Most CEOs who specialize in turning around struggling companies focus on costs. Nissan’s Carlos Ghosn, for example, was dubbed “le cost killer” by the French press. Tyco’s Ed Breen and Aetna’s Jack Rowe are both associated with head-count reductions. JPMorgan Chase’s Jamie Dimon is celebrated for his “ruthless” approach to cost cutting. But for Fred Hassan, chairman and CEO of the global pharmaceutical company Schering-Plough, the primary focus in a turnaround is the top line, and all his long-term corporate transformations have begun with the sales force. In part, that’s a reflection of his professional roots. Hassan began his career in fertilizer sales, an improbable choice for the soft-spoken, almost self-effacing son of a Pakistani diplomat and a women’s rights pioneer. The experience of those early days has influenced a long and successful career. Since 1997, when he took over the deeply troubled European-American drug giant Pharmacia & Upjohn (P&U), Hassan has built a reputation for being in tune with the front lines. It’s clear that Hassan relishes a challenge. After completing P&U’s merger with Monsanto in 2000, leading the new company—called Pharmacia—to health, and then steering it through its $60 billion acquisition by Pfizer in 2003, he was immediately tapped to take the helm at a struggling Schering-Plough. Over the past three years, he has overseen a remarkable recovery in performance, with improvements in every area of the business. Consistent with this CEO’s approach, the turnaround started with sales. For all these reasons, Hassan was a natural choice to be interviewed for Harvard Business Review’s double issue on sales. HBR editor and managing director Tom Stewart and senior editor David Champion visited Hassan in early February at Schering-Plough’s bright and airy headquarters in Kenilworth, New Jersey. During the conversation, it became clear that Hassan sees sales as the key to regaining control of the top line, which in his experience is more important than cost control as a long-term value driver. By focusing immediately on restoring sales force performance, a CEO can deliver a rapid turnaround in the numbers, which helps bankroll other essential changes while buying time for longer-term initiatives. A critical challenge for a management team is to motivate and organize salespeople to develop the right kind of customer relationships. In the pharmaceutical industry, that means creating bonds of trust between sales reps and medical professionals looking for better ways to care for patients. Indeed, the best way to gain market share in a crowded field is to be the salesperson to whom the customer turns for help. To make sure that he gets his vision across, Hassan works hard at reaching out to the frontline managers who supervise salespeople as well as interacting with the reps themselves. This unusually high degree of personal attention from a CEO not only makes the sales force feel respected but also gives Hassan valuable strategic insights. What follows is an edited version of the interview transcript. You’re a CEO known for leading turnarounds from the top line. Why do you focus on sales? The media like to point to a restructuring or a major strategic move as the key to a turnaround. But no restructuring or strategy will succeed long term unless you get control of your top line. Look at the U.S. auto industry. We can keep closing plants, but the real execution challenge is to reverse the market share slide. My first turnaround as CEO was with the failing Pharmacia & Upjohn merger. Although cost reduction numbers in the wake of that deal were largely on target, the bottom line was headed for a big shortfall because of a $2 billion gap in sales. The numbers were bad enough in themselves, but even worse, they had sent morale into a downward spiral, and the salespeople were among the most demoralized. They heard negative stories from customers on one side, and they got a bad vibe from the home office on the other. All this affected their numbers, which hurt morale even more. But because we focused on the salespeople early and got them to buy into the turnaround strategy, performance rebounded very quickly, which bought us time with investors. No restructuring or strategy will succeed long term unless you get control of your top line. In our industry, you really have little choice but to lead a turnaround from sales. You can always look good for a year or two by taking out some costs, but you have to be careful not to shortchange quality and patient safety. And you can’t cut back on R&D because that’s your future. You also can’t lead a turnaround from the product side because R&D cycles in pharmaceuticals take ten to 15 years, so improvements you implement in drug discovery and development don’t make much immediate difference. You have to deal with sales of the drugs you already have—or are about to have—and that window of opportunity is precisely defined because you know exactly how long you’ll have patent protection. An effective sales force lets you make the most of that time. And, of course, it sets you up to take maximum advantage of any changes and improvements in discovery and development when those kick in later. If sales is so important, why does it get such short shrift? Most CEOs have financial, science, marketing, legal, or manufacturing backgrounds—and no sales experience. So they don’t identify with the people who interact with customers. I think that’s where the disconnect comes from. Paradoxically, marketing people are sometimes guilty of undervaluing salespeople as well. In the more extreme cases, they’ll treat sales reps as just another conduit for the company’s message, along with direct mail and advertising. But salespeople are much more than a passive medium. They are active representatives of the company and can influence people’s perception of it through their ability to interact, to customize, and to build relationships with customers. Thinking of the sales force as anything less than that is a big mistake. How do you avoid making