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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: derekb.lowe@gmail.com Twitter: Dereklowe

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September 24, 2007

Good News From the HR Department!

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Posted by Derek

Enough time has passed so that I can talk about one of the more puzzlingly boneheaded decisions I’ve seen in the drug industry. Some years ago, the company I worked for decided to try out a new salary-based incentive plan. Nothing particularly unusual about that – the existing system was pretty generic, with the usual performance ratings, salary bands, and so on. (Finding out what salaries were tied to what levels, and which raises were tried to which ratings was difficult, but there’s nothing unusual about that, either).

But this new plan, rolled out first to the people in the Clinical division, was definitely something new. Here’s how it worked: your pay got cut 25%.

Well, that was an attention-getter, eh? But that’s how it worked. Everyone’s base salary was reduced, but (and here’s the good part), you could earn your way back to what you used to make by. . .meeting the goals that you’d outlined in your beginning-of-the-year Research Goals Statement! Hey, as the HR people pointed out excitedly in the rollout presentations, with this plan you could even earn more than your base salary if you exceeded the goals – what could be better?

You can probably guess the consternation with which this was greeted. It was immediately noticed, as in within the first few seconds, that such things as the profit-sharing plan payout were based on a per cent of base salary. That was going to get cut no matter what. But there was another (non-mathematical) problem with this brainstorm: the research goals statements that it all depended on were, as everyone knew, worthless.

How could they not be? How are you supposed to write down what you’re going to discover and what you’re going to do about it? These folks didn’t want broad general statements this time; they wanted specific, quantifiable goals that could be used to decide just how much you’d be paid. I remember arguing with someone from HR during an “informational meeting” about all this. I told her that if I knew what I was going to be doing in six months, it wouldn’t be research, would it? And I told her that no matter what the org chart said, my real bosses were a bunch of mice in cages and cells in a dish, and they didn’t know what the corporate goals were and they couldn’t be “Coached For Success”, the way that poster on the wall said.

This did no good. I got the impression that she thought that I was either making a joke, misinformed, lying to her about all this, or just rather slow in the head. At any rate, it turned out not to be a problem for me, or for anyone in research. As I mentioned above, this plan was first applied, on a test basis, to the people over in the Clinical department, and within two or three weeks several of the best people over there had found new jobs and hit the road. As, of course, anyone should have been able to anticipate.

There’s an awful lot of job mobility in the drug business. Everywhere you go you work alongside people who’ve worked somewhere else, and every year there’s some migration in and out. This salary plan might had worked out had our company been located on a remote tropical island, but even then people would have been chopping down palm trees and building rafts. Located where we were, with plenty of other companies around, it had no chance.

A hard-copy memo came out early one morning to the Clinical people, and it spread rapidly throughout the site. It was poorly formatted and grammatically incoherent, and once decoded it stated that the proposed salary plan would not be implemented and that no further ideas of that sort were coming. Some people suspected a poorly executed hoax, but to me the memo had all the signs of being authentic (which it was). It read exactly like something a VP-level person might compose, without the aid of his secretary, while his immediate superior stood behind him with a raised golf club. And so things returned to what passed for normal.

Comments (28) + TrackBacks (0) | Category: Business and Markets | Drug Industry History


COMMENTS

1. Grubbs the cat on September 24, 2007 8:09 AM writes...

Derek, this is shocking beahviour! How will your management be able to plan the number of development compounds they are going to make each year if you can't even predict the results of your lab?

;) note to self: at least some people have similar difficulties with performance management...

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2. RKN on September 24, 2007 8:12 AM writes...

I worked in exploration for the oil & gas industry for ~20 years, 16 as a full-time employee. The similarities between that industry and yours are striking, in terms of size, long-term risk, pipelines (not the physical ones), etc. Anyway, our HR dept. (formerly known, btw, as the "ER" dept., i.e. "Employee Relations", and they were oh so proud of themselves announcing one day that they had renamed themselves "HR", noting that we were all now human beings in their eyes, no longer merely "employees") pulled this same thing on us one year. We "humans" quickly realized how insidious such a pay cut was given, as you mentioned, that base pay is the basis of other benefits. Ensuing complaints and attrition shamed them into granting us a year end bonus, but guess what? The bonus was based on your base pay!

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3. Moe on September 24, 2007 10:33 AM writes...

So does anyone have a story about an HR department that actually "got it?" It might be more illuminating than another horror story.

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4. SynChem on September 24, 2007 10:37 AM writes...

Derek,

This piece gotta be the comical thing I've read for a while!! "Paralyzing dismay" is indeed an appropriate description of this ingenious plan. How could they be SO stupid!

