The Candy Tree – third article in a series dealing with the challenges faced by life science companies in Israel.
Although the innovator of the technology will always have the most knowledge in the specific field, their involvement in operational management is invariably unsuccessful, whereas their academic development is most beneficial to the company. In the light of this challenging circumstance, companies and entrepreneurs may find it difficult to sustain the working relationship, although sometimes either or both, agree to find a way to work together for the benefit of the company and together are able to realize the entrepreneur’s dream.
When our daughters, Nurit and Galia, were little, they slept in one room, beds alongside each other. Nights when I was not traveling or too tired after work, I would sit between them and tell them a bedtime story, not read from a book but tell it, as all the stories
were from my imagination. The stories would change from one evening to the next and if I were asked to tell one of them again, I would miss or add details and they would say, “Mommy, it’s not the same story”, and they were right.
They especially loved the following story about the Candy Tree.
In a forest amongst all the trees, grew a candy tree. Like other trees, it had a trunk and branches and leaves but instead of ordinary fruit, in this tree the flowers became candy, and every night the type of candy changed. On each branch there would be sour candy, wavy waves, marshmallow and more … as far as the imagination can extend.
The story ignited their imagination and they would ask if it was a real tree, how could sweets grow on a tree? How they actually grow and of course, if we could grow a few Candy trees in the yard?
At the same time, but in another home, a scientist told her children a story about the Magic Tree on which grow small molecules that heal diseases.
Her story began with a small laboratory in an Israeli university, a group of scientists received interesting results in a number of experiments they had conducted to understand a certain mechanism central in understanding cancer. This, of course, came after years of laborious but gratifying work. With a common desire, investors found the technology worthy of further development in the industry. A special contract was signed, and along with constant hardships and bumps in the road, a company was founded, with offices, laboratories and a CEO. The scientist behind the technology, and the entrepreneur of the company, continued to work at the university and later joined the company. One or two scientists from his laboratory also joined the company and so the journey began.
Along this same lines as the technological entrepreneur, we sometime perceive the CTO of a company.
He/She is the man/woman who dreams the technology, is sufficiently creativity, a scientist of note, has determination, no limitations, the person with the most knowledge in the required field, the main figure who dreams the technological dream. His role in the company is to move the technology forward.
How do investors and managers perceive the company’s entrepreneur?
A person with a strong scientific ability, no management skills, often a controversial personality, difficult to manage, not someone able to stick to a work plan, needs supervision and management. In short, someone short-term that, if everything works, will remain or if not, will pass the knowledge to the next person, and move on.
When to recruit an R&D manager for the company and what is the role compared to that of the entrepreneur?
The R&D manager must be a scientist, who, unlike the entrepreneur, must have the ability to prepare and manage a development plan according to industry standards. Should be a good administrator rather than an inventor, whose role is to promote the company and can at any given moment move aside the company’s technology entrepreneur. The R&D manager’s aim is to transfer the knowledge from the entrepreneur’s mind into the company, so that it is possible at any time to separate from the entrepreneur, and the company continues to work as if the technological entrepreneur was never there.
What happens in reality?
What is written above is, of course, a generalization. There are managers and investors who understand the importance of the company’s technological entrepreneur and strive to keep the entrepreneur and even if things are not always simple, this is a cost-benefit consideration for the company.
Others “move” the entrepreneur aside already in the early stages, sometimes even denying him any part of the pie.
Recruitment of a CTO to the Company
This is one of the toughest recruitments, because one must seek someone with the same skills and knowledge as the entrepreneur – scientific creativity and leadership, and someone who will continue to dream the dream from where his predecessor left off. This is of course, not a simple task.
3 stages in a Company’s life-cycle
The first stage is the entrepreneurship stage – the entrepreneur is the core of the company, his major responsibility is to initiate and develop the company.
The second stage is the development stage – the entrepreneur (as the CTO) works alongside other managers in the company, his major responsibility support the R&D manager to develop the product for validation, namely – clinical trials of the company produce.
The third stage is the commercial stage – the entrepreneur is assisting in problem solving and to start the research of the next generation/application.
a significant number of Israeli companies in the field of Life Sciences fail to bring the technology to the commercial stage. Technological failures and years of unsuccessful development are the destiny of many companies.
