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Contents
1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
2 Times of Change for Bayer: Yesterday, Today and Tomorrow . . . . . . . . . . . 177
3 Conceptual Background: Change Management . . . . . . . . . . . . . . . . . . 179
4 The Case: Change Management at Bayer . . . . . . . . . . . . . . . . . . . . 181
5 Summary and Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . 188
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189
1 Introduction
A. Moscho (B)
Bayer Business Consulting, Leverkusen, Germany
e-mail: alexander.moscho@bayerbbs.com
1 Czinkotaand Ronkainen (2005).
2 Fenwick (1999).
3 DiMasi, Hansen, and Grabowski (2003) and Moscho, Hodits, Friedemann, and Leiter (2000).
As a prospector, Bayer has strived to actively shape its own future during its
history. The quote “The precondition for success is not adaptation, but the will to
design changes yourself”4 by Werner Wenning, highlights this philosophy.
After Mr. Wenning became Chairman of the Board in 2002, Bayer was fun-
damentally transformed, encompassing changes in organization, portfolio, cost
structures and the remuneration system. Business was consistently aligned towards
innovation and growth.5 Already during the years prior to that, Bayer had been
characterized by an increasingly dynamic growth with varying degrees throughout
the business divisions.6 Today, life sciences within its portfolio and Asia from a
regional perspective represent Bayer’s major growth areas. Regarding innovation,
taking Bayer Healthcare as an example, Fig. 1 gives an overview of the innovative
products’ pipeline.
In order to put innovation and change management into the right conceptual con-
text, the article is structured as follows. In the next section, we are going to provide
more background information regarding Bayer. The third section provides a concep-
tual background on organizational change and change management. In the fourth
section we analyze how change management is pursued at Bayer, drawing on the
Bayer HealthCare
(since 1899)
4 Focus(2008), p. 12.
5 Focus(2008).
6 Metelmann and Neuwirth (2002).
Implementing Change Management Successfully 177
example of the Schering Integration in 2006. Last but not least, the last section sum-
marizes the main findings, provides conclusions and gives an outlook on the future
of change management at Bayer.
Founded in 1863, Bayer looks back on a long corporate history as a big player
in the chemical and pharmaceutical industries. Nowadays, Bayer is structured
into three operative divisions Bayer MaterialScience, Bayer HealthCare and Bayer
CropScience organized under a strategic holding. In 2008 it had net sales of over
C 32.9 billion and capital expenditures of approx. C 1.98 billion. Figure 2 provides
an overview of the different phases as well as the changes in structure.
When this structure was established, the goal was to concentrate resources on
those business areas, in which Bayer possessed its major strengths/core competen-
cies and saw greatest growth opportunities, leading to the portfolio of the three
divisions.7 Since 2002, Bayer has moved a transaction volume of C 42 billion.
It acquired businesses for C 28 billion (e.g. Schering and Aventis CropScience)
and sold parts of its portfolio for C 14 billion (e.g. divesting its classical chemical
business).
x = % of group sales
50% Health Care
20% Crop Science
Health Care 30% Materials
50% CropScience
Polymers
Polymers 50%
75% Chemicals
Chemicals
Pharmaceuticals
25%
CropProtection
90% Chemicals
Pharmaceuticals
10%
CropProtection
Chemistry
Biology / Physics
7 Focus (2008).
178 A. Moscho et al.
Divested Invested
– Diagnostics
Schering AG +
– Plasma
HealthCare – Roche OTC +
Bayer Generics
– Household insecticides Topsun OTC +
– BCS Antitrust requirements HealthCare
CropProtection Citracal +
47%
– Rhein Chemie Pritor Europe +
Polymers – PolymerLatex Levitra ex-USA +
H.C. Starck – divested
Wolff Walsrode – divested Aventis CropScience +
CropScience
Stoneville Cotton Seeds +
19%
Lanxess – Spun-off Gustafson Seed treatment +
8 Ibid.
9 Ibid.
Implementing Change Management Successfully 179
In a literature review Pardo del Val and Fuentes (2003, p. 148) define organiza-
tional change as follows: “Organizational change is an empirical observation in an
organizational entity of variations in shape, quality or state over time, after the delib-
erate introduction of new ways of thinking, acting and operating. The general aim
of organizational change is an adaptation to the environment or an improvement in
performance.”
