Bøllingtoft - Novo Nordisk: we should be responsible Cases on Management, Leadership and Organisations

Anne Bllingtoft

Novo Nordisk: we should be responsible

Anne Bllingtoft

Novo Nordisk: we should be responsible

From the book:

Knud Sinding and Anne Bllingtoft

Cases on Management, Leadership and Organisations, 1st edition 2012, chapter 15

1st e-book chapter 2013

Samfundslitteratur 2012

Cover design: Klahr|Graphic Design

Typeset: SL grafik, Frederiksberg

E-book production: Rosendahls BookPartnerMedia

ISBN: 978-87-593-9528-8

Samfundslitteratur

Rosenoerns All 9
DK-1970 Frederiksberg C
Denmark
Tlf: + 45 38 15 38 80
Fax: + 45 35 35 78 22
www.samfundslitteratur.dk

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No part of this publication may be reproduced or used in any form or by any means graphic, electronic or mechanical including photocopying, recording, taping or information storage or retrieval system without permission in writing from the publisher.

CHAPTER 15

NOVO NORDISK: WE SHOULD BE RESPONSIBLE

Some companies do a lot to define, develop and instil their core values in their employees, customers, suppliers, authorities and other stakeholders, but what are all those fine words worth, when reality bites?

At Novo Nordisk, they emphasise helping sick people, social responsibility in a wider context and earning money. However, its as if the first two elements overshadow the third a bit; and its not because Novo Nordisk needs an excuse for not earning enough money. Earnings are more than respectable, as is growth in the company.

Novo Nordisk was created in a merger in 1989 between Novo Industri A/S and Nordisk Gentofte A/S. The company develops, manufactures and markets pharmaceutical products and services. Novo Nordisk is one of the worlds leading companies in the treatment of diabetes and, in addition, holds a leading position in areas such as haemophilia care, growth hormone therapy and hormone replacement therapy. Novo Nordisks goal is to make a substantial difference for patients, treatment providers and society. The company is headquartered in Denmark and employs nearly 32,000 full-time employees worldwide.

The story of Novo Nordisk began in 1922, when August and Marie Krogh travelled to America. August Krogh was a professor at the University of Copenhagen and had been awarded the Nobel Prize in physiology. Marie Krogh was a doctor and researcher in metabolic disorders and she had type-2 diabetes. During their stay, the couple met two Canadian researchers who treated diabetes patients with insulin extracted from bovine pancreas. The method aroused great interest and the couple succeeded in getting a license to produce insulin in Denmark using this method. This was the beginning of the Nordisk Insulin Laboratory. Two brothers, who had previously been employed in Nordisk Insulin Laboratory, founded the competing Novo Therapeutic Laboratory in 1925.

In the following 65 years, both companies expanded. They established large research departments and competed against each other to be first with the latest products in the treatment of diabetes. Gradually, Nordisk and Novo also began to diversify their businesses and develop other products. Novo became the worlds leading producer of industrial enzymes while Nordisk developed medicine for the treatment of haemophilia and growth hormone disorders. Since the merger, the enzyme portion of the group spun off into an independent company.

Openness and communication get results

The CEO of Novo Nordisk is Lars Rebien Srensen. He came to Novo Industri A/S in 1982, and after having been around in both the world and the organisation, he took over management of the company after Mads vlisen in 2002. Forbes Magazine recently complimented the CEO for having transformed a sleepy pharmaceutical company into a global superstar. Forbes describes how Novo Nordisks sales as well as the companys market value have risen to new heights. Rebien Srensen gets a lot of the credit. Danish portfolio managers have suggested that Lars Rebien Srensen is Denmarks best manager. The CEO is rewarded for a high level of trustworthiness and for his ability to create growth and results. Professor Flemming Poulfelt, Copenhagen Business School, commented to a local Danish newspaper:

Investors look for payoff, and Novo Nordisk has long remained very high on the list. There have indeed been a couple of unpleasant cases as well, but no company operates without them. At some time or another, you will be hit by something, especially because you have to be right at the edge to be competitive. What matters is that you are capable of handling crises and maintaining credibility.

According to Rebien Srensen, one of Novo Nordisks tools is trend spotting. This tool is used to predict potential problems and opportunities in light of what is currently happening. Rebien Srensen explained:

If you have been able to identify the themes and have some views on them, so that, when they come up, you are mentally prepared and dont have to throw all of your management capacity into it, then you are at the forefront.

This applies to products that disappoint and never succeed, but also to Novo Nordisks policy on access to health in poor countries. Rebien Srensen says that Novo Nordisk has ended up providing insulin to the 50 poorest countries in the world at 20 % of the price charged by the company in developed countries:

It is just about the cost of making the product. Its no use giving the goods away. If we did, we would have no business.

Novo Nordisk was also among the first to publish the salaries of each member of management. Rebien Srensen says that this didnt happen for its own sake, but to be at the forefront of the business. It is the result of constantly increasing requirements for transparency:

You have to expose everything in the company, even if it doesnt always establish values, but sometimes it satisfies some level of curiosity.

He notes, however, that the trend is the same in the USA and other countries in which Novo Nordisk is represented, and thus it becomes an international requirement. The company has in addition to management salaries also been at the forefront of social and environmental reporting. Here too, it is not a question of being virtuous, but a question of whether its worth the effort.

If you are forced to disclose this information and do so late in the game, you wont get any credit for the disclosure. In fact, you will be credited negatively.

Social responsibility and sustainability

Lise Kingo is one of Novos top managers who, with the title Executive Vice President, Corporate Relations, is responsible for Novo Nordisks prominent position as a socially responsible and sustainable company. The message is that Novo must be managed according to the triple bottom line principle, which involves creating a balance between profit, social responsibility and environmental awareness. This is an integrated part of how Novo Nordisk does business alongside stakeholder engagement, which also plays a central role in Novo Nordisk. For many years, the company has systematically engaged various stakeholders to put focus on the important areas of the business. By involving all stakeholders in and around the organisation, Novo Nordisk is trying to understand its customers needs, and how these needs can be met. Long-term engagement with stakeholders is considered critical for the building of trust and understanding in a number of areas.

The involvement of stakeholders in the decision making process is considered to provide better decisions, and solution models that have a greater possibility of succeeding. Among Novo Nordisks most important stakeholders are people with diabetes and others, who are dependent upon the companys products, but also customers (for example public healthcare providers and payers), employees, investors, suppliers and other cooperation partners are considered important shareholders.