Talent boost: human capital management

2 November 2012

Following its $41bn merger with Schering-Plough in 2009, Merck’s vice-president of global talent management Chris Benko had his hands full managing a smooth integration, including a leadership transition. He speaks to CEO about the culture of talent recognition and development that made the merger a success, and how the company is ensuring a profitable future.

CEO: How has Merck's talent management model evolved over the years?

Chris Benko: One of the challenges we've had is that our business model was historically very successful and stable, supported by our approach to developing talent. We were not dynamic or reacting to changes in the external environment, a mindset reinforced by the continued success that we enjoyed as a business.

In the 1990s we were consistently one of the most profitable industries overall which, combined with our healthcare mission, provided the ability to recruit the best people. But this also meant we weren't forced to plan well, because we could afford the disruption and expense of recruiting externally at times when we failed to developed internal successors.

Beginning in 2000 or 2001, shifts began to occur that should have influenced how we were developing leaders, but we were slow to internalise these changes; for example, increasing pricing pressure for our products and growth in new markets are categories that would require leaders with different experience.

"In 2008, the merger between Merck and Schering-Plough, two similarly sized companies, was announced."

In 2008, the merger between Merck and Schering-Plough, two similarly sized companies, was announced. It's a huge undertaking for any two companies as large as ours; we were also nearing the mandatory retirement age for our CEO, which causes more organisational uncertainty. So everything around talent became about integrating the organisation, and there was actually limited capacity to address long-term talent planning.

With a lot of the merger integration behind us and a new CEO in place, we are truly updating the view of where our business is going and what it will take to develop leaders who are prepared for the future. For instance, we're going to have to create value in an environment with tremendous price and cost pressure, so to drive innovation we need our people to understand the business broadly.

We're competing in markets and for customers that are not as familiar for us, and we know we need leadership that reflects our customers. This includes emerging markets, adjacent businesses like animal and consumer health, as well as new therapeutic areas. We're a lot more diversified than we used to be as an organisation. So those are the kinds of changes that are shaping how we develop differently in terms of experiences and capabilities.

What are Merck's guiding principles toward talent development and how do they differ from how they were pre-merger?

A New York Times article in 1999 used the term 'Mother Merck' in the headline and went on to describe us as a generous and gentle employer. We used that moniker internally and I believe it was an accurate description of our culture and management's attitude toward our employees - very maternal. We felt that insulating people from all potential distractions would enable them to focus on inventing drugs and getting them to patients.

As the external environment and our own productivity became more challenging, we were reluctant to acknowledge the new reality internally. Where we're going in contrast is towards a culture that is rigorous, realistic and open with our employees. In the Mother Merck era, we wanted to tell everybody they were wonderful all the time and entitled to all sorts of resources and opportunities. Now we have embraced the need to differentiate people clearly in terms of performance. We also need to make differentiated investments in people based on the criticality of their role or their future potential.

We are getting managers more comfortable and skilled at telling employees where they stand. We communicate to our people about bonus and incentive targets so they are clear about what they are achieving compared to what is possible. There has been a direct emphasis on managing out low performers; being more direct about how we assess leadership potential because, in the long run, we're a healthier culture if people understand how they are viewed by management.

How do you strike that balance and manage the risks of finding breadth and depth?

That's a central question and one of the hardest aspects of my job - it's about trying to shift our mindset. We have a few senior leaders who have moved across typical organisational boundaries, which is helpful because they serve as role models and are more likely to promote similar stretch assignments in organisations they lead.

"We have embraced the need to differentiate people clearly in terms of performance."

We need to promote more challenging assignments that broaden leaders' experience, but without compromising performance or execution in a complex business. To help them grow, people have to be taken outside their comfort zone, and that means putting them into situations where there's some risk.

It's not easy in a culture where the majority of leaders have grown up in more narrow roles that emphasised specialisation. However, we put a lot of energy into finding appropriate stretch assignments and then broadcast them to the organisation to encourage leaders to follow suit in their areas of influence.

How closely do you collaborate, for example, with the CEO and at the boardroom level when it comes to developing their talent and having effective learning processes in place?

I collaborate a lot with the chairman and CEO Kenneth Frasier. He leads the interactions with the board, along with our chief human resources officer Mirian Graddick-Weir. The board was very attentive to the talent issues deriving from the merger and heavily focused on the CEO succession for a period of time. Now that we've come through that, they're really interested in what we're doing to develop leadership for the future.

They are personally engaged and getting to know some of our top talent; that's something we've been able to do now that we're clear of the merger and succession. Ken has an unbelievable amount of passion and energy for developing leadership, and he's a believer in digging deep and looking below the formal succession plan to understand the pipeline of talent. He allocates a lot of time and effort to knowing the talent and our plans at the top several layers.

Have you seen a general shift in terms of attitudes toward managing talent?

