INSIDE SMITHKLINE BEECHAM:THE ORGANIZATION AND CULTURE

A Term Paper in IR 202(Organization and Work)

Presented toDr. GERALDINE C. MAAYO

School of Labor and Industrial Relations, University of the PhilippinesDiliman, Quezon City

In partial fulfillment of the requirements inIR 202 First Semester

Academic Year 1999-2000

ByJAIME E. NOBLE, JR.

IR 202 / 6:00-9:00 p.m., Wednesday

October 14, 1999

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Table of Contents

pageI. Introduction 1II. The Company a) Company’s History 2 b) The Philippine Operation 3III. Corporate Culture: The Theoretical Approach 4IV. The Corporate Culture

a) On corporate goals and values 5 b) On management style 6

c) On human resources 6d) The "Simply Better Way 7e) On labor -management relations and industrial peace 8f) On workers participation 9g) On productivity and CBA 10

V. Conclusion and Afterthoughts 11Bibliography 13

I. Introduction

Corporate culture is one of the most important among subjects in human resources management. It promoted the role of

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organizational culture in corporate success. The people, the policies, and almost everything about the place determine the realization of corporate objective.

To illustrate, if an individual although grows in the company for years but seems to be unhappy with what happening around him, may consequently result to turnover wherein the company will be adversely affected specifically in its vision. Thus, cultural analysis is necessary if we are to understand how new technology influences the entire organization and us.1

This study generated two hypotheses, one coin viewed in two perspectives. First, we can say that by having a strong culture the performance of workers is dramatically better than companies with weak culture because their goals may be fragmented. Similarly, on the other side of the coin, having strong corporate culture the management can easily impose control on the employees wherein conflict theorists support this analysis.

Thus, the paper is written base on the two preliminary layout. However, the study limits its discussion to present the actual view of the company’s organization and culture in general approach. The analysis to supplant the above hypotheses will be provided on the conclusion.

The purpose of this paper is threefold: 1) It will discuss briefly company’s history and Philippine operation; 2) It will present the major organization and culture of the company and discuss the issues and problems the context of cultural analysis; and finally, 3) it addressed the two assumption on organization and culture briefly as a conclusion and interpretation.

1 Edgar H. Schein, Organizational Culture and Leadership, California: Josey Bass Inc., 1992, pp. 5.

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This paper was written based on the research on SmithKline Beecham corporation wherein I used to work. It is a transnational healthcare company and one of the leading pharmaceutical industries in the Philippines. This company has a very distinct culture worth studying.

The facts on this study are based on my personal experience in the company and interviews with Lito de Guzman (Human Resources Director), Bobby Sabater (Sandigan-President), and Marlon Pasia (Sandigan-Boardmember). This was supplemented by published and unpublished materials and data’s of the company.

II. The Company

a) Company’s HistorySmithKline Beecham, a pharmaceutical company was

created by the merger, on July 26, 1989, of two industry’s most respected names: SmithKline Beckman and Beecham Group. In just a few short years, it has emerged as a global healthcare leader.

SmithKline began as a small chemical business founded in 1830 by Philadelphia brothers in law, John Smith and John Gilbert. It became Smith, Kline & Company when Mahlon Kline was named partner in 1875. Many notable discoveries were made by SmithKline scientist, including research that led to Tagamet by John Black. Tagamet was the world's first effective ulcer treatment that led to the company’s first $ 1 billion products. For the achievement, Black was awarded three Nobel prizes in 1989. Again, SmithKline was the first to launch an effective mental health treatment, Thorazine, a sustained- released medicine, Contac and

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Engerix-B, the world’s first genetically engineered vaccine against Hepatitis B.

Beecham was incorporated in 1928, when it buys the Beecham Pills, business that has been founded in 1842 by Thomas Beecham. The company expanded greatly during the 1930’s then it bought the Macleans toothpaste and lucozade energy drink. In the 1940’s when it established research laboratories in Brockham Park in the U.K. Beecham scientist brought worldwide fame to the Brockham Park facility in 1957, when they discovered penicillin nucleus called 6-APA. That discovery made it possible to create an infinite number of new penicillin’s that can be targeted at a pre-determined range of bacteria.2

b) The Philippine OperationsSmithKline started its operation when it was granted a license

on September 25, 1963 to manufacture, sell, and export pharmaceutical related products. It housed its manufacturing plant and office in Cainta with around 215 workforce.

