Effects of Leadership in the Management Strategies of Merck and Company, Inc. Rana Satnani MGT-330 Management: Theory, Practice, and Application. July 2, 2010 Carolyn Harrison There lies a division in the business world between managers who “do things right” and leaders who “do the right things” (Bennis, 2007, p. 13). The primary difference between good managers and fantastic leaders is the ability to take risks and make independent decisions. Ethical leadership is more important today than ever with the rising effects of globalization on management across borders.
Corporations like Merck & Company Pharmaceuticals learn this lesson by thriving with superb management through crises. The impact of excellent leadership shows when companies prove they can survive and learn from problems. Merck has a long history of working ethically to improve the health and well-being of the world population. The company started by Dr. Ernst Christian Friedrich Schering in Berlin in 1827 and opened for business in America in 1891 (Merck, 2010).
Merck scientists are responsible for many important health care contributions, from the discovery of Vitamin B1, the first measles vaccine, antacids, to the first statins used to reduce cholesterol. Merck also takes pride in their commitment to animal health, revolutionizing veterinary science with the introduction of most pet medicines used today, such as antibiotics, and vaccines. Doctors worldwide await the annual publishing of the Merck Manual, providing valuable information on medicines and health conditions.
Merging with Schering-Plough in 1971, Merck has evolved into the second largest pharmaceutical company in the world (Merck, 2010). Management builds on ethical leaders To survive in progressively more competitive markets, companies have to attract and maintain excellent leaders to guide their companies in attaining objectives. Innovation and creativity lead managers to develop into powerful leaders, bringing inspiration to the staff and ingenuity to problem-solving processes. To produce managers with the highest potential for leadership, igher education institutes have a responsibility to focus on developing students’ ability to learn and plan for a lifetime of leadership. No longer can business management students simply study the technical aspects of business. According to Mabey (2008), the best graduate programs in America must ask two questions to strengthen the foundations of management learning: “(1) What managerial competencies, i. e. , knowledge, skills, and personal attitudes do educated managers need to act successfully in today’s rapidly changing business environment ? (2) How do we learn, teach, and assess effectively in management education? (p. 147). We are observing the best managers graduating from Masters of Business Administration programs in which students prepare with lifelong learning abilities coupled with interpersonal skills that inspire them to lead their employees to greatness. Clearly good managers can accomplish objectives, yet excellent leaders always questions why things are done the way they are and can recognize the significance of thinking creatively and from an open-minded perspective. A prosperous organization must embolden leaders to make ethical decisions to be effective for the long-term future in the corporate world.
Velasquez (2006) states “when employees believe an organization is just, they are more willing to follow the organization’s managers, do what managers say, and see managers’ leadership as legitimate. In short, ethics are a key component of effective management” (p. 41). One strategy for effective leadership is always to act with ethics as the primary objective. This strategy works because empowering ones’ subordinates will help a manager complete his or her objectives, but acting as an ethical leader will earn trust and loyalty from the team.
Both empowerment and ethics are what differentiates a manager from a leader. Leadership at Merck & Company. Merck Pharmaceuticals takes much pride in the way their company manages because ethical leadership promotes high-performance and company loyalty. In 2007, Merck introduced new employee leadership standards along the same line as the business strategy and Code of Conduct (Merck, 2010). These Leadership Standards evolve from previous guiding principles and rules focused on four foundational ideas: “innovation, inspiration, impact and integration with Merck’s values” (Merck, 2010, p. ). As the fastest growing pharmaceutical company in developing countries, a positive working environment with the foundation in the following managerial principles from Merck’s Core Values website (2010): “1. We are a unified Company, with all employees sharing in the mission of improving global health. 2. We share a strong core of ethics and integrity. 3. We put patients and customers first. 4. We value diversity and inclusion as essential, integrated elements of our culture and leadership. 5. We demonstrate scientific, business and operational excellence. 6.
We are results-driven and highly competitive. 7. We are empowered to make decisions and hold ourselves accountable for the outcomes. 8. We innovate and take appropriate risks. 9. We value feedback and learn from our successes and our mistakes. 10. We encourage debate and communicate candidly and respectfully. 11. We are efficient and agile, and responsive to change” (Merck, 2010, p. 1). Because the essence of pharmaceutical companies is keeping people healthy, these companies have serious ethical dilemmas they must conquer on a regular basis, using ethical leadership.
For example, in 1987 Merck scientists discovered a cure for river blindness, a debilitating disease predominantly diagnosed in low-income countries in Africa and South America, where people could not afford the cost of the drug. Merck leadership decided the company must donate the medicine to victims of river blindness because it was the ethical decision. The company has donated more than 2. 5 billion tablets of Mectizan™ since discovery of the cure in 1987 (Merck, 2010). Ethical leadership may have cost the company billions in cost of production but is a valuable commitment that gained trust and loyalty from consumers worldwide.