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5. Chemgeek on September 24, 2007 10:59 AM writes...

Maybe you should take a training session on "how to motivate mice and cell lines"

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6. SRC on September 24, 2007 11:05 AM writes...

Good one.

The thing I always found alarming about these HR initiatives is that their HR proponents seem earnestly to believe in them, which establishes beyond all doubt that they don't have clue #1 about research. It seems so...rational and sensible to them. Sort of like "scientific socialism." None of that messy uncertainty - everything will all be planned, and won't that be great! It's the accounting approach to research.

Executive suite proponents, on the other hand, I suspect just see it as a way of extracting cash from those at the coal face. In this context, one year our bonuses were denied because the company goal for "efficiency in use of working capital" wasn't met. No one in R&D had any idea what that meant, what it had to do with us, or how we could possibly have affected it, for good or ill.

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7. qetzal on September 24, 2007 12:10 PM writes...

I worked for a biotech that had a somewhat similar plan. You had to list the top 4-5 things you were going to try to accomplish, and when you hoped to have them done. A specific fraction of base salary was awarded, depending on how many you achieved.

Key difference #1: you did this every 4 months, so the time horizon was relatively short. Of course, our priorities seemed to change on a daily/weekly basis, so even 4 months was a challenge, but it's much better than doing it annually.

Key difference #2: in theory, you'd meet with your manager each month and review progress. As part of that review, you could agree to modify, delete, or add new objectives. So, if all your key objectives were based on some big program, and the program got canned, there was a mechanism for you and your mgr to set new objectives. Of course, that was in theory, and we all know the old saw about theory vs. practice.

BIG, big difference #3, that overwhelms all the others: this program was implemented as a new bonus program, on top of existing salary. None of this having to 'earn back' 25% of your base. Instead, it was a new way you could earn up to ~ 7% on top of your base.

The rationale was that your base salary compensated you for working hard, doing your basic job, & trying to do challenging things that the company wanted you to do, but that might not actually be possible. The bonuses paid out if you succeeded in achieving those challenging goals. The expectation was that few people would achieve more than ~ 60% (and partial successes counted partially, where appropriate).

The program had plenty of warts, but it had its good points. The main value, IMO, was to help keep people focused on activities that were in line with the company's goals. (Of course, one could argue that some companys goals are so ludicrous that that's actually a detriment.)

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8. Jose on September 24, 2007 12:17 PM writes...

My personal favorite is AMRIs "bonus" program. When interviewing, I was shown a scheme where you could earn up to a 25% bonus if you got a "ten" on your performance evaluation(!). Talking to people all day, I found out that managers couldn't, by decree, give anyone above a 3.5 or 4 out of ten....

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9. Milo on September 24, 2007 12:22 PM writes...

Ah AMRI... the stories I have heard....

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10. Fred on September 24, 2007 1:15 PM writes...

At the last place I worked (also known as the last place you would ever want to work) HR was taken to mean Human Remains.

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11. Markus on September 24, 2007 1:59 PM writes...

with all these horror stories I wonder: what is the best company to work for out there?

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12. milkshake on September 24, 2007 2:34 PM writes...

I once pointed out "on a all hands meeting" about our newly-rolled in healthcare and benefit-reduction scheme that the methods they were proposing "to improve our coverage" were tried in Soviet Union, and the outcome was completely predictable. This comment made the benefits person from HR sob - right there on the meeting. In retrospect, it was quite cruel thing to do to her because she knew better than everybody in the audience that the scheme was a money-saving benefit cut, not a great improvement, and she was just ordered by the top management to lie about it to us. It was a sham she did not volunteer for and with small kids she probably had more to lose than I did.

About ridiculous management schemes: In the second company I worked for we had to write our self-evaluation anual reports, about how we met our last year objectives. Then we had to propose our objectives for the next year. It was a sham because you knew everybody is going to put in stuff in fancifull terms to impress HR but in the end it was a routine stuff much independent of the project particulars.

In the first company I was with, we got an incredible cretin for the site director (fortunately he did not last) and he was proposing to create rivality between the labs: The idea was that two labs would work on the same project but keep their data and results secret from each other. The group that makes it to the milestone gets all the bonuses. While he was implementing this brilliant idea, a company-hired consultant with MS degree in psychology who before worked for Coca-Cola was holding team-building seminars, where people were told to hold their hands and chant: "We are one team dedicated to our mission!"

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13. RKN on September 24, 2007 2:48 PM writes...

