Why layoffs are a bad idea for big pharma

images4I’m not sure that any other industry has been hit as hard when it comes to layoffs as the drug industry.  Since 2000, the pharmaceutical industry has cut 297,650 jobs, according to consulting firm Challenger, Gray & Christmas. For reference, that is about as many people as currently work at the three largest drug makers — Pfizer, Merck, and GlaxoSmithKline — combined.  In my opinion layoffs may be good for the balance sheet in the short term, but strategically they leave the drug industry with a void in talented people.  I’m not sure if the drug industry can ever recover from such a heavy handed tactic.

Why are layoff’s a bad idea ? (Harvard Business Review)

[inlinetweet prefix=”” tweeter=”” suffix=”null”]Most managers underestimate how much disruption layoffs create[/inlinetweet]; they consume everyone in the organization for at least a year. Managers also typically overestimate the savings they will achieve and fail to understand that even bad recessions usually end more quickly than people expect.  To understand that reasoning, look at what really happens when you do layoffs. Each person laid off gets, on average, about six months’ worth of severance pay and outplacement services. So in essence, it takes six months to start saving money.


While it’s true that our current health care business model is broken and in the midst of the biggest transformation in history what really has to change is the organizational structure not just laying off people.  The drug industry desperately needs smart, innovative people who care more about what they do than their title of paycheck.  We need people who are willing to challenge the status quo and think of patients first while understanding that every dollar we spend has to provide real business results.   What we need less of are agency people who go from agency to agency in pursuit of new job titles and higher compensation packages with the promise that can rope in some big pharma clients.  Give me agency people who have actually launched and worked on a drug rather than people who spent a short time with a drug company and left to pursue a better title.

I know that there are some very good people working within the drug industry who are smart, savvy and care about what they do.  I also know that talented people would have to have a screw loose to want to work in an industry that casually lays off thousands of people as soon as drugs come of patent.  It might help the balance sheet in the short term, but strategically it could cripple an organization forever.