When Denise Peppard was studying for her master’s degree in business administration at the University of Michigan more than 20 years ago, she decided to pursue a career in human resources management. . . . Peppard realized that potential when she became senior vice president of HR for Wyeth last January. . . . Corporate and cultural change at Wyeth has served as Peppard’s focal point. She began her present job in the midst of a large-scale corporate restructuring program called Project Impact. Peppard began implementing the project while serving as the head of HR for Wyeth Pharmaceuticals—the largest division, employing approximately 92 percent of Wyeth’s 50,000 employees worldwide.

“The change we’re experiencing is throughout the pharma industry right now. You can look at it as an opportunity,” Peppard says, “because it’s good change. It’s the kind of change that we should be doing and will ultimately make Wyeth a better company.”

Project Impact goals include:

• Streamlining Wyeth’s operations.

• Exploring opportunities for alliances for research and development.

• Reducing production costs.

One of the first steps in implementing the restructuring plan was a series of job cuts. Just as Peppard began her new job, Wyeth officials announced the company would reduce its workforce by 10 percent during the next five years. In March, the company laid off 1,200 sales representatives in a cost-cutting move. The job cuts came after Wyeth’s patent expired on its popular Protonix acid-relief medication and the company began facing stiffer competition from manufacturers of generic drugs. Yet Project Impact appears to meet the intended short-term result: Compared with 2007, Wyeth’s revenue and earnings have grown approximately 6 percent in 2008. The company reported revenue of $11.65 billion for the first six months of 2008. “If there’s one thing to regret in this change process, [it’s] that we began with a short-term cost reduction associated with Protonix production and the sales force,” says Peppard. “I don’t think everyone in the company has quite grasped that this effort is not just about job reductions and that it is actually about changing the way we work.”

For examples, Peppard points to ideas such as using fewer manufacturing facilities and possibly using more third-party suppliers. Research and development partnerships with other pharmaceutical companies represent other avenues for Wyeth leaders to ponder.

“We really have to restructure the way people are working, and that’s a massive, massive change,” Peppard says during an interview at Wyeth’s headquarters. . . . Peppard sees the changes within Wyeth and the pharmaceutical industry as the natural response to its shifts in the global market. In the past year and for the first time ever, Wyeth’s international sales surpassed the company’s U.S. sales. Nearly half of Wyeth’s employees now work outside the United States.

Still, the workforce reductions ultimately impact individuals, and Peppard admits that making decisions that affect the livelihoods of people proves to be the toughest part of her job. “These are not decisions that are taken lightly,” Peppard says. Wyeth leaders “take great care with decisions to cut jobs and make sure that each affected individual is treated with care and dignity. Even though it’s a business decision, ultimately it comes down to a personal level, and that’s the really tough part.”

Questions for Discussion

1. What were the external and internal forces for change at Wyeth?

2. To what extent did Denise Peppard follow the change models proposed by Lewin and Kotter?

Explain.

3. Which of the target elements of change within the systems model of change were affected by the changes at Wyeth?
4. Would you expect Ms. Peppard to encounter resistance to change? Why? What might be done to reduce this resistance? Explain.
5. What did this case teach you about organizational change? Discuss.