I try to spend as much time listening to colleagues outside the pharma industry as possible and am building my own understanding of the trends that will shape our future in some of the critical emerging markets. I don't believe our pharma peers are the best benchmark for developing talent because most suffer from similar dilemmas in that we evolve more slowly than other industries.

"We need to promote more challenging assignments that broaden leaders’ experience, but without compromising performance."

One general trend I see is that establishment companies rooted in the US and Western Europe are beginning to realise that we don't write the rules anymore for how people should be developed. For a long time we did, but the size of the next generation and growth in new markets will give them a great deal more influence.

On top of that, an increasing amount of our talent needs are in parts of the world with different education systems and attitudes toward career development. That has to influence things and the ways we think about talent. That's a really significant shift that I think we're just beginning to experience and one that will certainly impact organisations based in the US and developed Europe.

What other industries do you see as a model that could work in pharma and at Merck specifically?

If I think about companies that have had to innovate differently, stay very close to their customers and have effectively developed general management skills, the consumer products and consulting industries are two from which we can learn a great deal. Many of the consumer companies are global and have adapted to different margins and customer preferences that require them to be very innovative.

How are individuality and teamwork measured at Merck?

It's a real challenge. We really believe it's critical to recognise and differentiate individual performance but we have an embedded scientific culture, which can be very individualistic. Collaboration, however, is one of the core leadership values we emphasise. We struggle sometimes to explain to people what that means because it can be interpreted as consensus, which is not effective in driving business results.

So we're always working to make sure that we provide clear expectations regarding what collaboration means and we try to reward it by recognising people's leadership, explicitly as part of how we evaluate performance.

We also have a lot of mechanisms to try to recognise team accomplishments that are not necessarily part of the formal performance cycle; when a team accomplishes something, we try to reward them and recognise it throughout the organisation.

How far out you map the future of Merck's leadership capacities?

What we've tried to do historically is to develop five-year plans for the top 100-150 roles in the organisation. However we've come to recognise that the organisation can change a great deal in five years, plus some of the experiences we need people to gain require more time or earlier intervention.

"An increasing amount of our talent needs are in parts of the world with different attitudes toward career development."

Rather than focus only on the jobs we have today we need to orient on the pools of talent who are agile enough to succeed in the future; we need to look at talent earlier, at people who have the flexibility to move around and gain meaningful development experiences.

So it's definitely beyond five years, but probably not more than ten. We don't necessarily know what role someone is going to land in seven years, but we're going to give them all the right opportunities to ensure that when the future organisation emerges, they're well prepared for it.

And those future roles might not even exist yet.

Right. It's very important that we focus on the most critical experiences and capabilities that we know are going to impact our business without trying to be too precise about roles. We're no longer in a static lifetime employment environment where we can try and plan people's careers for ten years and beyond; today's talent will move around faster, so we need to recognise that.

What we need to focus on is the highest potential talent who are between five and ten years away from our most critical roles but who aren't too senior to thrive in major stretch assignments. Our short-term successors who are already in the executive ranks have less room to manoeuvre into developmental assignments. That's why we're pushing farther down in the ranks.

Down in the ranks, how do you ensure talent retention in order to increase the likelihood that those plans are realised?

For us, formally recognising people and being open with them about how they're viewed has been an important shift, sometimes an uncomfortable one. We have lots of really smart, talented people here, which is why historically we've resisted being open about who is regarded as top talent.

"Rather than focus only on the jobs we have today, we need to orient on the pools of talent who are agile enough to succeed in the future."

We are beginning to communicate more directly about leadership potential and it significantly drives the retention of key talent when you recognise and invest in that and provide development opportunities.

The risk we worry about is disenfranchising the people who are the next tier of high potentials. Like most firms we're imperfect at identifying and calibrating potential. We don't want to lose people who have great potential but might not be on management's radar screen.

I think we know how to retain the very top by giving them the right attention. The challenge is more about how to identify and engage the people who might be right behind them in development or overlooked for other reasons, which is tougher for us to figure out.

Can you describe the global core courses at Merck?

We have a number of core courses for high potentials and leaders at-large. For people who are destined for managing director and broad general management roles, we run a year-long programme with internal and external faculties that includes action learning assignments.

We also have a version that leverages more virtual classrooms with key leaders from emerging markets, who tend to be somewhat earlier in their careers and more geographically dispersed.

There are core courses for foundational management skills that we try to provide for all new managers of people. More recently we've run sessions where we take some of our top emerging talent and have them spend focused time with the CEO. There's a development component to that event, but it's also about exposure to top leaders and their thinking.

Merck is starting to communicate more directly about leadership potential, which will, in turn, drive the retention of key talent within the company.
As vice-president of global talent management at Merck, Chris Benko oversees HR functions including talent management, diversity, learning and leadership development, recruitment, and organisational development. In charge of Merck’s post-merger culture integration efforts, he is responsible for a wide range of leadership programmes.