Merck Sharp & Dohme Argentina, Inc (A)

Written Analysis Of Case

March 26

2013
GROUP MEMBERS: Fareeha Naqi Haseeb Anwar Muhammad Ahmad Shahrukh Mushtaq

Merck Sharp & Dohme Argentina, Inc (A)

OVERVIEW OF THE CASE:
Merck Sharp & Dohme was one the leading pharmaceutical firms operating on Argentine soil .Its roots in the country dated back to 1915, when it authorized the H.K.Mulford Company to be the local distributor for its pharmaceutical products. Over the years, the company proved itself to be very profitable and expanded and made its mark in the market, in face of fierce competition and a highly uncertain economic climate. Antonio Mosquera took charge of MSD at a critical juncture in Argentinas history in year 1995, when the country was in the process making its transition from a traditionally closed economy to one that was open to trade and favored competition within its industries. Slowly and gradually he changed the culture of the company recruited new experienced people, often outsiders to the pharmaceutical business. The new personnel were hired keeping in view the changing times and thus needs of the company to modernize itself to have a competitive edge. Silvia Ring, MSDs Director of Development and Training, Cristina Quinteiro, Director of Human resources of MSD, and Martin Rodriguez Hunter, Director of Sales of MSD were three examples of professionals chosen to work for the firm given its specific needs. The following subsection traces the timeline that marked Merck Sharp & Dohmes journey as a company. 1915: Mercks rooted in Argentina 1954: Relationship continued 1979: imported all pharmaceutical products 1980: Economic turmoil MSD did not exist 1988: Signed a licensing and distribution agreement 1990: Maintained a strong position 2000: Sidus purchased MSDs manufacturing The efforts of the new managing director of Merck's subsidiary for Argentina, Uruguay, and Paraguay aimed to transform the organization and its culture. However, a recent development has occurred that may shake up the firms ambitions and render all efforts made in vain. The top leadership of the firm has recently been reported that one of the candidates who marginally failed to make the cut in its latest internship program was the scion of one of the key figures in the health care sector (a key customer of Mercks) and if he is included somehow in the program, he could bring in substantial sales revenues for the firm. This case study focuses on a critical decision: whether to offer the son of a high-ranking official in the government's national health-care program a place in the company's highly selective intern program for young professionals.

ANALYSIS OF EXHIBITS
EXHIBIT 1
This exhibit shows us the market share of MSD in comparison with other companies in the industry. Till second quarter of 1996, the share of the company has shown a falling trend and fell from 4.8% to 4.4% from 1994 to 1996. Meanwhile, MSDs competitors like Novartis, Bristol and HMR have increased their market share rapidly in the same time period.

EXHIBIT 2
This exhibit shows us the changes in the organizational structure made during Mosqueras time as MD. We can see that new departments have been added including Legal and Training & Development. Further, there is a shift from purely functional departmentalization to a hybrid of functional and product departmentalization through the formation of Business Units which involve employees from various functional groups. The new structure is designed to aid the transition to lower bureaucratic levels and higher delegation of authority.

EXHIBIT 3
This exhibit shows the Mission and Values of the firm. The point most frequently stressed is related to the importance of an ethical culture which focuses on integrity. Emphasis is also laid upon professionalism, teamwork, respect, empathy and open-mindedness.

EXHBIT 4
This exhibit shows us the sample questions from the companys newly developed 360-degree inventory for evaluation of managers. It is entirely in line with the values of the company. The virtues of an ethical system are conspicuously highlighted. The other core values are also incorporated.

EXHIBIT 5
This exhibit shows the Performance Appraisal Process Values. The focus is on transparency and commitment to the philosophy of constant improvement. Respect and dignity are also considered key in the process in addition to support for Merit Increase and Reward System.

