MBA Projects

MBA Projects

MANAGING PLANNED CHANGE:

A Case Study on Pacific Pharmaceutical Pakistan

Contents

1. Introduction to the Case   2                                                                                             

1.1 Purpose of the Case Study   3

1.2 Scope of Case Study     3

1.3 Methodology Used     3

1.4 Definitions     3

            1.4.1 Abbreviations Used        3

2. Company Profile   4                                                                                                         

3. The Change Scenario at Pacific Pharmaceutical: The Structural Change    6            

4. Change Management at Pacific Pharmaceutical       7          

4.1 Problem Identification    

4.2 Contracting with Associates    

4.3 Diagnosis of Organization, Group, and Individual: The Framework Analysis    

4. Gaining Employee and Owner Commitment for Change at Pacific        14

5. New Structure of the Company after Implementing the Change        15                   

6. Conclusions   16                                                                                                                

7. Reference List   17                                                                                                           

8. Appendix   18                                                                                                                   

1. Introduction

The pace of global, economic, and technological development makes change an inevitable feature of organizational life. To properly function, to adapt to external environmental changes, and to attain certain level of legitimacy, an organization may need to make several changes overtime. There are several types of planned change including structural change, cultural change, technological change, and change in strategic focus. Structural and technological changes are more frequent and common in industry. A case in point is Pacific Pharmaceutical Limited, where the management has brought a major change in structure, to support the expanding business.

1.1 Purpose of the Case Study

Purpose of this case study article is to present the findings of our study on Pacific Pharmaceutical Limited. The article primarily describes the nature of change occurred at the company and how the change was managed.

1.2 Scope of the Case Study

The case study report encompasses the company profile, change scenario at Pacific Pharmaceutical, change management at the company (problem identification, contracting with associates, diagnosis of organization, group, and individual, collection, analysis and feeding back the data for change, implementing and controlling change), and  new structure of the company after implementing the change.

The report also includes conclusions followed by a reference list.

1.3 Methodology Used

We developed a semi-structured interview by adapting the concepts from Cummings & Worley, 2001, and then conducted the interview Pacific.

1.4 Definitions

1.4.1 Abbreviations

Abbreviation	Stands for
APR	Applied Pharma Research
ASM	Area Sales Manager
SPO	Sales Promotion Officer
QCO	Quality Control Officer

2. Company Profile

The establishment of Pacific Pharmaceuticals Limited is the outcome of slow and steady, unremitting and consistent evolution, spanning over a period of five decades of a once modest drug store on The Mall (now Shahrah-e-Quaid-e-Azam), Lahore, set up by Haji S.M. Ismail, father of Mr. Irfan Omer, the present Chief Executive. This evolution from retail trade to high capacity, hi-tech production came gradually over the time in small improvements carried out piecemeal. Retail sales grew into wholesale, one-shop operation gave way to a nation-wide distribution network, local sourcing climbed up to international sourcing from world research centers.

Pacific Pharmaceuticals Limited is the long-term outcome of this process.

Pacific Plant: Overview

PACIFIC plant is designed to live up to the ultramodern style guidelines conducive to upholding the standards of Good Manufacturing Practices (GMP) and WHO's recommendations. Pacific has been awarded the prestigious European Union Certification (German GMP).It stands in good stead among the Pharma manufacturing facilities anywhere in the world. The plant is made up of high performance and highly sophisticated sub-units, mostly imported from Germany, Italy and the United Kingdom. The local components used are acquired on the principle that there would
be no compromise on quality at any level. The entire premise is centrally air-conditioned.  Environmental control is so meticulously attended to that the raw materials and the end products are also kept at the most suitable temperature so as to ensure maximum stability and efficacy. The Italian-based Technical Centre of Marion Merrell Dow, the innovative research-based multinational, contributed valuable technical guidelines towards its design.

Pacific Plant: Basic Features

Location: 30 K.M. Multan Road, Lahore-53801, Pakistan.

Total area: 6 acres

Covered area (so far): 2.75 acres

Formulations being produced: tablets, capsules, syrups and ointments        

Marketing

Pacific has five marketing teams - Red, Blue, White, Green and Indigo, each headed by a

Business Unit Head. Briefly, there are 250 Medical Representatives who are all highly qualified and experienced officials and are handling the marketing of the products successfully.

Basic Manufacturing

With a view to attaining self-reliance, PACIFIC has commenced its own basic manufacturing for life-saving drugs. Work is in full swing to make this project a success on top priority basis.

Pacific Pharmaceuticals - A Model Unit

Having seen the state-of-the-art machinery and equipment installed by PACIFIC  in its plant, and its excellent performance in the realm of pharmaceutical manufacturing, the Ministry of Health, Government of Pakistan, has declared Pacific Pharmaceuticals a MODEL UNIT. Further, the above fact has also been recognized by the foreign pharmaceutical experts and in that Pacific Pharmaceuticals has been awarded the Distinguished Award.

3. The Change Scenario at Pacific Pharmaceuticals: The Structural Change

The change that was brought in by the management at Pacific is structural change. The basic reason for replacing the old structure with new one is to improve performance in the context of expanding business.