On the other hand, Beecham Research started in 1966 management of Zuellig Pharma Corporation based in Makati. It consists of around 90 employees mostly sales people. Its products were carried out by a third party manufacturing, Interphil Laboratories in Sucat.3

Late 1980’s were crucial for both companies due to adverse economic environment. A number pharmaceutical company has been declining its local operation. They actualized their first round of structural adjustments by strategic alliance to improve cashflow, increase profitability, and increase market share in particular.

2 Facts are gathered from press release on SmithKline Beecham’s history. 3 Ibid.

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Likewise, to increase productivity and global competitiveness in general. The merger of SmithKline Beecham in the Philippines was formalized on January 16, 1990 after series of integration meetings.

In 1996, the company initiated another round of adjustments, the acquisition of Sterling Corporation and its products. This can be viewed as an expansion in its Philippine operation to cover the Asia and the pacific markets. SmithKline Beecham decided to acquire the said company to accomplish one of its plans to come up with new consumer products and consequently maintain the Sterling’s network markets.

Today, it boasts and maintains a manufacturing plant in Cainta that manufactures premium pharmaceutical related products for local and Asia pacific market. The company also manufactures product for Sanofi Winthrop, also a pharmaceutical company. Likewise, Interphil Laboratories was retained to manufacture other pharmaceutical products. Thus, it came out with a promise of “Simply Better”4 ways as a corporate culture and values.

III. Corporate Culture: The Theoretical Approach

The company’s corporate culture is very apparent. The general message of the corporate culture literature is that the cultures of an organization (values, beliefs, ethos, and way of doing things) influence its performance and can be manipulated by the management.5

4 Simply Better is SmithKline Beecham worldwide slogan.

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The message also has prescriptive statement. Through a change in management style and the use of mission statements. Here both management and employees can advance together in one direction. Likewise, the search for excellence becomes more a shared challenge and the means in boosting profitability and productivity of the company.

The concept of corporate culture is most useful if it helps to explain some of the more seemingly innovation aspects of an organization.6 One of the common assumptions is that culture to contribute to performance, it must possess distinctive traits and potent nature.7 This line of argument can be found in different literature on the subject. It includes deeply ingrained people oriented philosophy that is summarized as "respect of humanity". This, combined with apparent autonomy of workers in the organization, helps produce a sense of belonging or family feeling within the organization. Thus, generating productivity and profitability through people.

IV. The Corporate Culture

a) On corporate goals and core valuesLet me cite a part in the SmithKline Beecham’s promise, “At

SmithKline Beecham, the source of our competitive advantage is

5 Williams, Bobson, etal. Changing Culture: New Organizational Approaches, 2nd ed. London: Institute of Personnel Management. 1989. pp. 14.6 Edgar H. Schein, Organizational Culture and Leadership, California: Josey Bass Inc., 1992, pp. 8. 7 D. Levine, Reinventing the Workplace: How Business & Employee Can Both Win, Washington D.C.: Brooking Institute, 1995, pp.11.

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the energy and ideas of our people, our strength lies in what we value: CUSTOMERS, INNOVATION, INTEGRITY, PEOPLE, PERFORMANCE. We are people with purpose, working together to make the lives of people everywhere better, striving in everything we do to become The Simply Better Healthcare Company”.

On core values, the success of the company depends on the achievement of these five core values. This can be referred as survival manual of the organization that equipped the employee's tools of reference to guide their respective daily undertakings in the company.

First, the customers. The company in customer oriented. It provides products and services of superior value to meet the expectations of internal and external customers. Thereby, maintaining and increasing the company's competitive advantage.

Second, is the idea of innovation. The company constantly strives to be creative and innovative in all its endeavors. All the employees are encourage to bring forth new and better ideas for improved performance whatever the responsibilities.

Third, performance and quality. The company is performance driven and continuously aims to improve in all activities. Likewise, the company demands openness throughout its operations to engender trust and integrity.

Finally, the company considers the employees as partners that work together in the pursuit of the company’s mission and goals. Here, teamwork is strongly valued and every employee is motivated to succeed. As mentioned earlier training and team building seminars are regularly conducted on labor and management side.

b) On management style

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The management style of SmithKline Beecham can be attributed to founders of the company on which they establish hands on management and created a set of practices that grew up around the company. These include informal meetings, dinner with employees, and out of towns.

The company that was created, became a transnational corporation because of team commitment allied to philosophy of innovation through people. In other words, it is a people-oriented company with the philosophy of “Win-Win” environment.

The most notable aspect of the company approach to management is the “Simply Better” Way, which stated the company’s basic values and philosophy. This was put in writing and credited within the company as the basis for its success and strong sense of employee's loyalty.