The role of the managers and investors is to preserve contact with the technological entrepreneur and to support him to invent and solve technological problems. At the end of the day, if the company succeeds, the entrepreneur’s personal, emotional and economic efforts should be adequately rewarded. He should be an essential part of the company’s success and to realize its dream.
Insights from recruitment processes conducted over the last year
…From one spring to the next…
Which is more important in management – experience or leadership?
It is of course best to have both. Does the life sciences market in Israel suffer from a lack of managers who are leaders, with experience in management and global management? In any area, one could indicate a lack of knowledge, experience and managers. A company in the medical field with the scope of $10 million per annum, seeking a CEO to lead it to sales of $30-50 million, will find that the number of managers in the medical industry, who have accomplished such a feat, is relatively small. A company seeking an R&D manager who has led an innovative medication from idea to market, will also find itself with a limited selection of good managers to choose from.
However, the option of relocating activity outside of Israel poses significant challenges too.
2016 was a year in which companies in the pharma and medical devices area transferred various positions outside of Israel, including company CEOs, sales and marketing management, clinical studies management, medical management, regulation, and even setting up full R&D activity parallel to or instead of that conducted in Israel.
It may be said that in almost all areas of activity of companies developing medical technologies, there are examples of those who have opted to conduct part or all of their activity outside of Israel.
However, these transitions are not always functional or stem from a lack of suitable manpower. They are sometimes part of a company’s strategy; for example, as preparation for sale, steps toward public issue in the USA, or launching products in the American market.
Decrease in bodies investing in life sciences in Israel
The trend in recent years of decrease in local investment in pharma and medical devices necessarily compels companies to mobilize capital from outside of Israel. Investors from the USA and other countries prefer to have the location of activity and especially company headquarters, closer to them. A board of directors consisting mainly of non-Israelis often helps the company to gain achievements; the downside to this is the intense pressure placed on companies to build an American management.
Willingness of companies to initiate activity in the USA
This kind of activity requires a great deal of financial staying-power, an understanding that the recruitment of the first executive in the USA will lead to the establishment of a local team, and that measuring the results of such moves requires patience and accuracy.
Mainly, it requires managers and investors with the experience and ability to build a strategy, and allocate the appropriate resources in order to achieve it. This usually involves running long-distance.
The million-dollar question: why not sell?
Even companies taking their first steps in Europe or the USA, are required to set sales goals. Many company executives have limited experience in managing companies that have achieved significant sales, and even those who have, are still dealing with markets in which the health systems are dynamic and subject to change, with difficult, uncertain regulation.
In recent years, all of these variables have coalesced; hence, this genuine difficulty in making sales is the lot of many managers in the medical industry.
Many companies prefer an Israeli executive to manage their European markets, mainly due to the shorter distance involved in recruiting an executive in Israel, as well as easier bridging of the culture gap. At times, companies’ budgets are very limited but recruiting one manager in Europe to cover several regions is not simple. If unsuccessful, there is no lack of excuses or real reasons for it’s failure; if successful, the company is at high risk, having all its sales reliant on only one person.
If a local manager is recruited, regardless of the target market, it is extremely important to understand both parties’ expectations, and to find the right person for the startup, one capable of handling the stress of introducing an innovative product into the market. A suitable manager who is easy to work with would probably be a better proposition than an unsuitable manager with the right connections. Nevertheless, time is money; hence, it is necessary to examine how to work with and support a culturally suitable manager for an organization that is not successful at generating sales.
For startups that are public companies entering the commercial stage, the pressure from the shareholders on company executives is increased, and the challenge to generate sales is enormous. The first few years are very difficult when the information is public, and only outstanding managers survive both the internal and external challenges.
High requirements and meager resources or executives from the Y generation
Companies with scant resources recruiting executives, attempt to consolidate functions, placing several areas of responsibility upon the employee/manager for which remuneration is not always proportional. A manager of clinical trials in Europe must spend 50 percent of his time abroad; a sales VP must spend 70 percent of his time traveling. Call this the Y generation, but it may very well be that we have lost the ability to recruit executives willing to work hard for low pay, with only the technological challenge and desire to save the world, to motivate them. Hard, challenging work must be rewarded; companies compete for human resources, and only outstanding executives are capable of maintaining high motivation among their team over time, as required in the world of medical technology. In addition to management, remuneration is a significant factor in the ability of companies to attract and retain good employees.