Globalization leads managers and to make tough moral decisions with the potential best outcome, so it is easy to see why Merck is the leading pharmaceutical company in third world countries. Public relations in a time of crisis Another strategy for superior leadership is through Merck’s history of handling crisis situations with honesty and fairness. By actively learning from successes and mistakes, Merck can be proactive about problems before they become worst case scenarios. A perfect example of the leadership approach is Merck’s massive Vioxx withdrawal and subsequent recall of 2004.
The withdrawal of the highly profitable arthritis and pain medicine resulted from “a study designed to test the effectiveness of Vioxx in preventing potentially cancerous colon polyps, but which had also shown that the medication doubled patients’ risk of heart attacks and strokes” (Merck, 2010, p. 1). The accidental finding must lead to a decision that has a basis in “research, executive decisions, board notification and concurrence, and communication with regulators” (Merck, 2010, p. 1). Of course this type of development can lead to disastrous consequences, but how the company handles it is vital.
Following the Vioxx withdrawal announcement, several class action lawsuits were set, Merck shares fell 27%, the company’s equity market capitalization decreased by $25 billion, and public outcry began for resignation of chief executive officer, Raymond Gilmartin (Merck, 2010). Interestingly, Merck management and directors handle crises with honesty and grace, by requesting the public to listen. Instead of hiding behind press releases and public relations counseling, Gilmartin appeared on several globally syndicated television programs to apologize and explain the situation.
Gilmartin’s immediate transparency and open communication eased the consequences of a potentially negative development or scandal for Merck. This well-articulated strategy of active leadership shows employees and consumers proper communication, learning from mistakes and ethical standards will lead to long-term growth, profitability and a work environment that retains superior, trustworthy management. Globalization is a challenge An increasingly globalized business world leads to amplified competition and a need for superior leadership.
As companies expand to overseas operations, they face the burden of “more responsibility, challenge, and operating leeway than they might have at home” (Bateman, 2009, p. 235). International leadership has the burden of bridging the gap through developing an understanding of cultural issues in foreign lands. Because of inherent ethnocentrism, American executives have to deal with his or her own lack of awareness and closed-mindedness to be successful managers abroad. Bateman (2009) warns that managers who lack an innate sense of compassion and understanding for others will rarely succeed on the global scale.
With a working knowledge of human psychology and cultural studies, managers are more apt to become international corporate leaders. Some industries have to pay extra attention and effort into ensuring their company is fitting into a foreign culture’s laws, rules, and societal norms. Pharmaceutical firms are one of the business types that must be extraordinarily sensitive to societal expectations because without public approval, Merck’s products cannot succeed in a competitive market.
By signing on to the United Nation’s Global Compact, the world’s largest corporate citizenship initiative, the firm “confirms its dedication to support the Compact’s 10 guidelines in the areas of human rights, labor, environment, and anti-corruption” (Merck, 2009, p. 1). According to Bateman (2009), despite differences across cultures, research shows that most people live by a set of five core values: “compassion, fairness, honesty, responsibility, and respect for others” (p. 41). These values are not just from Merck’s mission statement and Code of Conduct, but through the company’s actions, policies, and decisions. Conclusion Managers can learn about leadership from examining the innovative history of corporate pharmaceutical giant, Merck ; Company. Through the adoption of strong ethical guidelines, Leadership Standards, and the Merck Code of Conduct, the company has set an example of companies seeking leadership growth and development.
Because of the demands of an increasingly competitive and globalized market, companies can implement strategies with a basis in open communication, cultural awareness, and corporate responsibility. Excellent strategy, performance, and work environment result from the proper guidance and effective leadership of a well-trained manager. Merck is a unique example of a company with a conscience, backed by hundreds of years of experience in effective leadership. References Bateman, T. S. ; Snell, S. A. (2009). Management: leading and collaborating in the competitive world (8th ed. . New York, NY: Mc Graw- Hill. Bennis, W. (2007). Leaders: strategies for taking charge. New York, NY: Harper Paperbacks. Mabey, C. (2008). Management and leadership development. Academy of Management Learning ; Education, 2010, Vol. 9, No. 1, 145–152. London, UK: Sage Publications. Merck ; Co. (2009). Fighting river blindness. Responsibility and Corporate Governance Standards at Merck and Company. Retrieved July 2 2010 from: http://www. merck. com/responsibility/access/access-feature-mectizan. html Merck ; Co. (2009). Merck ; Co. , Inc. igns on to United Nations Global Compact. Retrieved July 1, 2010: http://www. csrwire. com/press_releases/25151-Merck-Co-Inc-Signs-on-to-United-Nations-Global-Compact Merck ; Co. (2010). Building a positive work environment. Responsibility and Corporate Governance Standards at Merck and Company. Retrieved July 2 2010 from: http://www. merck. com/corporate-responsibility/basics/employees/employees-benefits-compensation-training/approach. html Velasquez, M. G. 2006. Business ethics: concepts and cases. (6th Ed. ) Upper Saddle River: Pearson Prentice Hall.