that mistake? You have to differentiate the salesperson in the customer’s mind—just like you differentiate brands. The typical high-volume general practitioner is usually well known to all the drug companies. He probably sees as many as 50 to 60 different reps on a regular basis. He’s got to decide who he is going to let into his inner circle of trust—and that may be only 15 reps. We work hard at being included in this circle. That means making each customer experience more than a typical detail call, in which the rep gives his scripted presentation and that’s it. Standard detail calls program the doctor to treat the rep as nothing more than an information conduit. The key is to make the relationship value adding so that the doctor comes to trust our rep and looks forward to seeing him. You have to differentiate the salesperson in the customer’s mind—just like you differentiate brands. A trusted salesperson can be very helpful to doctors. Doctors are much more pressed for time than they used to be, which limits their ability to keep up with new developments. At the same time, patients now demand much more information, so doctors somehow have to stay abreast of medical advances and all sorts of other information. Fifteen years ago, patients wouldn’t have been quizzing their doctors about the side effects of prescribed drugs. Today everyone wants to know about the drugs they may take, and the more sales reps can help doctors handle these questions, the more valuable they will be. That’s why our reps differentiate themselves by focusing on science and on the concerns of patients—the doctor’s customers. This means, of course, that reps must be forthcoming about the medicines they sell. And along with that knowledge, they must bring integrity and honesty about the science to their jobs if they’re to build trust-based relationships with doctors. How do you set salespeople up to seek out and develop those kinds of relationships? We begin by attracting and retaining people who have the right attitude and behaviors. They must enjoy the professional aspects of selling or they won’t become A players. We’ve also adjusted the salary and bonus ratio in the compensation package to give a relatively high salary component, which reduces the kind of hyperactive selling that undermines long-term trust building. And we inculcate our philosophy further through our sales training programs. We’ve also found that it helps to cover multiple therapeutic areas in servicing primary care physicians. At pharma companies, the primary care sales forces are often organized along therapeutic lines. A sales rep promotes only cardiovascular products or only central nervous system products, and so on. At Schering-Plough, in contrast, two years ago we reorganized most of our primary care sales force into six “mirrored” divisions, which are all the same in terms of structure. Each division has around 500 reps, and each rep serves one of about 500 territories, which means we have about 3,000 salespeople covering some 500 territories. Any rep in any division can, in principle, carry several kinds of Schering-Plough products, which gives us great flexibility in setting selling priorities for our reps and introducing new products. (See the exhibit “Organizing for Trust.”) Organizing for Trust Two years ago, Fred Hassan’s management team instituted a major sales force restructuring at Schering-Plough. Today, unlike the sales forces at most pharmaceutical companies, Schering-Plough’s salespeople are not organized by and large by therapeutic area. Instead, the company has structured its sales force according to doctors’ needs, which means that individual sales reps carry products from multiple therapeutic areas. This structure not only increases the company’s marketing flexibility but also gives salespeople more ways to make themselves valuable to their customers. The diagrams below are not an exact representation. If you had a therapeutically oriented sales force covering, say, allergy and oncology products and came up with a new cardiovascular product, then you would either have to acquire a whole new sales team or force teams in other therapeutic areas to compromise their work to sell the new drug. We can just put a couple of our divisions on the job. During a large new-product launch, our mirrored divisions are especially powerful because we can have up to five sales reps meeting with a doctor. This kind of engagement would be much harder without our new structure. After the launch, our practices dictate that no more than two reps regularly discuss the product with any one physician. I should add that once you’ve settled on a structure, you should keep to it for as long as possible. In theory, you could restructure sales territories every new selling period on the basis of new product priorities. A standard computer program can accomplish that. But it takes a rep six to 18 months to build a trusting relationship with a customer, so constantly breaking up relationships would turn every sales call into a detail call. That’s why companies that rely on frequent restructuring to solve their sales problems usually end up in even worse trouble. But how exactly does the new structure help build trust with customers? It gives them more reasons to trust us. If you cover a broader range of treatments, you have a greater variety of ways to relate to the customer and more opportunities, therefore, to add value in the call. That gives you more opportunities to build trust. This is a subjective area, but we believe that our improving sales performance is linked to the increasing trust we are building in the doctor’s office. A variety of measures, including physician feedback, suggests to us that our salespeople are steadily building trust with their customers. We also use data, such as in these slides, to sense how we’re doing. (See the exhibit “Calling on Doctors.”) If we get these types of things right, we believe our long-term value to shareholders will grow. Calling on Doctors Pharmaceutical sales calls are monitored and