I feel retrospectively greedy about my last comment. Overall, I have to say the decision makers at the company where I worked treated the employees, er, "humans," quite generously. Maybe not as generously as we thought they should given the barrel price of oil (and that was when $25/bbl was a lot - can't imagine employees' expectations these days at $80/bbl!), but pretty good nonetheless. Still, HR was notorious for their countless "employee incentive plans," which were usually rolled out with a motto of some sort. "Paradigm Shift" was one of the more nebulous ones I recall.

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14. MolecularGeek on September 24, 2007 3:08 PM writes...

At times like this, I am reminded of my father telling me that a resource is something consumed to manufacture a product. Puts a new spin on what "Human Resources" does, doesn't it?

I'll second the comments about the lunacy of expecting an employee to write their own objectives for the coming year in their performance review in conjunction with their self-assessment of their performance on last years goals. It feels like a reeducation camp in post-war Vietnam. And I've never been a big believer in having individual contributors define their goals in terms of some vague set of annual corporate goals either. If you don't get enough information about the details of the implementation, you're going to end up just putting down what your immediate supervision wants you to, and if you actually DO know enough to self-select worthwhile/meaningful goals, you probably know enough to be a threat to the organization if you decide to leave. I appreciate the intent of making everyone feel empowered, but sometimes it's faster and less stressful to drop the facade and admit that there is a management hierarchy.

MG

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15. MTK on September 24, 2007 3:24 PM writes...

Markus,

There is no answer to your question "Which company is the best to work for?" Essentially, in any company, or profession for that matter, you are going to have good folks and incompetent folks. In every company over a certain size, there are going to good departments to be in and bad ones. In every department, there are going to be good bosses and bad ones. And let's not stop there, in any situation, there are going to be good employees and bad ones. Just find the situation you feel fits your aspirations and attitudes best.

As for HR stories...I'll share one. At an interview, when I got to the HR rep, the first thing she does is push a piece of paper at me and says that I need to sign it. I ask what it is and she tells me that I'm agreeing to comply with the company's drug policy. I ask "What is the company drug policy?" She replies, "Well, it's long and complicated and I don't want to go into it now." Now I'm thinking, "Something long and complicated sounds exactly like something I should read before agreeing to comply." Of course, it's an interview and I don't want to sound like a troublemaker, so I sign off. I actually took that job and in an evaluation of the interview process told HR that I thought it was unfair to ask someone to comply with a "long and complicated" policy without explanation. The HR person (a different person) looked at me like I had three heads. Honestly, she was completely dumbfounded that someone might have issue with this.

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16. milkshake on September 24, 2007 4:39 PM writes...

At Celera in SF they made me pee in the cup as a part of job interview - because the company has had a chemist supposedly making his own dope at night and even though no criminal charges were filed they wanted to cover their arses.

This explanation gave me a pause but their offer was good so I complied. It turned out to be the most unpleasant company I was with, completely dishonest top management, huge rivalries, unrealistic asignment setting people for failure and so on. I run away after less than one year. Shotly after they axed the reserch site and blatandly cheated their employees from severance.

How they treat you at job interview is an indicator of how they may treat you as an employee.

Also, companies differ a great deal, and I think most of it comes from the personal style of the top and middle managament. If they are generous and laid-back or if they are nervous vicious lying bastards, it will reflect in the level of bullshit. For example I have had a very good impression of the management at SUGEN/Pharmacia. It was a place where most chemists were quite happy. Also, HR are just a messenger, they do things to protect the company (and document everything) but they just take orders from the top like everybody else.

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17. Polymer Bill on September 24, 2007 4:52 PM writes...

I distinctly remember when it was pointed out that there was someone in our corporate headquaters (was Danbury, CT back then ) who got a bonus everytime I was paid less.

How little things change.

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18. CMC guy on September 24, 2007 4:53 PM writes...

Markus- I would echo MTK that must find situation which works for you personally so it’s a bit of an old cliché that you must "know yourself" (Many ways to crystallize this personal recognition state but a good resource is a book like “What color in your parachute” to ID traits, skills and desires). Certainly good boss(es) can be a direct key to particular job or company and better scientists can often struggle as effective supervisors and I have been lucky to have a couple that where good at both (I would say look for “honest” ones during interviews however often the most unethical people are very adept at not revealing themselves; until it’s too late- as I have learned the hard way). A smaller company may create opportunity to see and learn on wider range of drug dicovery/development activities but resources can be more restricted and less security (although thats pretty much no longer a norm).

