Merck CEO-Ken Frazier. First African American Leading a Major Pharmaceutical Company

Mr. Kenneth Frazier has been the CEO of Merck since January 1, 2011. In an industry dominated by white men who are either scientists or salesmen, Ken Frazier is an unlikely CEO. He is a lawyer by training and an African American who grew up in Philadelphia's inner city. He comes from a very humble background. His father was a janitor with a limited education who Frazier admires and adores. He describes his father as "one of the most intelligent men" he has ever met.

At the time of his appointment, many analysts saw Merck as a company in need of rejuvenation. Merck's mission is to save and improve lives around the world, and to uphold the highest standards of ethics and integrity. All indications were that Merck was having a difficult time fulfilling this mission. For a company that has introduced more new medicines in the past 60 years than any other company, Merck ranks only fifth in new drug approvals over the past 10 years. Since 2003 the company's stock has been up and down with no clear direction. Except for the purchase of Schering-Plough in 2009, organic growth has been stagnant. Merck has not launched a drug that has reached annual sales of more than $1 billion since 2007. Drug research is a high-risk and time-consuming process. Only one out of every 5,000-10,000 compounds screened becomes an approved drug. It takes an average of 10 to 15 years at an average cost of more than $1 billion to develop a successful medicine. Mr. Frazier was seen as the candidate best suited to set things right.

Mr. Frazier's understanding of Merck's business comes from his 35-year career with the company; first as an outside attorney and then as the company's general counsel and top marketer. Frazier believes that Merck's competitive advantage is the quality of its research, and he worships its researchers, who can spend 15 or more years developing a single new medicine. "All I can do is create an environment where really talented, smart, committed people want to show up and (discover new drugs)," he once proclaimed. Echoing this sentiment, one writer said of Mr. Frazier, "He professes a nearreligious belief in letting his scientists do their jobs."

After a slow start, Mr. Frazier has begun to make some real changes. A lot of his initiatives are right in line with our recommendations for fostering a learning organizational culture (see Exhibit 12-5). For example:

Since assuming the leadership of Merck, Frazier has reiterated his desire to return Merck to a culture of innovation. In his 2012 annual report he said, "We believe that innovative and productive research and development is the only sustainable way to create true and enduring value for all of our stakeholders." He backed his commitment by increasing Merck's R&D budget for research. The world is changing, Mr. Frazier said, but Merck's focus on pursuing the best science and building a sustainable business is steadfast. One of the recommendations for fostering a culture of learning is to create a shared vision for learning.

As a learning organization, Merck aims to promote a culture of professional development that will support its employees' growth while aligning their career aspirations with the company's strategic priorities. With its new professional development tool called Career Maps, employees have increased exposure to key competencies and skills for roles across the company. The competencies within Career Maps are linked to learning resources, empowering employees to focus their professional development on building and enhancing skills and helping them develop a plan to achieve their personal career goals. This is part of creating a culture conducive for individual and team learning, providing incentives for learning and innovation, instituting mechanisms for channeling and nurturing creative ideas, and building confidence in followers' capacity to learn and adapt.

Merck recognizes that its employees are an invaluable source of ideas that can help transform it into a stronger, more innovative company. So, to take advantage of this asset, Merck created an annual event for collaboration among thousands of its employees globally. Over a three-day period, employees engage in an online brainstorming forum to tackle some of Merck's greatest transformational challenges. The round-the-clock format is designed to break down traditional divisional and geographic barriers and engage and inspire participants from all levels of the organization. At its latest gathering in 2012, some 24,000 employees from around the globe contributed more than 16,000 comments and ideas. This program encourages creative thinking, facilitates systems thinking, broadens employees' frame of reference, creates an environment in which people can share ideas and learn from each other, and is a great mechanism for channeling and nurturing creative ideas.

These programs and initiatives are all hallmarks of a learning and knowledge-based organization. Another hallmark of a learning and knowledge-based organization is innovation. Merck is dedicated to the highest level of scientific excellence. Merck's commitment is reflected in this direct quote from its Web site, "We strive to identify the most critical needs of consumers and customers, and through continuous innovation, we challenge ourselves to meet those needs."

Merck is a $44 billion company in revenues. It employs about 76,000 people worldwide. The stock is near its 52- week high at $59.84 a share, which occurred on May 1, 2014. According to information from its Web site, Merck has a robust pipeline of potential new drugs, with a wide range of product candidates across each phase of development. For those who said at his appointment that "only time will tell," there is evidence that Mr. Frazier's leadership is beginning to pay dividends. There is broad confidence in the long-term outlook of the company because of the strategies and changes that Ken Frazier is putting in place.

1. In what way(s) has Kenneth Frazier demonstrated his effectiveness as the leader of a learning and knowledge-based organization?

2. Given our discussion on the distinction between a traditional and learning organization, what type of organization is Merck? Support your answer.

3.Kenneth Frazier has maintained that the pillar of Merck strategy will remain innovation. Suggest some ideas he can institute to enhance innovation.

4. Describe the strategy that Kenneth Frazier has articulated for moving Merck forward.

5. Drug research is a high-risk and time-consuming process. What evidence is there to support this assertion?

6. What specific personality and leadership traits does Kenneth Frazier possess that align with leading a learning- and knowledge-driven organization like Merck?