analyzed by IMS Health, an independent consulting company. According to IMS’s tracking system, visits by sales reps that are formally recorded by a physician’s staff are counted as sales calls. On this measure, Schering-Plough ranks fourth, as the graph on the left shows. But IMS also tracks the outcome of the call by measuring the number of “contacts” with the physician and medical staff during the rep’s visit. Examples of contacts include product discussions with doctors and various kinds of interactions with medical and office staff concerning products. On this measure, Schering-Plough tops the list, as the graph on the right shows. Has the emergence of other communication channels, such as the Internet and e-mail, affected the sales model in your business? Not really. Personal interaction will be the core sales activity for a long, long time. That’s how you build trust. That core activity will be more productive if you do good direct mail, have a good Web site, advertise well, or are visible at medical conferences and seminars. But anything extra you do thanks to new technology will tend to supplement rather than replace direct selling. Educating people through TV or print advertising, for example, gives them more questions to ask their doctors, which makes the doctors need trusted sales reps even more. Let’s look at the type of people who sell your products. Are they lone wolves or team players? Obviously, they have to be good performers in their own right, but teamwork is essential as well. At the local district level, three or four different kinds of salespeople may need to share information and work together. If managed care colleagues have achieved approval for a product to be on a managed care formulary, other people on that sales team have to create the pull-through, and somebody else may have to get a hospital product onto a hospital formulary. The lone wolf approach works well in other industries, I guess—insurance or real estate, where you usually have to make only one sale to each customer. But it doesn’t work in ours, where companies connect with customers in many different ways and repeatedly over a long period. When you want to restore morale in a struggling sales force, where do you begin? You begin with the district sales managers—the people I call “frontline managers.” If I can get this management team to understand my vision and strategy, the rest of the sales force will follow. It is very powerful when you are able to gain buy-in from the frontline managers because they then become a dedicated extension of senior management’s vision. Typically, a frontline manager will be responsible for ten to 12 sales reps, who will be looking to her for confirmation that the strategy is really going to work. And it’s not just her subordinates she’ll influence. Salespeople in any industry are highly networked. People know what’s going on in other companies. For all these reasons, we try to make the district managers our ambassadors from the center. These managers were certainly an important factor in the first integration steps following P&U’s merger with Monsanto in 2000. Very early in that process, I made sure that we got together with the Monsanto and P&U district managers in the United States and Europe. The point was to show them that instead of spending a lot of time on administrative issues, I was out there where it mattered. That helped motivate them and, in turn, the reps they managed, which meant that we didn’t lose control of revenue during the merger process. In fact, we enjoyed healthy revenue growth. How do you get salespeople to buy into your plans? We make it a priority to educate people on the front lines about the company’s strategy. That means letting them in on what I’ve been talking about with top management—I often end up in meetings with them using the same slides I showed to my senior management team or even to my board of directors. Linking them into strategy this way is really important because sales forces are often allowed to become detached from the center. In a way, I look on the salespeople as our first line of customers. If we can get them to feel that they’re an important part of the company, then they won’t immediately assume the worst if we have execution problems down the line with, say, the incentive plan. Then there are my CEO dialogues with the sales reps. These are regular meetings that I have with about ten sales reps at a time. The group is small enough that the reps can talk to me as individuals but big enough to generate a broad discussion. These meetings are always high-quality time. I’ve been doing this long enough now that many of the reps have had several meetings with me, which helps me see how morale has progressed. I also regularly meet our customers in different settings, both with and without my sales colleagues. This serves two purposes. First, it teaches me a lot about the effectiveness of the sales process. Second, it gives me an opportunity to make our sales colleagues feel that the company understands their position and wants to help. I went on calls once in Manhattan and saw that the rep had to carry around a bag of samples on foot and on public transportation. What reps in a city need, clearly, is a bag with wheels. When I came back, I made sure that my trip report, which I shared with my executive team, included this observation. Some might feel that the personal attention you give to the sales force is excessive. Do you agree? Not really. The sales force has to be up there with R&D and the global functions—especially Compliance. And role modeling begins at the top. I routinely report on my experiences to my top cross-functional managers, and I encourage them to go on sales calls. Yesterday morning at a management committee meeting, I made a point of asking about a national district managers’ meeting that I hadn’t been able to attend. The fact that we spend time in the most senior committee of the corporation talking about a meeting with frontline managers makes a strong impression. I also personally see