Karen Tibbals worked for many years as a market researcher for some large pharma companies. She recently left pharma and marketing research to enter divinity school. At the same time, she started her own blog. For her first post, Tibbals discussed the need for innovation in marketing research. The second one described how the preferred vendor system in pharma specifically stifles this sort of necessary originality.
With Finance and its henchmen in Purchasing and HR running pharma's operations, intangibles such as insight, veracity and innovation are low priorities when it comes to selecting suppliers. Finance and its minions claim that such qualities, in fact, don't really exist because they are not easily quantifiable or amenable to spreadsheet analysis. Absent such characteristics, marketing research becomes a commodity service that the pharmas can retain on a lowest cost basis. Some companies even go so far as to make supplier candidates compete for retainers by means of negative auctions -- lowest bidder wins. Since it works for hog bellies and soybeans, why not use it for marketing research?
The process isn't confined to staff support services such as marketing research. The preferred vendor system also led to production problems and recalls in every division of Johnson & Johnson: pharmaceuticals, consumer products, devices and diagnostics. Quality assurance and other production people started complaining about requirements to use low bid vendors, yet Finance and Purchasing just shrugged as the recalls started coming every other week. Meanwhile the CEO who looked the other way received $143 million as a goodbye kiss from the board of directors while he moved his chair down the hall from chief executive to chairman.
Pharma's current struggles with patent expirations, unethical and illegal practices, payer cost constraints, and unproductive new product development suggest the need for one basic quality among the businesses that support the industry. People may use different terms to describe it and apply the approach in a thousand separate ways, but essentially it consists of truth telling. The necessary practices all begin with telling the client pharmas how the world is working, together with the fact that their current approaches aren't adequately addressing those realities. Yet that is exactly the sort of professional integrity that the preferred vendors systems eliminate.
Consider ad agencies as the prototype that exemplifies the lack of integrity into which pharma is funneling all of its providers. The fundamental core of ad agencies consists of winning and keeping accounts. Once they have become an agency of record, they maintain the account not by producing good strategy, creative executions or outstanding work in any of the scores of other services they offer. Instead they keep an account by massaging the client and making him/her/them feel good about the relationship. Often this nurturance of good feelings obliges account managers to shield clients from reality instead of thrusting it in their faces. Clients are made to feel smart, resourceful and pragmatic as a result of the agency's efforts to manage perceptions and call them reality.
Line managers are often complicit in this management trend toward Finance's control of operations. Self-serving perceptions are easier to maintain than cold confrontations with adverse reality. A few line managers and their support staff, such as Tibbals, understand that the preferred vendors give them boilerplate, slam-bam, thank you ma'am service. They glumly take what's given and work with it, or through it or around it.
Top managers, for their part, already know reality. They see it as a tooth and claw jungle they have mastered with hard work, ass kissing and luck. These managers don't need truth tellers and, in fact, they would prefer to hide essential realities from others in the company.
So if top managements want to squelch truth tellers, that leaves only the shareholders, the diligent employees and the customers who need such a service. Oh well, they lose.
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