THE LEADERSHIP TRAITS, STYLE AND ACCOMPLISHMENTS OF ANTONIO MOSQUERA

To analyze this case, it is important to study the work done by and the leadership of the new MD Antonio Mosquera of the company who took charge only a year ago and since then changed the whole organizational setup to a great degree. Any decision that ought to be taken must be in line with the progress under his regime. We learn from the case that Mosquera had a great deal of experience in the industry and had worked under various capacities for Mercks parent company, particularly in the United States. He was an extremely proactive and energetic executive who, without wasting any time whatsoever, set himself to the task of transforming the company. The challenges that he faced were substantial: an old system based on cronyism, rigid bureaucratization, excessive centralization, strong unionization, illicit means of selling and infringement of intellectual property rights had become hallmarks of the pharmaceutical industry in Argentina. Mosquera sought to take a solid stance against the status quo. He developed an open culture where information could be shared without fear and collective responsibility be established among the employees. The corporate structure was decentralized and lower-tier managers empowered. The organizational structure before he came in was that of functional departmentalization and under this arrangement the coordination between the various functional units was poor. He shifted the structure towards product departmentalization and formed business units where people from various functions grouped together. The dearth of properly educated and trained staff was tackled impressively. For this, Mosquera began hiring in accordance with specific job descriptions and qualifications and attracted many non-union employees. In addition, he broke the conventional mode of industry-centric promotions by bringing in competent people who had little to do with the industry itself but were efficient at making corporate decisions and were flexible and open to change. Also, he set up a Training & Development department that helped train current staff as well as new additions to the workforce. Innovation was something virtually non-existent in the industry when Mosquera took over. He ensured that new ideas would be fostered in his reign and every employee in the firm was free to bring his or her ideas forward to improve operations. The power center of sales and marketing was neutralized by Mosquera as these departments were dismantled methodically. The appraisal basis was also altered and sales people rewarded not for simply the number of doctors they interacted with but objective sales figures. The most important change that Mosquera brought related to our central decision was the inclusion of many ethical principles into the stated values and day-to-day running of the firm. In Exhibit 3, we see that the core Personal Value is integrity about which is written We maintain the highest ethical and moral values that we do not compromise as a result of job pressure or external demands. In the case, several examples of moral and judicious decisions taken by Mosquera and his cadre of top executives have been highlighted and his commitment to ethical values is what attracted most of his new recruits to the firm. The following table shows the cultural shift that took place under Mosqueras leadership.

OLD CULTURE 1 2 3 4 5 6 7 8 9 10 11 Managers were only supervisors Closed system Authoritarian Decision Making Unethical behavior Corruption Rigid hierarchy Centralized decision Functions were maintained separately Innovation was discouraged Absence of employee empowerment

NEW CULTURE Flattened hierarchy Decentralized Integrated Innovation was encouraged Employee empowerment Transparency Managers possessed all types of skills Open system No authoritarian Decision Making Ethical behavior Corruption free

From the above analysis, we can infer that Mosquera is a combination of a transformational and a visionary leader. His transformational leadership style is obvious from the way he deals with people. Instead of telling them exactly what to do, he encourages them to ponder over problems and find solutions on their own while hinting them towards the right direction. He therefore plays the role of mentor and inspires workers through his dedication, openness and character. As was noticed in the text, he was unique in that he was highly accessible and showed his face to everyone in the company. His visionary style was apparent from the start as he felt discontented at the state of the company and conveyed an attractive vision of the future that improved on the present situation, which is what defines visionary leadership1.

CORE PROBLEM
This is a clearly a case of Business Ethics and the leadership of Merck is faced with what is known an ethical dilemma. An ethical dilemma is a complex situation that often involves an apparent mental conflict between moral imperatives, in which to obey one would result in transgressing another2. The decision that is to be made is related to whether or not the son of a key figure in the governments health care program for retirees ought to be unworthily given an internee spot in the firm. Out of a pool of 30 candidates, the top 15 were to be to be selected and the person in question finished 16th. The internship program was headed by Director Training & Development Sylvia Ring and was designed by the collaborative efforts of Director HR Cristina Quinteiro and MD Antonio Mosquera, who was to make the final decision. A call by the middle manager who informed Sylvia Ring of the potentially valuable intern was also made to Director Sales Martin Rodriguez Hunter. Although the caller was rebuffed by Ring, his words had a different effect on the ears of the Director of Sales, who had favored. Director of HR Cristina Quinteiro had opposed Hunters contention and said the person must not be hired. Now the onus was on Ring to give her verdict on the issue so that the final decision could be made.

FACTOR IN FAVOR OF HIRING

The factor in favor of the decision is obvious: potentially increasing sales and hence increasing profits. This is Hunters point when his view is asked for. He says that if this guy is allowed into the company we will have a very good opportunity to get our product into the government formulary and increase sales by $5 million a year. So there is a definite monetary benefit attached to the unethical viewpoint and this is what makes the situation rather complex and the decision difficult.

FACTORS AGAINST HIRING

Transformational efforts thwarted Although one may argue that this is a one-off situation, the ideas propounded and brought into action by Mosquera so effectively might go to waste as a result. This is because the four key members of the organization who played central roles in bringing about the transformation of the company will have this decision that is contrary to everything theyve done so far on their conscience. This might hinder their efforts in the right direction and spoil their enthusiasm for the same. In taking the stance against hiring on behalf of Ring, the result of hiring would alienate two out of the three company executives from the whole philosophy of Mosquera. It is against the companys values In both exhibits 3 and 4 we see a concentration on ethical behavior. Thus the stated values of the company and the key feature of its appraisal program will be contradicted by this decision.