The old structure comprised of a CEO with one Plant Manager and one Marketing Manager. The Plant Manager was responsible for taking work from foremen who further supervised the manufacturing staff. Quality issues were also overseen by Plant Manger.

The Marketing Manager supervised Distribution Manager and National Sales Managers. Each National Sales Manager had to supervise Regional Sales Managers who further administered Area Sales Managers. Finally, the Area Sales Manager directed Sales Promotion Officers.

Where National Sales Managers, Regional Sales Managers, Area Sales Managers were managed by Marketing Manager, they were also responsible for reporting to  Distribution Manager. This created a dual authority that was lowering the efficiency due to the intense competition in the market and expanding business (see this old structure in figure on the next page).

4. Change Management at Pacific Pharmaceuticals

We describe the structural change, which was initiated, implemented and managed at Pacific Pharma, in the form of following process framework:

4.1 Problem Identification

Although middle level management staff was facing problems with old structure for a long time due to its dual authority feature with an expanding business nation-wide as described earlier, the problem came on to the top when the sales of the firm declined unwontedly and repeatedly. Top management of the firm decided to take feedback from middle level management who presented several reasons with one common cause that there were problems in handling marketing side up. The second major issue was related to quality. Services of one Plant Manager, who also worked as QCO (Quality Control Officer), were seen inadequate. But, of course, management couldn’t directly accept all these presented facts, which could not be something but the gut feelings of middle level managers. So the CEO and then-Director of the firm decided to take help from some professional management consultants.

4.2 Contracting with Associates

The management at Pacific Pharmaceuticals contacted and then contracted with a Management Associate Firm registered with Chamber of Commerce. The contracting process started with initial meetings in which mutual expectations were set and decisions regarding time and resources were made. Associates also documented the essential requirements and desirable requirements of the contract in close collaboration with the management at Pacific. Time period of one year was estimated in the contract to carry out the changes required.

4.3 Diagnosis of Organization, Group, and Individual: The Framework Analysis

This section presents an overview of the diagnosis of organization, group, and individual as conducted by the associates (consultants):

Organization-Level Diagnosis

The organization level diagnosis at Pacific is as below:

Inputs

General Environment:

General environment of Pacific, which consists of social, technological, economic and political forces, has low to moderate level stability. Socially the environment is cohesive, family-oriented. Rapid technological advancements in global environment is very dynamic and reinforces the competition. Economic and political situations are not very stable.

Industry Structure:

There are more than 540 pharmaceuticals currently working in the indigenous industry. A record from the survey of doctors shows that on average one senior doctor in a hospital is visited by 65 to 75 medical representatives each day who come to introduce new medicines. Sensitivity of the nature of product and intensity of competition have significantly increased the forces like supplier power, buyer power, threats of substitute, threats of entry, and rivalry among competitors.

Design Components

Strategy of Pacific Pharmaceuticals:

Strategies of the Pacific are to:

• Serve indigenous markets comprehensively and explore foreign ones.
• Seek and acquire technologies that are strategically relevant and commercially viable.
• Design and support development activities that effectively transform technologies into products of recognized value.
• Build or develop markets for our technologies.
• Anticipate and adapt to the changing healthcare environment.

Technology at Pacific:

Pacific uses state-of-the-art technology. Primary reason is to beat the competition. Technical interdependence Pacific is moderate to high. Technical uncertainty Pacific is very high.

Structural Systems:

The structural system of Pacific before installing change aimed at dividing work into Plant Setup and Marketing Setup. Inter-setup and intra-setup coordination was poor. The idea regarding problem in structure that was presented by middle managers remained beneficial in identifying the root cause of the overall scenario. The real problem and perceived one were found closely related.

Measurement Systems:

The measurement systems at Pacific had dual status. For Plant setup it was satisfactory. Supervisors’ control and information systems fulfilled almost all requirements of management. On marketing side-up, however, the measurement systems were weak with dual authority nature inherent in matrix structures. Measurement of performance of the Manager Marketing and Distribution Manager was ambiguous. Individual sales representatives’ performance measurement was a bit better.

Human Resource Systems:

Human resource functions were not performed by some specialized department. Instead, the recruitment, selection, training, and appraisals were carried out by line managers at plant and on marketing side up. Compensation was decided by Top management and owners. (After brining the new structure, these all functions have been shifted to Administrative Setup, which is an intervention in the system).

Organization Culture:

Pacific, from inception, focused adequate efforts to maintain a productive and conducive corporate culture. Main values that reinforce its culture are to:

• Act with honesty and integrity.
• Drive for results, assume ownership of work, and recognize accomplishments.
• Value each other and the company and strive to create a caring environment.
• Provide opportunities for personal and professional growth, and expect each to seek challenge and to contribute.
• Value creativity, initiative, teamwork, and employee development.
• Aspire to excellence.