This definition highlights that deliberate actions are undertaken in order to
achieve an improvement, and that corresponding changes in organizational struc-
ture and processes, as well as performance are a result. These changes can then be
empirically observed.
In this context “change management subsumes all the measures that are nec-
essary to initiate and implement new strategies, structures as well as systems and
behaviours”,12 therefore resembling what is done in order to achieve that deliberate
organizational change.
Top management usually is the dominant coalition within the organization which
determines organizational goals and objectives, influences decision-making pro-
cesses, shapes the organizational structure, formal procedures and influences the
reward systems.13 It designs the organizational structures which in turn facilitate
or hinder certain processes. With its preferences for certain approaches it moreover
gives strong implicit and explicit signals to all employees as to which practices are
favored. Explicitly or implicitly, it communicates its preferences as vision, intent or
during social interactions with employees. Therefore it shapes a great part of the
content of the shared mental models existent in the organization, determining how
people communicate and what is communicated.
Therefore, the communication of a clear vision of the future state is impor-
tant to initiate change successfully.14 To overcome possible resistance to cultural
change, employees have to be well and timely informed about the changes as well
10 Ibid.
11 Ibid.
12 Al-Ani and Gattermeyer (2001), p. 14.
13 Hofstede (1981).
14 Also confer Schein (1995) and Schreyögg (2000).
180 A. Moscho et al.
as the goals to be achieved, and should ideally have a strong individual performance
orientation.15
In order to explicitly foster change processes, management can take measures on
the organizational and the individual level.
On the organizational level, structures, processes and personnel have to be pre-
pared, and aligned with appropriate and management systems in place that set the
right signals.16 Organizationally, the desired behavior and attitudes can be visibly
promoted with the help of change agents within the organization.
Another important topic is the establishment of the necessary formal and infor-
mal communication channels.17 Here, technological communication channels are
not only referred to but also create opportunities for direct face-to-face interaction.
This personal interaction, especially in groups,18 can serve as a powerful way to
maintain the necessary trust and to facilitate the evolvement of the desired shared
mental models.
On the individual and group level, individuals and groups already within the com-
pany have to internalize the change content, while newly incoming members of the
organization have to demonstrate a basic fit with its requirements. The latter can be
accomplished by appropriately defined HR hiring profiles. Newcomers can receive
training to ensure they have the necessary methodological and analytical know-how,
are informed about the organization and processes within the company.19
In considering which instruments have to be applied for successful change, gain-
ing an overview over the situation at hand in which to apply these instruments is
vital. For this purpose the “consensus matrix” is shown in Fig. 4.20
The first dimension refers to how much consensus exists among employees about
what they want to achieve (e.g. which goals do they have, which priorities do they
set, how much effort do they invest in achieving the intended results?). The second
dimension refers to how they want to achieve it (e.g. which cause and reaction chains
exist and which measures can be taken).
Christensen et al. (2006) propose that it depends on the situation of the com-
pany which instruments will work best, and they differentiate between the four
general approaches power (e.g. rules and role definitions), leadership (e.g. charisma
and role modeling), management (e.g. measurement systems and standardized pro-
cesses), corporate culture (e.g. democracy and behaviors) and mixed/overlapping
instruments (such as visions, negotiations and financial incentives).
