Fighting the pink slip

Fighting the pink slip

Every financial depression has its casualties. The only hope is that the current economic recession does not permanently compromise the viability of the pharma recruitment market globally. Aashruti Kak writes

As we already know, the recent economic meltdown was responsible for the wreckage of many economies, and many careers across industries. In order to survive the financial typhoon of this magnitude, many organizations decided to drastically change their business models as an endeavor to sustain their profitability by enforcing massive cost cutting, which mainly included lay-offs of innumerable professionals, contributing to the already existing unemployment burden of the world.

These circumstances raise several issues, the foremost being-whether lay-offs are the ultimate answer to such situations, or a final option. Even though companies may think of lay-offs as a shortcut to stable finances, the surfacing truth is that the ‘savings’ eventually get cancelled out by immediate expenditure of severance packages, underperforming stressed employees, expense of outplacement and so on, followed by the later cost of recruitment, training inexperienced/untrained staff and attrition.

“The reversal of brain drain from developed countries to India and from MNCs to Indian companies has had some impact on compensation structure as well as perquisites offered, raising the bar, which has made talent acquisition and retention a major challenge”

– Dr Ajit Dangi President and CEO

Danssen Consulting

Dr Ajit Dangi, President and CEO, Danssen Consulting, avers that the impact of mass lay-offs on the pharma recruitment scenario has to be seen in the context of many major trends that are taking place in the business environments. “Pharma R&D is gradually shifting from chemistry to biology where the regulatory pathway is complex, and outcome uncertain. The discovery cost of an NME has crossed $1.5 billion while R&D productivity is virtually halved. Moreover, R&D pipelines of most research based companies are running dry and block buster model is losing its sheen, and with several blockbusters nearing patent expiry, M&A activities are becoming aggressive.”

The global financial setback compelled many pharmaceutical organizations to steer straight into new business strategies that would ensure their survival. Many chose inorganic routes like mergers and acquisition, which eventually led to/is still leading to mass staff cutbacks in some of the biggest pharma companies. For example, the expected lay-offs as a consequence of the Pfizer-Wyeth merger (worth $68 million) amount to 19,500 employees took the cake, while Merck’s acquisition of Schering-Plough ($41 billion) came at a cost of the jobs of 16,000 employees. Johnson & Johnson (J&J) let go of 8,900 jobs to ‘improve finances’, joined by AstraZeneca which laid-off 7,400 employees for the same reason. GlaxoSmithKline (GSK), succumbing to expired patents, failure of Avandia (diabetes drug) and other legal expenditure, had to lay-off 6,000 employees. Other companies that cut back on their staff were Eli Lilly, Teva, Boehringer Ingelheim, and Sanofi-Aventis among others.

Cause and effect

The main reason these companies cited was to avoid duplication of services and employees, leading to improved finances, and eventually, faster growth of the company. Although, being let go of by an organization that an individual has served for years is a crude way of saying that it does not need him/her, fortunately, in delicate times like these, there is no disgrace attached to the phrase ‘laid-off’ because it is very likely that the employee was not at fault, but the restructuring of the company was. Moreover, times have changed–organizations provide their employees the best training possible, with a wide range of knowledge and experience, to prepare them for economic setbacks like the current one, so that an employee can find another job option.

As compared to companies in the US, Europe and other Asian countries, Indian economy was just bruised, with pharma and healthcare sectors as one of the safest sectors for employment. Quite a few Indian companies dealt with the threat of degenerating world economy by not laying-off employees, but by enforcing hiring freezes, curbing perks and incentives, other than cutting on administrative costs.

In fact, there were many domestic as well as Big Pharma companies that continued to hire people in the required fields, contrary to companies in other affected countries. Dangi provides a reason, “Ballooning healthcare budgets in most developed countries has forced Governments to control healthcare costs and initiate rigid pricing policies, while regulatory guidelines are becoming stringent, resulting in longer cycle times for approval of new drugs. Hence, the center of gravity of pharma R&D and manufacturing is gradually shifting from West to East, particularly to India and China.”

While most MNCs have managed to protect their bottom line, top lines are shrinking and low single digit growth, sometimes even degrowth, has become a norm, resulting in large companies such as Pfizer, J&J, Eli Lily etc to lay-off thousands of employees to cut costs. The data bank of most HR recruitment agencies is overflowing with experienced and well qualified people. The attrition rate is, therefore, likely to reduce as more people are chasing few openings. “Due to the emergence of the CRAMS model, many technical jobs will be outsourced, resulting in availability of good quality professionals. The recession in developed counties has added fire to the fuel, resulting in the return of many well qualified candidates with appropriate skill sets to India. For instance, in the past couple of years J&J India has been able to attract several Indian MBAs from well renowned management institutes like Harvard, Wharton, Kellogg etc.” Dangi goes on to say that the quality of management in many Indian companies has gone up so significantly, such that working for MNCs seems less glamorous. This will help well managed Indian companies to attract good quality talent.

“The reversal of brain drain from developed countries to India and from MNCs to Indian companies has had some impact on compensation structure as well as perquisites offered, raising the bar, which has made talent acquisition and retention a major challenge. Also many young professionals are demanding better work life balance,” opines Dangi.

“It is only the innovative, flexible and well designed career advancement of HR policies that will be able to face these challenges successfully,” he concludes. After all, job security remains the most basic need of the majority of professionals anywhere.