Short-run VS Long-run The decision may reap immediate financial benefits but may harm the company in the future as one person not entirely suitable for his job will have been hired and will have substantial influence within the firm as the potential sales he will bring in through his influential familial contact will probably come at some price or the other. It would be unfair to the candidate dropped This point was made in the case by HR head Cristina Quinteiro in her remarks on the subject when she said There were fifteen who were judged better than him, so it is not fair to include this person and exclude one of the others. The company can grow without this hiring In Exhibit 1 we see that firm has been able to maintain its market share in the industry and will only improve given the measures taken by Mosquera. Therefore, it can do without such an unethical step. The decision might set a precedent for similar future lines of action It is very easy to make one unethical decision and become addicted to it. Martin Rodriguez Hunter asked what harm hiring the individual could do. This is similar asking what harm a playful or innocent lie does. The answer is that it forms a dangerous habit that may prove to be lifelong and extend to many important stages in ones life.

RECOMMENDATIONS:
We suggest Ring to act ethically and refuse the recruiting of the candidate who will not be hired on merit. The ethics that leaders in an organization use to manage employees may have an effect on the morale and loyalty of workers. The code of ethics leaders use determines discipline procedures and the acceptable behavior for all workers in an organization. When leaders have high ethical standards, it encourages workers in the organization to meet that same level. Ethical leadership also enhances the companys reputation in the financial market and community. A solid reputation for ethics and integrity in the community may improve the companys business. Leaders and employees adhering to a code of ethics create an ethical organizational culture. The leaders of a business may create an ethical culture by exhibiting the type of behavior they would like to see in employees. The organization can reinforce ethical behavior by rewarding employees who exhibit core values and integrity that coincides with the company code of ethics and disciplining those who make the wrong choices. Profit and ethics must go side by side. This is a successful investigation on ethics and profit which leads the relationship between them and state that ethics and profits do go hand in hand Ethics must go hand to hand with profit though they are complementary. If corporate ethics assemble an exclusive top management support, expand the core values and code of conduct, if ethics training or program conducts through the view of profit, if reporting and monitoring be neutral, if continuous improvement gain by the company then profit will run towards the corporation. So, ethics and profit must always be go hand in hand. The decision to recruit the candidate might boost the sale of the company .This decision would be a short term decision. Looking in to the long run the company would be benefited as its bases are strong. The cultural change in Mark & Sharp Dohme would definitely lead to success. According to Thomas Donaldson, the Mark O. Winkelman Professor in Ethics and Law at the Wharton School at the University of Pennsylvania, There is a growing realization all over the world that ethics is vitally important for any business and for the progress of any society. Ethics makes for an efficient economy; ethics alone, not government or law, can protect society; ethics is good in itself; ethics and profits go together in the long-run. An ethically responsible company is one which has developed a culture of caring for people and for the environment, a culture which flows downwards from the top managers and leaders.2

WHY SHOULD ONE BE ETHICAL?

There is already something odd about this question. It is like asking, Why are bachelors unmarried? They are unmarried by definition. If they were married, they would not be bachelors. It is the same with ethics. To say that one should do something is another way of saying it is ethical. If it is not ethical, then one should not do it. Perhaps when business people ask why they should be ethical, they have a different question in mind: what is the motivation for being good? Is there something in it for them? It is perfectly all right to ask if there is a reward for being good, but this has nothing to do with whether one should be good. It makes no sense to try convincing people that they should be good by pointing to the rewards that may follow. One should be good because good is, by definition, that which one should be. As for motivation, good behavior often brings a reward, but not every time. Think about it. If it were always in ones interest to be good, there would be no need for ethics. We could simply act selfishly and forget about obligation. People invented ethics precisely because it does not always coincide with self interest.

CONCLUSION:

Radical changes require adequate Authority .A man must have inner strength as well as influential position. What he does must correspond with a higher truth3

REFERENCES
1. 2. 3. 4. Robbins, Stephen P.; Coulter, Mary; Vohra, Neharika (10th Edition), Pearson Learning http://en.wikipedia.org/wiki/Ethical_dilemma, Viewed March 24, 2013 Bhatia, S. K. (2002), Business Ethics and Managerial Values, Deep & Deep Publications Moon, Chris; Bonny, Clive; Hoffman, Michael (2001), Business Ethics: Facing Up To The Issues, Bloomberg Press