I know there are often very caring and knowledge individuals working in HR who truly aim to aid employees and the role can be tough. Unfortunately HR is typically the “management interface” with most workers and often become the blunt instruments to carry out policies from above that have narrow focus (i.e. bottom-line). Twice I have seen very good HR Directors leave which was then followed in a few months by wide spread lay-offs (and found reason for those HR departures were the people did not want to execute the down-sizing).

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19. Karl on September 24, 2007 6:16 PM writes...

Moe (#3):

No.

Closest thing to a clueful HR department I've seen was ~15 years ago, in a very small company, where the HR person (singular) was a benefits admin, nothing more; knew it; and left it that way. I've never seen a >3 people HR department that understood why Catbert is funny.

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20. Anonymous BMS Researcher on September 25, 2007 7:00 AM writes...


I am sure it will come as a major shock to regular readers of Derek's blog to be told there are times when the HR department at Bristol-Myers Squibb can be reminiscent of a Dilbert strip.

Google the phrase "core BMS behaviors" to find examples of our current HR-speak. Google keywords from our list of such to learn how many other organizations use the same consulting outfit to write their core behaviors. Google "Rick Lane channel stuffing" to learn how some of our top executives in the past have implemented these core behaviors.

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21. BlaBlaBla on September 25, 2007 12:00 PM writes...

It's best to remember that an HR division does not exist for the benefit of employees, it is an extension of the management team. Their mandate is to keep payroll and benefit cost increases to a minimum (if not cut) while containing turnover. Like many folks, HR people often make ignorant decisions based on some perceived short term benefit (as Derek explained) at the expense of longer term planning. Sometimes this is unavoidable as in the case of slowing business, other times it is just bad management and poor strategic planning.

In the current marketplace, most of the leverage you have as an employee is the two week notification and flight to another company. This requires keeping at least 6 months of expenses on hand, your resume up to date, and the upkeep of a professional network. While I wouldn't necessarily advocate job hopping, one needs to be prepared and flexible for the time when the next consultant suckers your HR team into one of these bonehead plans.

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22. RKN on September 25, 2007 1:44 PM writes...

While I wouldn't necessarily advocate job hopping, one needs to be prepared and flexible for the time when the next consultant suckers your HR team into one of these bonehead plans.

Good advice, and the wary employee should watch for opportunities to backfill their own absence. At least where I worked, it was quite common for someone to return as a consultant immediately after being laid off. For them this was a nice triple-dip: 1) a sweet contractor's salary, often more per hour than what they made in their full-time role, plus, 2) their old salary, which they continued to be paid for up to 3-4 months after termination, and 3) their severance pay.

Many people I know who did this actually did the math and figured that they had to work only one year in this capacity to make the same amount of money it would have taken them 3-5 years to make as a full-time employee. Less benefits of course, but even after paying their own benefits it was usually still a win-win situation for them.

This produced an interesting dynamic; more and more employees wanted to get laid off with a severance package. It became a big enough problem that before long HR stopped the policy of allowing employees to volunteer for layoffs. Especially since the employees most likely to volunteer were the ones most likely to get quickly re-employed - in other words, the good ones.

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23. Anonymous HR Victim on September 26, 2007 7:17 PM writes...

It's not just a pharma article, but you will all see the truth in Fast Company's, "Why We Hate HR."

Example #3: HR isn't working for you.

Enjoy!

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24. PPP on September 27, 2007 5:24 AM writes...

Back to milkshake comment, as a former Pharmacia employee, I also have a good remembrance of how HR worked there....listening to the R&D folks and willing to extend the bonus system down the line. The ominous thing is that good companies tend to be swallowed and digested...

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25. Pharma Market Researcher on September 30, 2007 6:14 AM writes...

All this is evidence why I made a good choice 15 years ago to go from HR to market research. Oh wait, let the market research bashing begin!

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26. prajitha on July 13, 2009 1:14 AM writes...

It shows that the employees should watch out or such types of actions from the company. This is the reason why people jump from one post to another.

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27. John Galt III on July 23, 2014 1:31 PM writes...

there has been some great research on perverse outcomes of incentive plans

http://www.ted.com/talks/dan_pink_on_motivation.html

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28. Anonymous on July 24, 2014 12:10 PM writes...

"There’s an awful lot of job mobility in the drug business. Everywhere you go you work alongside people who’ve worked somewhere else, and every year there’s some migration in and out. This salary plan might had worked out had our company been located on a remote tropical island, but even then people would have been chopping down palm trees and building rafts. Located where we were, with plenty of other companies around, it had no chance."

I see the article was written in 2007 - it's amazing how fast things have changed!

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