risks, and were scared of failing.”

So what exactly needed to change?

“I saw our biggest opportunity around behaviours. Integrity is absolutely critical, but it’s more than that – it’s how you work alongside each other, how you collaborate, how you celebrate, and what you tolerate. Collaborating, being surrounded by diverse teams and listening to the outside world to bring that learning inside, is critical to finding solutions that are effective and simple at the same time. If we want people to bring their best selves to work, they need to feel that they can do that, whether it’s diverse thinking, speaking up, offering an alternate opinion or a dissenting voice. We needed to unleash the energy of our talented associates, and enable them to focus on a few clear priorities so we could serve our mission. The culture needed to change.”

Culture and performance go hand in hand

Why is culture so important when you have a good strategy?

“I never saw the business and our culture as being separate. I believe that culture can be a unique differentiator and competitive advantage. How we do things is at the heart of what we achieve. It’s a culmination of a hundred thousand small choices that create a culture. As an organization, you’re going to have a culture whether you like it or not. So, you have to ask yourself the question: are you going to help shape it into something productive, fun and successful – or do you just let it be whatever it’s going to be. I believe that great cultures are intentional. You have to make it a point of focus in your values, vision, mission and, importantly, in your strategy.”

Some things needed to stop. Were there some things that you needed to start?

“Yes. For me, the two big pieces missing were a strong external orientation, and making things simple. External orientation is imperative because we need to understand the context for our decisions and actions, and get foresight into trends. We need to understand the dynamics of our markets. In practice, this means three things. The first is that our headquarters in Basel has to serve the needs of our country operations, and not the other way around. Local markets have different rules, regulations and contexts, and we need to empower our country-based associates to respond to these. Second, we need to focus on competitor activity and market share. And third, we need to move to an outside-in approach. This means moving from a product/science focus to a patient/physician focus.”

‘Simplification’ can mean many things. What does it mean to you?

“Making things simple above all means prioritizing. In our desire to offer our best, we have often taken on too much. It’s always easy to add another item to the list, but we often defer dropping items, so the list just keeps getting longer. The hardest discipline is to prioritize and focus on a handful of strategic imperatives. It is hugely motivational for anyone to be able to see a link between what they do every day at work and how this contributes to the mission. The more activities we indulge in, the fuzzier this link becomes, to the point where work can become mundane and routine. The tighter our focus, the easier it becomes for everyone to see how they are contributing.”

The organization applied its historic strength in execution to move the culture journey forward

Culture change has a bad reputation for being difficult to achieve and for taking a long time. The Pharma Executive Committee (PEC) in Novartis started the summer of 2016 by creating aligned and authentic change stories. People from across the business sat together over the course of 2017 to define the specific meaning of External Orientation and Making Things Simple. The outcome of their discussions was turned into a cultural blueprint for Novartis Pharmaceuticals, or conversation starter, that each business can use to make the constructs come alive for them. It is emphatically not a checklist. Hudson’s first task was to be sure that his own executive team understood that this change also meant they all had to work on themselves. Each of them, including himself, had to be credible and to be seen to walk the talk. By the time they launched the work to the top 150 leaders of the Pharmaceuticals business unit at their annual meeting, they came across as very aligned and committed. The leaders hold each other accountable for behaving in ways that support the culture change and for calling each other out when they slip. Then 28 teams were launched, including the PEC, the 11 leaders of the countries that generate the most revenue, selected Global Functions and business leadership teams. Leaders go through individual and team development, are observed and receive personalized and specific feedback to support their actions and behaviours.

The process is well underway, but surely too soon to look for signs of success? 

“We are not there yet, but we are already seeing signs that give us confidence that our culture will not only serve our mission but also differentiate us from our competition in terms of performance. We had a strong 2017 in our business unit, and I believe what contributed to this success is really how we worked to achieve things: our cultural focus to live our values and behaviours, make things simple to have more time to spend on the things that really matter, and keep an externally oriented mindset to bring valuable insights into our strategies. The external experts we hired to help us have said they’ve never seen a culture move so quickly. In a way, it wasn’t a surprise because, when I joined, our cultural diagnostic clearly stated that our phenomenal drive to achieve results and focus on execution is our towering strength as an organization. We will continue to use hard measures to track progress, such as the annual Global Employee Survey, and other measures like regular pulse checks. But the place already feels different. For example, when Serelaxin, a treatment for acute heart failure that had great early results, failed its late-stage clinical trial, we addressed it at a town-hall meeting to thank everyone for their passion to bring a new treatment to patients. In the past, we didn’t celebrate failure and smart risk-taking, but everyone had worked as hard as they could and did their best, and we wanted to acknowledge that and thank them.”

OQ, Organizational Intelligence, as a critical third quotient in addition to IQ and EQ

Lew Platt, the former chief executive of Hewlett Packard, was famous for his 1990s quote: “If only HP knew what HP knows, we would be three times more productive.” It was the start of knowledge management.

Could this be helping to move this culture change along so fast?   

“It’s an interesting statement because knowledge management is important, but I have started to think about it a little differently. I believe that the best organizations have three things. It’s important to have a high degree of IQ in any organization. You also need people with high EQ to work well together and bring out the best in people. But my idea is that there is also a third quotient that can truly move the needle: OQ – Organizational Intelligence. It’s a concept and idea that’s gathering momentum in our leadership team and we’re striving for an organization where we have this high OQ, in addition to EQ and IQ. People in organizations with a high OQ have a true enterprise mindset, are driven by a real sense of purpose and curiosity to learn, and they take decisions for the greater good, not for the good of the silos. They are striving to be greater than the sum of the parts. We need people who want to build the company, not only build their own careers; associates that focus on what they can do for our mission, the business and on creating something sustainable and impressive. Self-interest decreases and shared goals increase. To achieve our mission, there is no room for self-interested behaviour. Our leaders have to be there for their associates to help them reach their full potential and encourage them to think differently. It’s about a mindset that is curious to always find new ideas to better serve patients, physicians and healthcare systems; seeing the bigger picture; and debating and challenging the status quo. I believe what often makes culture change so slow and tortuous is a lack of OQ. By building this core capability, we are creating a culture that no one else can copy and that will give us a unique competitive advantage.

Ultimately, I want to create a great place to work – a place where everyone wants to work and enjoys working – while in pursuit of the company’s purpose. That’s really at the heart of it all.”

— Liz Mellon is editorial chair of Dialogue