Case Study on Management Functions: UCB Pharma Research Paper
UCB Pharma is one of the leading global biopharmaceutical companies. Basically, the company focuses on the research, development, and commercialization of innovative pharmaceutical and biotechnological products. The implementation of innovation is one of the essential conditions of the company’s commercial success since innovations put the company in the advantageous position compared to its competitors.
Traditionally, the company develops pharmaceutical and biotechnological products in the fields of central nervous system disorders, oncology, allergy and respiratory diseases, immune and inflammatory disorders. One of the basic goals of the company is to sustain its leading position in the market, to a significant extent due to innovations and development of new business units, such as the one that deals with inflammatory disorders and development of relating pharmaceutical and biotechnological products. At the same time, it should be said that UCB Pharma is originally a Belgian company with headquarters in Brussels. It is very important to underline the fact that currently the company operates worldwide and it is widely representing in many states and practically in all continents, including the Americas, Asia, Africa, Middle East, Oceania, and Europe.
The European subsidiaries are responsible for marketing, medical information and distribution of pharmaceuticals originating from UCB’s research and developments in the above mentioned therapeutic areas. The research activities are organized into three Centers of Excellence around Europe: Braine-l’Alleud (Belgium) is focused on the central nervous system, Cambridge (UK) on inflammation, and Slough (UK) on antibodies and oncology.
The company has changed dramatically in the last decade from a classical chemical company (e.g. production of plastics) with some focus on the pharmaceutical market into a dynamic biopharmaceutical company. In such a way, a significant shift in the perspectives of the development of the company has occurred due to the change of its priorities.
This year, UCB announced the proposed acquisition of Schwartz Pharma for cash and shares valuing Schwartz at 4.4 billion euros. The recent acquisitions are in line with UCB’s vision to build a global biopharmaceutical leader, bringing to specialists new medicines to treat patients suffering from severe diseases.
Resulting from the expansion of UCB, a new business unit (BU) focusing on inflammatory diseases has recently been established in most subsidiaries. Basically, all subsidiaries have the similar and well organized structure. The majority of subsidiaries now have 4 business units; a “primary care products” BU, one “central nervous system diseases” BU, a “special products” BU and thus the new BU “inflammation”. As is the case in most pharmaceutical marketing/sales organizations, the business units in the UCB subsidiaries are supported by two additional departments: HR/Finance and the Medical department.
The UCB office in the Netherlands located in Breda is not an exception and is organized in the similar way as the majority of subsidiaries are as it has been just described above. The Dutch subsidiary consists of four business units, HR/Finance and a Medical department, as other subsidiaries do. Each business unit is headed by so called General Franchise Managers which are responsible for the stable functioning and progress of their respective business units. The HR/Finance department is led by the Managing Controller and the Medical department is led by the Medical Director. The General Franchise Managers, Managing Controller and Medical Director all together make up management team of the Dutch subsidiary they closely cooperate and it is the efficiency of their team work that defines the efficiency of the subsidiary at large.
The UCB Pharma faces certain problems in its functioning and development. The major problem the company is facing is the problem of the result control, especially in the Business Unit of Inflammation since it is one of the most perspectives units of the UCB. In fact, the essence of the problem is the lack from the part of the Business Unit of Inflammation over the practical implementation and realization of its developments. This means that medical specialists working in this unit are simply deprived of an opportunity to control the final products, instead they are used as developers of ideas and products, while the control over specific medicaments is actually in hands of non-medical professionals. As a result, such a lack of control from the part of medical specialists creates a considerable tension and undermines positive relationships within the business unit and the company at large since a part of its personnel turns to be simply excluded from the commercial outcomes of its work.
Consequently, the morale of some employees of the company decreases dramatically while specialists that actually take decisions as for sales or promotion of some products turn to be in a privileged position that misbalance the organizational structure and threatens to the normal relationships between specialists working within the company.
The UCB employees that fall within the confines business units are the General Franchise Managers, sales people, marketing people and business unit assistants. However, there exists certain inequality within the business units. Certain employees that formally belong to the Medical department (for instance, Medical Advisors and Medical Scientific Advisors) are outsourced to the business units. They cannot be fully integrated in the work of the personnel and, consequently, cannot constitute an integral part of the team working in the company. This is why it is possible to speak about the lack of opportunities to develop an efficient team work and close cooperation between staff members because of such a position of Medical department and its personnel that inevitably affects the functioning of the entire company since the lack of effective cooperation naturally leads to the decreasing effectiveness of work of the business unit and the company at large.