C) On human resourcesSmithKline Beecham often uses credentialist system. Despite

it is not written formally in the corporate policy and claimed that the company is an equal opportunity employer, the culture of the company dictates this process. In fact, various publications analyze and interpret that the cultural factor has a hand on this. Since culture influences what other members of the organization, they interpret this situation and react to it are a significant determinant of the of any undertakings being implemented.8 This approach is apparently emphasized in the recruitment process wherein the applicants are selected on the merits of the following parameters. First, the educational level. The possession of a particular credential is characterize on what level of education an applicant

8 Williams, Bobson, etal. Changing Culture: New Organizational Approaches, 2nd ed. London: Institute of Personnel Management. 1989. pp. 36.

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attained. In particular, the recruitment people tend to classify the candidates for the job into undergraduate, graduate, or postgraduate depending on the requirements of the job.

Second, is the prestige of the college or university. Applicants and employees from reputable schools are given preferential treatment. Again, let me reiterate that this is unwritten company policy. Of course, there is always an exception, particularly on merit of the candidate and employees productivity.

Third, the person’s capabilities are also taken into consideration. These include past working experiences and qualifications. It depends on how extensive one’s job and training. Basically, individuals who used to work on large and prestigious companies are generally being considered.

d) The “Simply Better” WayThe employees live and work the “Simply Better” Way. First,

the term represents the corporate-wide culture initiative. It embodies all that employees strive to be as company and individual.

Second, the term is a way of life. It a process of continuous improvement aimed at attaining the company’s goal. The organization is committed to develop individual skills for the transformation of employees in more productive and competitive worker. In addition, it came out with a “Mini MBA” program to develop continuing intellectual ability. Here, the candidates for promotion and trained on basic and advance management skills

Third, the phrase is more than just a framework of defining the systems and processes by which the work is organized and the methods and tools used to ensure consistent excellence. The company adopted a superior way to satisfy customer needs

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through sustainable competitive strategy. It embraces change and innovations by letting employees improve faster and better, thereby optimizing opportunities for success.

In effect, the “Simply Better” way is a management by process. It is a new way of managing the company that gives the employees the tools to solve problems whether working as individuals or team members, thereby making their jobs easier and freeing them to be more creative. Moreover, the phrase along with the company’s products, has come to represent what SmithKline Beecham stands for across the world.

e) On labor-management relations and industrial peaceThe company’s labor-management relationship may be

describe as a partnership with willingness on both sides to embark on new approaches based on mutual trust and drive for improved performance. The nature of labor-management relation is not adversarial. We can characterize it as a mutual social partnership committed both sides' welfare.

The recently concluded collective bargaining was very good example of mutually beneficial relationships between management and employees. This has set the climate for alignment between management and labor in the organization through more active worker's participation. This has also imbued a sense of pride and accomplishment in the company.

The sound management and labor relationship were manifested by the following concrete signs. First, active labor and management dialogues were existing within the company resulting to open communication. This was a new concept that may be viewed as initially threatening. However, due to the level of mutual trust was instead was supported by the union.

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Second, unions are considered partners in carrying out company projects. For 18 years of union existence since 1980, the company never experienced any form of strike or any form of protest that resulted in work disruptions.

Lastly, the company is supportive in the training and development needs of the future leaders of union allowing them to take leave more than what is prescribe in the CBA. Furthermore, core officers of the union were trained on facilitation skills and have acted as co-facilitators in company wide activities such as teambuilding program and other workshops.

With this, we can note that the essential variable was the relationship that the team built with the labor group through constant feedback and open communication to all concerned.

f) On workers participation and open communicationThe attainment of the company’s goals can be attained

through corporate wide culture initiative that emphasized values and leadership practices with employee's active participation. Workers were asked to share in quest for continuous improvement.9

Consequently, both teams were very open in its communication process that at no point was there a threat of a deadlock or need for a third party to resolve the issued. The corporate climate of the company can be notably considered as harmonious. However, conflict is inevitable within the company itself. Nevertheless, what is unique in the organization is that grievance address as early as possible and bring into proper forum which are the HR and the Union to settle matters in utmost democratic judgment.9 Gathered from SmithKline Beecham’s newsletter.

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To further promote open communication the company also came out with a program like “An Hour with the G.M. “ held regularly at the end of each quarter. This aims to strengthen the communication lines particularly between the general manger and the employees. In this session, the employees are updated on highlights of the company regarding ongoing projects, plans, and changes in systems or policies. Employers are also given the opportunity to ask question, raise issues or concerns that may need clarification. This program has been ongoing up to present.

g) On productivity and CBAThe policies and procedures, particularly those connected

with performance management systems, actually had a very large part to play in the management of the organization which the case of SmithKline Beecham. This was perhaps illustrated by the effort that management put into the measurement of productive annually not only with the rank and file but also the managers. In fact, the recently concluded CBA was a productivity based.