more senior managers in the sales divisions on a regular basis than those from other divisions, even though they are not direct reports. All this ensures that everyone in our organization appreciates the efforts of our colleagues on the front line, who have to make their six, eight, or ten calls a day and get past all the obstacles to connect with busy doctors. As a CEO, do you get involved in making sales? In some industrial marketing companies, landing the big contracts is a way for a CEO to make headlines. But I have no interest in usurping the role of my sales colleagues. I focus on being in tune with our people and assuring them that I’m behind them, that I care about them, that I care about the reputation and integrity of our company, and that what they do is important to the company and to patients. I think that is where I make a difference. It’s easy to see that American salespeople would respond well to your approach. Does it pose any special challenges outside of the United States? Not in my experience. Once people are in small groups, the cultural stereotypes don’t apply anymore. People in sales are naturally extroverted, and that proves to be stronger than any cultural stereotype. When I went to Japan for my CEO dialogues with our sales reps there, a lot of people thought that none of the reps would say a word to me. But within about ten minutes, they became very lively. Another time, when I was with P&U, I met some sales reps in a remote part of China. To my surprise, they told me that one of the benefits they most appreciated was the company’s stock option plan, which we had just put the sales reps on. Most people at the time thought that only Americans would really value a stock option plan. And yet here were sales reps in the depths of rural China telling me they liked it. If some marketing people have blind spots when it comes to sales, how do you change that? Many marketing people in the pharmaceutical industry started in sales. But schisms can arise, especially in times of stress. Left unmanaged, people in the field might point a finger at people in marketing, and vice versa. You have to fight this. One of Schering-Plough’s six formally identified Leader Behaviors is “shared accountability and transparency.” We make concerted efforts to model and teach the right behaviors to emphasize just how important they are. In one of my former companies, we went to a sales and marketing meeting and handed out T-shirts with the words “sales” and “marketing” on the front without a space between them. This symbolized what we wanted the department to be. We also have various business processes that ensure that both sales and marketing resolve any tensions early on in a new project. One of the most important is the Plan of Action (POA) meeting. These meetings can take place three times a year, and they require marketing people to work with district managers and sales reps to develop special sales programs. The marketing people elicit input and feedback from the salespeople to design the best possible program, and there’s a lot of emphasis on teamwork. In the end, our ability to plan and then execute as a team has greatly increased as a result of this process. Can you give us an example? Sure. Let’s say we were developing brochures to disseminate new approved clinical data on one of our products. From the very beginning, our market research colleagues would be speaking with customers to develop the initial messaging. We would then use a forum like the POA to involve the sales force in the early stages of the project—well before the brochures were finalized. This not only ensures that everyone buys into the brochure but also encourages the salespeople to actually use it with their customers. Once again, we’ve been able to give sales reps something they can talk about, and in so doing they will make sure that we get the information to the people who need to see it. A process like this takes more time on the front end, but I can tell you it’s worth it. Do you find that interaction with the front line generates any strategic insights? Absolutely. The sales reps are usually the first to spot gaps in the product line. There was a case of this recently in our respiratory business. The sales reps had told me that they would like to be able to offer an antibiotic in addition to our antihistamine line. I remembered this request when the opportunity came up to access an antibiotic called Avelox, which is used to treat pneumonia. Licensing Avelox wasn’t a very big deal in terms of its bottom-line effect, but its strategic fit was good. It allowed our salespeople to present a much broader range of respiratory products. It made the reps feel more relevant to their customers. I think they had started to feel that we weren’t committed to respiratory products, so this move lifted their spirits and made them realize that we were serious about the area. If it hadn’t been for their input, we would probably have passed on the Avelox opportunity, and Schering-Plough would have struggled longer in respiratory products. What you hear from the front line can be a great corrective to the prevailing wisdom. What you hear from the front line can also be a great corrective to the prevailing wisdom. I worked at a company where the R&D people had developed a glaucoma drug for the Japanese market. The conventional wisdom was that because eye care was not a core business, the company should partner with a specialist Japanese distributor. We were all set to do this. But when I talked to our salespeople in Japan, they told me that being able to offer the glaucoma drug would really help them with their customers. They also believed they could do a better job than the Japanese distributor because they were better trained as sales professionals. We took the courageous step to give the product to our own people, which turned out to be a wise decision. The glaucoma product sold very well in its own right, and sales of other products also benefited because salespeople were motivated to do the best they could.