Conclusions, comments, and food for thought
We see that in Israel we have talented, highly experienced managers. Recruiting good managers demands accuracy, the ability to view a wide range of options, and a great deal of daring, creativity and imagination.
If a company seeking an R&D manager with experience in managing the development of an oncology drug, insists on many years of experience in developing drugs in this area, will encounter a limited choice of candidates in Israel. On the other hand, a company that decides to recruit a gifted manager with experience in developing drugs, and supports him with advisors on oncology, will have a considerably broader choice of candidates.
A Biotech company seeking a CEO who has mobilized $15 million and cut a deal with a large pharma company, will have a relatively easy time recruiting a CEO in Israel with the experience and achievements required in the medical device world, thus considerably increasing the number of eligible candidates.
Companies who are not creative and imaginative in their recruitment and recruit foreign executives, not as a planned strategic move, but rather out of necessity, will find themselves faced with a considerable managerial and economic challenge; probably greater than the knowledge gap a local executive would need to bridge, and without taking into consideration the adverse long term effect this would have on the industry.
Organizations can only succeed if their employees are successful.
Employees can only succeed if their managers are successful.
“An organization’s strength is as strong as the weakest link in the chain”
Much has been said about the fact that the reason that the life sciences industry, in all its forms in Israel, does not maximize its success, is a lack of suitable managers and, if in the past it was still possible to hide behind unsuccessful technology or investors who do not understand the business, today it is widely known and denoted that the primary failure in the industry lies in management.
Replacing a Manager in the Organization
Most CEOs/Department Managers, especially of a complex organization, at some stage encounter the need to dismiss an employee in managerial position. Invariably this process is put off for various reasons. In some cases the manager proves unsuitable after a long period and already a good report has been established, or sometimes the manager is under the impression that he is “irreplaceable”. But one of the main reasons for avoiding replacing a manager is the fear of change and of the effects of the change on the organization and staff.
Replacing someone in a managerial position is costly, expenses including the recruitment process itself, the direct (and indirect) costs of dismissal and the absorption and training of the new manager.
Nonetheless, leaving an unproductive manager in the position is detrimental for both the organization and the employee. The manager will feel the dissatisfaction and become frustrated; his depreciating self-confidence will result in anger and mismanagement which in turn will lead to additional dysfunction in his position and in the company.
The Timing of Replacing a Manager
From experience, most managers agree that the replacement process for a managerial position should be instigated 8-12 months prior to replacing the employee.
Very often it is a long time before we realize that the lack of success of the program is the result of unsuccessful management. From this moment, it will be some time before the manager is replaced (unless a crisis occurs or the failure is severe, demanding immediate action). In these cases the CEO/Division Manager will invariably be accused of procrastination, which in the best scenario, will lead to only minor financial detriment to the organization.
The process of Recruiting a Manager into an Organization
Whether looking to replace an employee in a managerial position or to employ a new manager, the managerial recruitment process is a long one.
Commencing with a definition of the precise requirement, the CEO/Division Manager should define what the organization needs at the moment and whether the profile is similar to that of the outgoing manager? Has the essence of the function undergone change with time and the dynamics in the organization? Specific requirements and demands are systemically listed and the search begins.
Generally, the organization will commence its search privately and only after some months with no success, will approach a Recruiting company. The average time taken for an organization to examine what is available in the market (they invariable recruit candidates who are looking for work and who are not necessarily the most suitable) is 4-6 months. The average duration of the recruitment in the Executive Search process is between 6-8 weeks; given a short internal process at the organization, the recruitment process would end within 10 weeks
All this results in 7-8 months delay from the date on which it was decided to replace the unsuitable manager. Further delay of up to 3 months, will occur if the successful candidate needs to give advance notice before leaving his place of employment.
Total: 14 to 20 months of unsuitable, unsuccessful management and a very high financial investment, with very little return!
Window of Opportunities
Organizations in the life-sciences field take many years to develop technologies and they have a very restricted window of opportunities – limited resources and competition overriding knowledge and money.
Professional, efficient and especially, rapid replacement of unsuitable managers would definitely promote the companies’ chances of survival and success.
We would be happy to assist in the process of examining the human resources in your organization, in development and consultation with managers and in recruiting suitable managers for the organization.