The issue of establishing consensus is amplified, when it is not only one com-
pany with potentially different subcultures, but two companies, as in the case of
Broad consensus
Charisma Folklore
Salesmanship Religion
Rituals
Vision
Leadership Culture Tools
Role Modeling Tools Tradition Democracy
Apprenticeship
Negotiation Strategic planning
No consensus
Training
No consens Extent to which people agree on cause and effect Broad consensus
Fig. 4 Cooperation instruments within the consensus matrix, adapted from: Christensen,
Stevensen, and Marx (2006) p. 30
essential to maintain the cultural core of Bayer with the values: A will to succeed; a
passion for its stakeholders; integrity, openness and honesty; respect for people and
nature; as well as sustainability of its actions.23
In order to master the insecurity that comes with such change for the employees,
this process was accompanied by intensive discussions with the employee represen-
tatives. As a consequence, plans could be turned into reality relatively smoothly,
also because established processes could be maintained during integration of the
new companies, establishing more security. At the same time and in order to perma-
nently learn, it was thoroughly analyzed which processes could be taken over from
the newly acquired companies. By doing so, during the time of transition, insecurity
for the new employees could be replaced by the recognition of being part of a better
solution.24
What is essential to fostering this change sustainably is proof that the new sit-
uation is beneficial for the company – or expressed as “The best driver is always
success”25 by Mr. Wenning with regards to how improved performance was a result
of the changes. Indeed, for five and a half years Bayer was able to improve its
quarter to quarter performance and employees were given the chance to participate
in this by changing the remuneration system to become more performance-based
(only altered recently by the world economic crisis).
Also, surveys are regularly performed to establish an overview regarding how
employees perceive the situation and to get their feedback on topics such as “The
values and leadership principles of the Bayer Group are quite clear to me/have my
support/are very important for my daily work” or “The compensation system is
transparent” and results of these surveys have been continuously improving.26
In the following paragraphs, the Schering integration will now be taken to illus-
trate Bayer’s approach to change management in more detail. As already mentioned
earlier, post-merger integration represents the ultimate change management chal-
lenge,27 making it a very interesting scenario for illustrating the approach in more
detail. The Schering acquisition is quoted as Bayer’s largest acquisition in the
company’s history until today.
Like Bayer, Schering was also a traditional German company operating inter-
nationally. The merger of Bayer and Schering started in March 2006, when Bayer
had the chance to act as a “white knight” for Schering, after Merck KGaA had
launched a hostile takeover. Financial markets were surprised how fast Bayer pro-
ceeded not only with the takeover itself but also with the preparations for the Post
Merger Integration (PMI), which started in parallel.28
23 Bayer (2008b).
24 Focus (2008).
25 Focus (2008), p. 12.
26 Focus (2008).
27 Galpin and Robinson (1997).
28 Courth et al. (2008).
Implementing Change Management Successfully 183
To illustrate the complexity of the consolidation and optimization effort, here are
a few numbers concerning this undertaking:29
Less regarding the complexity, but more the sheer dimensions of this undertak-
ing, here are a few key figures: The consolidated sales of the new Bayer Schering
Pharma AG were approx. C 7.5 billion in 2006. The number of employees involved
was the sum of about 16,900 employees from Bayer’s pharmaceutical division and
about 25,000 employees from Schering.30 The phases of the Post Merger Integration
project are shown below (see Fig. 5).
The project organization reflected a number of deliberate considerations for suc-
cessful change management (see Fig. 6 for an overview of the project organization).
For example, an Integration Champion was appointed.
The program management decided to treat “Day One” (the legal entity imple-
mentation in each country) as a key milestone, and in order to prepare this, weekly
Global PMO (Project Management Office) lead calls with 60 participants were
Fig. 5 Phases of the post merger integration. Source: Courth, Marschmann, Kämper, and Moscho
(2008) p. 10
Steering
Steering Committee
Committee
Integration
Integration Champions
Champions
Global PMO
Communication
Communication Synergy
Synergy &
& Fin
Fin Mgmt
Mgmt Integration
Integration Process
Process Legal Review/Support HR/Org.
HR/Org. design
design
Regional Corporate
Corporate Admin
Admin and
and Product
Product
Research
Research &
& Development
Development Business
PMOs Supply
Supply (BACKBONE)
(BACKBONE)
PMO Europe Research CMC Business Units Finance&Treasury Board Support
Fig. 6 PMI project organization at Bayer Schering Pharma. Source: Courth et al. (2008) p. 11
Analysis Measurements
Input Employees
(Interviews & Employee Survey
Definition of
Focus Groups) Bring New BSP
BSP Behaviors Culture to Life
Science For
A Better Life
Underlying BSP Values,
Link to business practices,
performance mgmt
Leadership Principles
34 Focus (2008).
186 A. Moscho et al.
Focusing on
Customer Needs
f
el
s rs
De
er u
th Yo
liv
er
O g
in
& pin
g
o
Re
el
ev
s
ul
D
ts
Living our
Lead
Values
ex g
pl in
ity
ing P
m m
Co erco
eople
Ov
Pa
rtn ing ly
er ink l
in
g Th gica
t r ate
S
the cultural spread between the companies (Fig. 10). “B” stands for Bayer, whereas
“S” shows the respective scoring of Schering.
