Never Easy

Never Easy

One of the most difficult tasks by any company during right sizing is how to do this without creating collateral damage. The reality is there is no way this can be done without creating collateral damage no matter how hard a company tries. Let’s face some of those pesky facts again, management for the most part thinks sales people are lazy and overpaid. Sales people for the most part think management are a bunch of clueless no nothings who spend most of their days worried about what color the toilet paper is in the executive restroom. Sales people want to sell and get tired of being judged on anything else but sales. Management basically doesn’t trust sales as they never sold a damn thing themselves so they no idea what a sales person goes through each day.

Here’s the truly sad part when it comes time to right size typically it’s the sales people who get the ax while management if they do get the ax also get a nice fat severance package. This scenario is playing out right this very moment at Novo Nordisk (NYSE: NVO) who will be reporting earnings this Friday.

As we’ve been noting of all the companies in the diabetes drug space Novo has one of the most difficult job. They are up against their arch rival Lilly (NYSE: LLY) in the insulin and GLP-1 markets. They are up against a wounded and desperate Sanofi (NYSE: SNY) in the long-acting insulin market. While GlaxoSmithKline (NYSE: GSK) and AstraZeneca (NYSE: AZN) are competing in the long-acting GLP-1 market which is blunting Victoza sales growth.

In the past Novo followed a very simple and very successful philosophy, build premium products which in turn received premium reimbursement. Rarely if ever did the company lay off any sales people and often adding more when everyone else was subtracting. Yet as we all know the world has changed dramatically and the company finds itself in unfamiliar territory. While still producing premium products, they are no longer receiving premium reimbursement, far from it. The diabetes drug business has become a commodity business where price trumps performance.

To remain competitive management had little choice but to right size. Yes, we know this hurts but given the competitive dynamics of the market they had no choice.  And given the distrusting nature of the sales/management relationship there was bound to be some hurt feelings no matter how this was done. Listen there is no easy way to tell a sales person “Hey we’re very sorry that we screwed up and didn’t see the changes that were going on right in front of our eyes. Yep it was obvious to everyone else but somehow we missed it. Therefore, even though we didn’t give you all the tools you needed to succeed we’re going to throw you under the bus. Please turn in the company car and don’t let the door hit you in the ass on the way out. If you need anything don’t bother to contact me, we have a series of meetings coming and need to decide what color to paint the executive dining room.”

The reality is while Novo may be inexperienced at right sizing, it doesn’t make a difference it needed to be done.  Quite frankly there is nothing they could have done to lessen the sting, let’s face facts who likes getting axed. These people have families to support and mortgages that need to be paid. Even worse while some may get rehired the majority will not. Another pesky fact, pharmaceutical sales reps are not a growth industry especially when the pharmaceuticals they are selling have become commodities.

Lean and mean is the order of the day and sales people are just too expensive. Add in the fact that the role they used to play is being replaced by technology, throw in all the new regulations and well…..

As Momma Kliff used to say; “We know this isn’t easy. We know it’s hard to accept especially when the moron who axed you gets to keep their job. But look on the bright side no more ride along, no more stupid meaningless metrics or conference calls which only waste your time and take you out of the field where you belong. Remember as hard as this may be what comes around goes around.”