Output

The outputs of the earlier strategic orientation (due to older structure) of Pacific are:

• Organization performance in the form of financial returns began declining from high to low levels.
• Sales per employee, perceived product quality declined; error and wastage rate increased.
• Satisfaction of stakeholders also lessened.

Group-Level Diagnosis

The group-level diagnosis at Pacific is as below:

Inputs

The organization design components: Strategy of Pacific Pharmaceuticals, Technology at Pacific, Structural Systems, Measurement Systems, Human Resource Systems, and Organization Culture, which have been described earlier in detail, serve as input to group design.  

Design Components

Goal Clarity:

At Plant Setup, the goal clarity was high. On the other hand, at Marketing Setup it was low and with expanding business the clarity was further reducing resulting into the diseconomies of scales.

Task Structure:

At Plant Setup of Pacific, the work had been designed on the principles of division of labor and lean development. Each worker used to do his own work and the product passed through different stages. The same phenomenon, as being beneficial, is still being used at Pacific. A proper Quality Control department, however, didn’t exist in past. At Marketing Setup, the task structure was quite ambiguous. Shared responsibilities, similar designation, and dual authority had created uneven situation of work design.

Group Composition:  

At Pacific, there are demographically less diverse group members. At Marketing Setup, however, there is a wide-spread diversity due to the belongingness and matching of sales people with their area for the purpose of taking benefits from in-built familiarly with geography. 

Group Functioning:

Interpersonal communication and trend of sharing good feelings with each other at Pacific was moderate to low. Appropriateness of group functioning at Plant was higher that of Marketing Setup.   

Performance Norms

Performance norms at Pacific were usually derived from the standards of performance as set by top management before restructuring the organization. Well-defined tasks at Plant also contributed to these norms. On marketing side up, the targets according to characteristics of area derived the performance norms.

Output

The outputs of the earlier group orientation (due to older structure) of Pacific are:

• Increased costs
• Decreased productivity by salespersons
• Declined perceived quality; or misperceived quality.

Individual-Level Diagnosis

The individual-level diagnosis at Pacific is as below:

Inputs

Inputs that affect individual job design at Pacific, which have been elaborated in earlier sections of this case, are:

1.      The organization design components: Strategy of Pacific Pharmaceuticals, Technology at Pacific, Structural Systems, Measurement Systems, Human Resource Systems, and Organization Culture, which have been described earlier in detail, serve as input to group design. 

2.      The group design components: Goal Clarity, Task Structure, Group Composition, and Group Functioning, Performance Norms.

3.      Personal characteristics at Plant and Marketing at Pacific

Individual Design Components at Pacific

Skills Variety: low to moderate

Task Identity:  moderate to high

Task Significance: moderate

Autonomy: at Plant: low; at Marketing: high

Feedback: high

Output

The outputs of the earlier individual orientation (due to older structure) of Pacific are:

• Low job satisfaction
• Increased absenteeism
• Lack of personal development

5. Gaining Employee and Owner Commitment for Change at Pacific

Initially management and afterwards the consultant firm and management both struggled hard to get employees and owners committed with the needed change efforts.

To convince owners, the relationship of declined sales with structural problems was demonstrated in a non-technical, simple and understandable way. Real critical incidents and examples were also documented and presented. Resistance from owners’ side, which later on was coped up, was stronger than that from employees’ side. Reason was the heavy budget required to bring the change.

Employees also resisted but as the change produced new in-house promotion opportunities and also produced new jobs rather than eliminating existing ones, the level of resistance was a bit low.

On the whole, management at Pacific faced difficulties in gaining commitment at the start while initiating the change. After the budget was allocated and the change process started, the resistance abated to some degree. After implementing the change, the brought-in benefits further helped sustaining the change. The struggling party in the whole scenario mainly is the management at Pacific.

6. New Structure (After Change) at Pacific Pharmaceuticals

New structure at Pacific divides the organization into 4 major setups.

1. Plant Setup: Production, Quality Control, R & D, Engineering, Import.
2. Administration Setup: Security, Personnel, Gardening, Sanitation, Paint, TeleOp, Imports, Registration, Accounts, Export.
3. Marketing Setup Division 1: Business Unit1, Business Unit2, and Business Unit3.
4. Marketing Setup Division 2: Sales, Medical Advisory,

See the new structure of Pacific Pharmaceuticals Limited on next 2 pages.       

6. Conclusions

We, from the analysis, conclude that the management at Pacific Pharmaceuticals took a right decision to avail the services of change management consultants supplemented with the insights of own middle management.

The business outcomes in the form of increased productivity and quality are also evident of the appropriateness of decisions regarding the change. Although managers at Pacific spent much time and cost in gaining the commitment of their employees and firms owners for change, the new structure is likely to produce benefits in medium- to long-term for Pacific.

Reference List

1.      Pacific Pharmaceutical Introductory Handbook (1^st Rep.), (2002), Lahore: Pacific Pharmaceutical Limited

2.      Cummings & Worley, “DIAGNOSIS OF ORGANIZATION, GROUP, INDIVIDUAL”, Essentials of Organization Development and Change, 1^st Ed, pp.52-74.