Pfizer to close Ann Arbor research facility

According to many news sources, including the New York Times and the Detroit Free Press, Pfizer's worldwide cutbacks announced monday include shutting the entire Ann Arbor research facility, which directly employs 2100 people. Pfizer is also the largest taxpaying company in Ann Arbor.

Detroit Free Press:
Pfizer Job Losses are Blow to Ann Arbor
Jan 23, 2007

Ann Arbor, which has been a bright spot in Michigan's bleak economy, got a taste Monday of what the rest of the state is going through.

About 2,100 jobs will be gone. Pfizer's 2-million-square-foot research hub will become empty....

But many workers are expected to follow their Pfizer jobs to other states. The company plans to transfer up to 70% of the jobs that will be displaced in Ann Arbor.

"I think the worst effect is that it essentially undermines our efforts to diversify our economy away from the auto industry," Grimes said. "We just took it on the chin in the area that we wanted to go into."

The city and state's tax rolls will take a hit, too.

Pfizer is Ann Arbor's largest taxpayer. In 2005, the company paid $4.5 million in taxes to the city, or 6.2% of the city's $72 million in tax revenue. That year the company paid $12.6 million in taxes to state and local governments.

The New York times reported:
Pfizer, Hurt by Rival Drugs, Will Lay off 7800
Jan 23, 2007

Pfizer said yesterday that it would cut 7,800 workers, close several manufacturing and research sites and overhaul its business practices in hopes of coping with competition from cheaper generic drugs and setbacks in developing new products.

The new layoffs are in addition to 2,200 that Pfizer announced last month, when it cut its American sales force by 20 percent. The 10,000 job reductions, involving all parts of the company around the world, account for about 10 percent of Pfizer’s global work force.

The cuts will include closing a plant in Brooklyn that employs 600 people, and research sites in Michigan employing about 2,400 people. [Page C6.]

In the Ann Arbor News, the layoffs were associated with a need for a culture change, although the direct reference to Pfizer was missing.

A critical point here, that is not made explicitly, is that even extraordinarily good research staff can be "neutralized" by a wet-blanket culture that discourages exploration and innovation.

It is not sufficient to have great people, and even great research facilities, which Pfizer did - a company must also have a great innovation culture, which apparently Pfizer did not. If that's true, it's not a reflection on the staff, but on management's failure to shape the culture.

As with the rest of "system thinking", where "blame" is more correctly pointed at "the system" not the hapless worker who was last on the causal chain, we have to ask if closing the research facility is tackling the correct problem. We can recall the worst performing engine manufacturing plant that GM had that was taken over by, I think, Toyota, which changed
under a dozen top people, and became the best performing engine planet in the world.

You have to wonder what would motivate Pfizer top management to care, a broader problem with CEO "compensation" in the USA today. According to the Ann Arbor News, former CEO Hank McKinnell departed in July, under pressure, following a 40 percent slide in Pfizer stock prices - and "left with what could easily be described as a $83 million golden parachute."



The article on page D1 of
The Ann Arbor News
Jan 22, 2007
Pfizer's test: changing the culture
by Mary McDonough

Pfizer has been open about the need to change its bureaucratic culture. Top-ranking officials have often been quoted sayign the company can't cost-cut its wayt o innovation and instead needs to encourage its people on the R&D side to discover new drugs more quickly.

One local life sicences entrepreneur told me [that a Pfizer folks ] aren't encouraged to "think outside the box".

How important is company culture?

Ann Arbor based Denison Consulting, which attempts to quantify exactly that, released its newest study Friday. ...

The Denison Consulting report PR Newswire summary can be found at
HRMarketer.com
Latest Study from Denison Consulting Determines that Companies with High-Performance culture deliver...

ANN ARBOR, Mich., Jan. 25 /PRNewswire/ --

According to the latest research conducted by Denison Consulting, companies that demonstrate higher levels of performance in key areas of organizational culture -- including adaptability, consistency, mission and involvement -- tend to deliver better results in return- on-assets, sales growth and shareholder value.

"It's possible to measure, monitor and influence organizational culture, and we have developed scientifically valid tools to accomplish such vital tasks," said Dan Denison, who co-founded Denison Consulting, along with his business partner Bill Neale, in the 1990s. The company, with headquarters in Ann Arbor, Michigan, also operates offices in Zurich, Switzerland and Shanghai, China.

Experts in organizational development, Denison and Neale have created survey instruments that have been used in North America, Europe and Asia to help businesses improve their results. During the past 10 years, more than 4,000 organizations have polled their employees using the Denison Organizational Culture Survey (DOCS), a tool for diagnosing organizational culture and performance.

Ryan Smerek, a research analyst at Denison Consulting, led the most recent study. He examined data from a sample of 102 companies that had deployed the DOCS survey between 1996 and 2004. Businesses that achieved the best scores in the poll were compared with those earning the lowest scores in the survey. In effect, the top quartile -- or 25 percent of the sample -- was contrasted with the lowest quartile group.

Companies with the best organizational culture scores earned an average return-on-assets of 6.3 percent, vs. 4.5 percent for firms with the lowest organizational scores. The top-quartile firms achieved average, one-year sales growth of 15.1 percent, as compared with .1 percent for the lowest-quartile group. And companies with the best culture scores also led in shareholder value, with average market-to-book values of 440 percent as compared to 350 percent for firms with the lowest culture scores. (A company's market-to-book value is the ratio of the market price of its shares over its book value in total equity.)

"These results represent a dramatic affirmation of the importance of organizational culture, and its link to real-world business results," said Smerek. "The companies that achieved higher scores on mission, consistency, involvement and adaptability earned $6,300 for every $100,000 in assets, while those with lower cultural scores earned $4,500 for every $100,000," he said. "That's a huge difference -- a return-on-assets difference totaling 40 percent."

Researchers at Denison Consulting also took a longer-term look at the 102 companies in the sample. During a three-year period, the firms with the best organizational culture scores significantly outperformed their industry peers, as well as the companies with the lowest organizational culture scores, in all three outcome areas -- return-on-assets, sales growth, and shareholder value.

A previous study by Denison Consulting found that organizations with higher DOCS scores do a better job in satisfying their customers, vs. organizations with lower DOCS scores.

"Organizational culture is extremely important to business success, and the really good news is that it is not a soft science," said Denison. "With valid data on an organization's culture, we can pinpoint areas for improvement and predict the positive business results that are likely to be achieved with the right interventions and action plans."

Information on Dennison Consulting is available on-line. Even from the graphic on that website, one can see they're using the "clash of cultures" model - the circle on the right with 4 colors being the classic logo, as is the logo on the top left of the webpage.

Organizational culture is a core research focus at the University of Michgan's Ross School of Business.

An example of University of Michigan use of the Denison culture survey is available on-line. Slide 28 captures the key ideas:

• Build the organization around teams, not individuals.
• Require performance appraisals for everyone.
• Reward and promote people who build organizational capability.