Companies often talk about improving their gene pool and fire employees each year supposedly with that goal in mind. However, not all companies do a great job at that and it often is an exercise by managers to get rid of employees that they do not like. But why should this goal apply only to junior and middle-level employees. Why is this so rarely applied to top level executives.
Let us take the example of Merck. Raymond Gilmartin completely screwed up how he handled the recall of its blockbuster drug Vioxx. Not only has he destroyed over $25 billion in shareholder value, he might very well be responsible for laying the foundation of an eventual bankruptcy. But it took the Merck's board of directors over seven months to recognize that a change in the external environment required a change in management.
Merck's board has failed again by appointing a Merck insider as the new CEO. Improving the gene pool generally means bringing some fresh blood. If Gilmartin will continue to be an advisor and the board will be involved more actively in management, can we expect any change in Merck's strategy? Probably little. Plus, the new CEO is neither a strategy guru nor someone who is known for implementing strategy. What Merck needs is a business model transformation but what it gets is someone who can only streamline its operations.
What about Pfizer?
Hank McKinnell, the current CEO of Pfizer, might very well be a clone of Gilmartin. He has repeated and continues to repeat each and every mistake committed by Gilmartin. Pfizer is going through the same drama that Merck is going through except for the six-month time lag due to the difference in the timing of the recall of Bextra.
This may be a wakeup call for Pfizer's board as well to ask McKinnell to let someone else set the strategy for the company. Enough shareholder value has already been destroyed at Pfizer.
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