As can be seen, there was a considerable need for changing to a single shared
corporate culture. The one trait most consistent between them at that time was that
both showed a similar customer focus.
Then, the implementation phase followed, which tackled turning the shared BSP
culture into reality. The behaviors that were defined and guide BSP’s behavior today
Decision-
Making
Slow S B Fast
People-
Mindedness
Low B S High
Customer
Focus
Weak B S Strong
are: (1) Be Decisive, (2) Customers First, (3) Communicate with Integrity, (4) Live
our Commitments, (5) Challenge the Status Quo, (6) Partner across Boundaries, (7)
Strive for Success.35
Figure 11 summarizes the change process for the cultural transition from two
distinct cultural profiles towards one shared BSP culture. This comprised the imple-
mentation of vision, values, principles and expected behaviors. On the one hand,
processes, structures and the allocation of resources were aligned, and, on the
other, cultural change was managed. The new community was built by enhancing
competencies and adjusting behavioral patterns.36
Considering what was said earlier regarding the consensus matrix it has been
crucial to establish a shared understanding regarding the “what to do” and “how to
do” of the newly established entity Bayer Schering Pharma. The thorough approach
chosen helped to prepare a holistic and sound basis for future management.
Concluding on the Bayer-Schering integration case, it is important to mention
that not only Bayer has had the opportunity to experience and learn from several
significant acquisitions and integrations during the past years. Moreover, it deliber-
ately chose to retain this knowledge by promoting its conservation within specific
organizational units, like the Business Unit Business Consulting.
In these terms Bayer’s inhouse consultancy, Bayer Business Consulting, acts
as an internal service provider and knowledge pool for capabilities crucial to
the Group. One business unit of the service company Bayer Business Services
GmbH (Fig. 12 provides an overview of its organization) Business Consulting has
been growing significantly during the last 3 years and now comprises about 100
employees, in three offices – Leverkusen, Shanghai, Wayne (NJ) and Pittsburgh.
Action
Structure BSP
Formal VISION
Organization VALUES
Strategy BEHAVIOURS
Processes
Infrastructure /
Systems
Culture
Leadership
Mental Models / Behaviour
Competencies / Capabilities
Mobilization
Learning Organization
Status Quo Self-description
Image/Identity
Time
35 Bayer (2009a).
36 Bayer HealthCare (2007).
188 A. Moscho et al.
During the past years, Bayer has lived through a major transformation. With the
consolidation of its business to three subgroups, the organization was subjected to
a tremendous change structurally. At the same time, the employee base was greatly
transformed, putting even more strain on the successful management of maintaining
a shared corporate culture. Today, the company is successfully positioned to face the
relevant challenges of the 21st century.
Considering how the experience and knowledge regarding successful change
management is retained within the organization, it affords an interesting opportunity
Implementing Change Management Successfully 189
for further research to study this deliberate creation of a change management capa-
bility in more detail. In particular, an analysis showed how such internal change
management capabilities compare with externally integrated change management
capabilities performance-wise and, as could be reasonably assumed, if this is con-
tingent upon the type of project (e.g. acquisition versus internal reorganization), as
well as industry and the size of operations.
Concluding, Bayer strives to be a dynamic, learning organization and has created
certain “repositories” for knowledge and abilities to react fast in handling challenges
as efficiently and effectively as possible. In creating this collective knowledge and
developing it further, Bayer is able to strengthen its ability to behave strategically as
a prospector.
As a company committed to value creation and rigorous value management,
portfolio management will continue to play a crucial role within the Bayer Group,
aiming to further strengthen its market positions through strategic acquisitions and
alliances.37 With upcoming challenges such as the growing world population and
climate change, decreasing arable area per person worldwide,38 and demographic
change, change management capabilities broadened over the past years have much
potential to be put to good use.
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