The division in function between sales/marketing personnel, on one hand, and medical personnel, on the other hand, is clearly reflected in the bonus system: Sales/Marketing people can earn a bonus up to 20% of their annual income. Medical personnel could earn a bonus up to 7% of their annual income. The difference in the height of the bonus that one could earn makes sense considering the different roles between sales/marketing personnel and medical personnel. Such inequality also dissuades medical personnel to work more effectively since the reward for their work would be lower compared to the sales/marketing personnel.
At the same time, there is the problem of controllability since there remains a significant split between the knowedge of desired results from the part of Medical personnel and the lack of possibility to influence the situation to achieve the desired results.
The problem of controllability and improvement of the position of the Medical personnel, especially its impact on the desired results, indicates at the necessity of the development of the efficient Management Controls System which is extremely important for a normal functioning of any company and any unit within the company. Management Controls Systems produce a significant influence on employees’ behavior and its impact can be regulated and direct so that employees acted and progressed in a desirable way. Naturally, such a planned and efficiently controlled development of each employee will eventually result in the increase of the probability that an organization, i.e. the BU Inflammation of the UCB Pharma, will achieve its goals.
The development of Management Controls Systems is based on objective causes that force the organization to implement such systems. The first cause is the lack of direction when the organization and its personnel are not properly directed and actually its work cannot be efficiently organized while the goals remain unclear. Secondly, motivational problems may be also extremely important since the lack of motivation decrease the productivity and efficiency of work at large. Naturally, in such a situation it is vitally important to track the moment when the motivation of employees is not simply getting lost but it is just starting to decrease that is, actually, one of the first signals indicating at the necessity of changes. Obviously, without an efficient Management Controls System it is practically impossible to properly assess the level of motivation of employees.
Finally, the third category is personnel limitations. It is possible to speak about the necessity to carefully analyze the progress of every employee in order to clearly define whether his/her professional level keeps growing or, probably, on the contrary, the employee is gradually degrading. Certain objective limitations, as the lack of equality between sales and marketing people and Medical personnel in the BU Inflammation of the UCB Pharmacy, may exist that naturally needs the improvement of Management Controls Systems.
There are mainly several Management Controls Systems being applied in the unit now. Firstly, Result control is used and this is actually the dominant Management Controls System used in the BU Inflammation. The dominance of Result control is quite natural since Medical employees are highly qualified professionals who do not really need control over their performance but its results are crucial.
Secondly, there is also Pay-for-Performance which involves rewarding employees for generating good results and punishing them for the poor results. This provides opportunities to stimulate employees for good results and, in such a way, increase their motivation.
Finally, Management by Objectives is also applied within the BU Inflammation but this form of Management Controls Systems is rather limited because it can be really efficient only when the desired results areas can be controlled that is obviously not the case of the Medical employees.
In such a situation it is obvious that the existing Management Controls Systems are not efficient, the situation has to be improved, and it is necessary to develop certain recommendations to be implemented.
Primarily, it is necessary to clearly define dimensions on which results are desired. The further development and researches should be clearly understood not only by Medical or Sales/Marketing personnel separately but by the whole staff in general. In such a situation, the Management by Objectives seems to be inefficient till objectives are not actually defined. This is why it is possible to recommend concentrating on objectives, firstly, and than using the currently existing forms of Management Controls Systems, i.e. MBO. At the same time, it is necessary to integrate Medical personnel into the evaluation of desired results.
Furthermore, it is necessary to properly measure and evaluate performance in the dimensions defined and this exactly when Management by Objectives should really come into play. Unquestionably, at this stage it is necessary to increase the role of this form of Management Controls Systems and use it more efficiently than it currently is.
After that it is necessary to apply MBO to achieve the targets. It is necessary to set understandable and desirable performance targets for which employees could strive for. On the other hand motivation of employees will play an important role and in relation to Medical personnel moral motivation should be supported with material one. Using the Result control, it is necessarily to respectively reward Medical personnel at least equally to Sales and Marketing people.
At the present moment the BU Inflammation, being an important part of the global biopharma leader the UCB Pharma, can face a serious problem of the deterioration of the work of Medical personnel which is in a bit deprived position compared to the rest of the unit’s personnel that is basically caused by the inefficient work of the Management Controls Systems. In such a situation, it is obvious that changes are essential. This is why the recommendations given above are essential to realize since they aim at the clear defining of the dimensions where results are desired, measuring performance on these dimensions, setting performance targets, and finally providing rewards that could encourage and motivated the personnel of the BU Inflammation at large, and Medical personnel in particular. In fact, this can be really helpful but real efficiency can be achieved only through the improvement of Management Controls Systems and it is not even necessary to implement new ones but simply to improve the existing ones.
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