Vikas Bhadoria, Senior Partner and Vivek Arora, Associate Partner, McKinsey & Company, emphasise on the need to build a strong quality culture, which will lead to superior performance and can build a company’s reputation to world-class levels
Building and maintaining high-quality products and processes is top priority for CEOs across industries, more so in the pharmaceutical sector where the foremost objective is to ensure patient safety. Quality-related events have put several companies in a spot, impacting not only sales and market valuation but also their reputation.
Senior managements across companies emphasise that quality is their most important business objective, and highlight it in important internal and external stakeholder interactions. Companies have been making substantial investments in quality including remediation, in order to upgrade technology and infrastructure, build high-profile leadership teams, onboard domain experts and hire more resources.
However, non-compliance observations from recent regulatory audits, show issues similar to those flagged two-three years ago. While some of these are technical and relate to product quality and the reliability of standard operating procedures, others indicate gaps in day-to-day activities such as data management, investigations, material management, and other shop floor practices.
A closer look suggests that the managements’ efforts have not necessarily translated into mindset and behaviour change at the shop-floor. Only a few have been able to build a quality culture where everyone from the ‘top-floor to shop-floor’ takes ownership of quality and feels responsible for it. This requires shifting deep-rooted mindsets and behaviors which have been built over years.
Stepping back from pharma, iconic global companies attribute their inimitability to culture which is lived by everyone in the organisation. Google’s culture of innovation touches all of its employees, some of whom have generated ideas that have transformed the world of technology. Toyota’s culture of lean and continuous improvement makes it one of the most efficient and respected manufacturing companies.
Quality in pharma is no different. McKinsey’s empirical research done jointly with International Society for Pharmaceutical Engineering (ISPE) has established that culture is one of the biggest contributors to quality-outcomes in pharma. Sites with a strong quality culture have superior performance including fewer lesser product failures.
To understand what drives quality culture at pharma plants and corporate organisations, we used a comprehensive approach covering over 25,000 shop-floor workers, supervisors, middle-managers and senior executives.
The results were fascinating. Apart from a few company specific nuances, the big cultural gaps were similar for most organisations, varying only in degree of deviation from best practices. There were six common themes:
Low-capability workforce, high attrition and a transactional approach to capability-building: A large portion of operators and analysts do not have the capabilities to keep up with increasing complexity as well as regulatory expectations. Our experience indicates that attrition rates in manufacturing and quality control can go up to 30 per cent. Training is often conducted with a ‘tick the box’ mindset, focussing on compliance needs rather than building technical, functional and behavioural skills required for different roles.
Limited understanding of best practices and quality: Many shop-floor workers do not comprehend evolving quality guidelines and best practices. They lack understanding of common industry metrics such as ‘out of specification’, ‘out of trend’ and ‘process capability’, or their implications on day-to-day work.
Lesser focus on quality vis-à-vis cost and productivity: Our benchmarking of over 700 pharma plants globally, indicates that high-rankers on quality, also rank high on cost efficiency and productivity. However, on the shop-floor at some pharma companies, the commonly-held belief is the opposite. The workers believe that quality and productivity are inversely proportional and this feeling could be driven by disproportionate focus on delivering high volumes at low cost.
Fear of escalation to supervisors and management: We find that employees, who are closest to the product and machines, are often apprehensive about raising day-to-day quality issues to their seniors. This is either because of the fear of being held responsible, or the burden of getting things back in order. These problems are magnified as managements move away from the shop-floor and senior leaders spend less time solving problems on the ground.
Limited collaboration: At the plant level, some organisations do tend to work in silos, with limited interaction between the manufacturing, quality and engineering functions. This inhibits information sharing, as well as the participation in critical investigations that require cross-functional expertise.
Management behaviour: Quality is the top agenda in senior management discussions at external forums; yet the same leaders fail to demonstrate similar commitment and focus in their day-to-day behavior and interactions. Topics such as cost reduction and on-time delivery, get higher priority at times at the expense of quality.
Building a culture- What it takes?
Our experience of culture transformations across industries, suggests that more than two-thirds of such attempts do not fully meet the desired results. Organisations often fail to communicate an inspiring change story, and management behaviour is not supportive or does not reflect the change. Other reasons are insufficient allocation of resources, inadequate reinforcing mechanisms, and in some cases the employee’s inability to change.
Indian companies including some pharma players who have undertaken the culture-change journey, are trying to address these issues and the six underlying themes mentioned above.
Building conviction through the organisation: Aligning on a common goal of quality excellence is the first step in the culture-change journey. Successful companies use a multi-channel approach to communicate the change story. This could include setting a quality-focussed vision and communicating that through various physical and digital modes of communication (such as posters, videos), town-hall meetings, shop-floor huddles, visual statements of purpose and smartphone messaging.
Some companies have developed cross-functional forums where employees can regularly meet, share their experiences and discuss ways to improve quality. This helps create a broader base of change agents, who are committed to making a difference.
Demonstrating quality focus in day-to-day behaviours: Leaders of the organisation need to make behavioural adjustments to ensure they put quality above all else; particularly during interactions on the shop-floor. In management meetings of some companies, quality discussions are slotted ahead of other agenda and chaired directly by the CEO. Senior leaders go on ‘gemba walks’ to demonstrate commitment to quality and identify improvement areas, as well as have conversations with operators, and coach them on ensuring good quality in their work.
A very important cadre that needs to change behaviour is that of shop-floor supervisors. With a direct exposure to operators, it is imperative for them to create an open and transparent environment, so the latter feel comfortable about flagging issues. Building supervisory capability also helps improve operators’ day-to-day experience, and hence reduces attrition.
Making quality a priority across functions and reinforcing it through cascaded performance dialogues: So that quality is not just the responsibility of the quality-control function, quality- related key performance indices (KPIs) or key result areas (KRAs) need to be shared across all function-particularly those with a direct impact on quality such as manufacturing, R&D, and engineering. Performance dialogs covering quality need to start at the shop-floor, and go all the way up to the CEO.
With digitisation and automation in use more widely, companies have access to advanced analytics for real-time data monitoring and performance management. CEOs can monitor quality parameters on a particular machine, in real-time. These systems can create higher awareness of good quality.
Empower and enable the shop-floor to drive change: Organisations need to build capabilities of their workforce. Revamping training and capability-building practices is often an early requirement. In the short-term, workers and supervisors need capability-boosters in critical areas like- conducting high-quality investigations, ensuring sterile manufacturing environments, enforcing data reliability, and general shop-floor cleanliness. In the longer term, the training curricula, particularly for news hires, needs to be redesigned to include not just compliance, but a full suite of technical, managerial and behavioural skills. The training approach needs to evolve from being confined to classrooms. It needs to be multi-channel, experience-led and on-the-job, and with frequent reinforcements.
Building a culture of quality is a long journey. One-size does not fit all. Most interventions have a long gestation period and require commitment from the management. But once in place, it can build a company’s performance and reputation to world-class levels.