In the past, CBA’s, the traditional method of Collective bargaining was used thus, creating undue anxieties caused by the heated discussion. Differences in position during the negotiations were prevalent forming a “Win-Lose” atmosphere. Apparently, this affects the morale and productivity of the employees. To solve the problem the company came out with a series of team building activities with the union. In addition, other joint workshop paved the way for a new thinking for the union and management side.

The establishment of the partnership shifts the paradigm of labor-management negotiation process from traditional style where concerns of labor are opposed to the directions of the management. It transposed to a principle-centered style where

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concerns of both parties are resolved through a problem solving approach and “Win-Win” principle. Here, the culture of mutual participation not adversarial relations can easily be detected.

What is also significant to the organization is that the existence of these measures clearly put the company in an adaptive mode in this period of global competition. This therefore guarantees not only survival but also competitiveness and growth of the company in the next wave of global competition.

V. Conclusion and Afterthoughts

The paper presented a unique opportunity to know and examine SmithKline Beecham’s organization culture. We can learn much of the organization and culture on how they attained the company’s vision as an individual and as a Human Resources practitioner.

As we have seen, culture is both an input and an output. The culture of an organization therefore likely to be the product of past strategy.10 Culture influences what the employees attend to, how it interprets the responses it makes to changes in external environment.11

In the case of SmithKline Beecham, organization and culture can be look at two perspectives based on paper hypothesis. The functionalist view is apparent that union and management because of the corporate culture are determined to mutually work together (which is the essence of organization) to achieve the corporate vision. We can also observe that the recent CBA was to manifestation of this premise. Furthermore, the culture visibly

10 Williams, Bobson, etal. Changing Culture: New Organizational Approaches, 2nd ed. London: Institute of Personnel Management. 1989. pp. 35.11 Ibid., pp. 36.

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provides autonomy of the employees. In fact, auditing of employees on the spot or without any prior advice from auditing party is not allowed although it is not against the company policy of inspection. In return, the worker felt to have a degree of autonomy over their work and performance. For the management, this gives the worker the concept of responsibility and accountability for the work the worker assigned to them.

Employees of SmithKline Beecham clearly know the goal of the corporation and they are working to attain them. Both the worker and the management in the company share only one goal, both are towards facing the global challenge that requires labor and management to work hand in hand.

On the other hand using Marxist paradigm, a strong corporate culture acts a control over individual behavior, thus, allowing considerable discretion without any connected cost for the company. Here, having strong corporate culture the management can easily impose control on the employees. An analysis using conflict approach on collective bargaining provides us that the union was servile by choosing productivity-based pay increase instead of the usual across the board. In productivity-based merit increase can also be coined as profit-based wherein the management will lose nothing because if the company’s operation is not profitable.

Therefore, although it is recognized that “Simply Better” Way does buy a certain element of goodwill, they do not overemphasize it because of the cost associated with isolating employees off by enforcing the culture in a uniform manner. There is also evidence that points to important cultural differences within organization (such as between division, departments, staff groupings, and national operation) demonstrate that an attempt to impose

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uniformity on these subcultures is often counterproductive. Thus, we need to recognize in the implementation process of any program the cultural perspective within the organization.

Lastly, an entity that represents the collective conscious and unconscious of the organization and that forms the basis of influence on the behavior of the organization. Thus, become significant determinant of organizational performance.12 The Company’s organizational goals are geared towards increase profit, increase sales, and increase productivity. For both enterprise and their workers, there is a need to understand the dynamics of organizational change under this new economic regime so that both can hurdle the threats and maximize the opportunities.

Bibliography

Williams, Bobson, etal. Changing Culture: New Organizational Approaches. 2nd ed. London: Institute of Personnel Management. 1989.

Richard Hall. Sociology of Work. US: Prentice Hall. 1996.

William G. Ouchi, Theory Z, New York: Avon Books, 1981.

12 Williams, Bobson, etal. Changing Culture: New Organizational Approaches, 2nd ed. London: Institute of Personnel Management. 1989. Pp. 37.

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Various SmithKline Beecham Newsletters and Press releases, published and unpublished

Watson Wyatt Worldwide Philippines. Tactics and Processes of Corporate Restructuring:The Philippine Experience. A Survey Report in 1999.

Edgar H. Schein. Organizational Culture and Leadership. California: Josey Bass Inc. 1992. pp. 5.

COMMENTS

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