Quality culture: A big test for Indian pharma

Once a culture that fosters high standards is in place, the sector will truly become world class

One of Henry Ford’s pithiest idioms defining quality at the shop floor, is as relevant today as it was when he was building the assembly lines at Detroit a hundred years ago. Ford famously said that “quality is doing it right when no one is looking”. Manufacturing company CEOs the world over, have tried this over the years, with varying degrees of success. India’s pharmaceutical industry is grappling with the very same issues.

India is the world’s third-largest pharmaceuticals producer by volume and thirteenth by value. Generics companies have seized the opportunity that opened up as blockbuster drugs lost exclusivity and pharma exports are expected to touch $30 billion by 2020, by industry estimates. The global market dynamics led to companies focusing mostly on the time to develop new products, rather than the robustness of their product design and related quality systems. This has resulted in quality issues and gaps in shop floor practices.  

Organisations built a culture with the erroneous belief that quality does not go with cost and productivity. Quality was seen as the job of quality control and quality assurance teams, but with limited line-ownership and CEO’s mind share.

These flawed beliefs coupled with evolving regulatory expectations, resulted in higher scrutiny and action. The pendulum has now swung the other way and the high cost of poor quality has forced CEOs to take notice. Quality is on top of the agenda and this is no surprise, as the company’s topline, market valuation and reputation often depend on it. Yet even now, the panic seldom percolates to the layers that constitute the bulk of the organisation. 

Organisations, while dealing with quality-related challenges, tend to spend much more time and resources on technical issues than strengthening core mindsets and beliefs. Effective and sustainable improvement needs a culture that makes quality a way of life.

Iconic global companies attribute their uniqueness to a culture, lived by everyone in the organisation. Google’s culture of innovation touches its 57,000 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 in the world. Quality in pharmaceuticals is no different. 

The missing link McKinsey research across 34 pharmaceutical sites shows that culture drives up to 30 per cent of quality outcomes. Sites with a strong quality culture have fewer complaints, product failures and process deviations. 

While pharmaceutical companies have been investing millions of dollars on quality remediation measures like infrastructure upgrades, strengthening technical systems, automation-culture could be the missing link. Having a quality culture means every employee considers quality to be their own responsibility, and assesses the impact of every decision on quality. Their everyday behaviour is a role model for quality. All this, when no one is looking. 

McKinsey’s research of 2,200 culture transformations globally, suggests that about 70 per cent of them fail. Employees are often resistant to change, management behaviour does not support it, and resources are sometimes inadequate. Building a culture of quality requires shifting deep-rooted mindsets, which have often been developed over the years, by supervisors prioritising cost and delivery over quality. Some of the reasons can also be traced back to our roots and socio-economic influences.

The belief that culture cannot be measured is now a myth. McKinsey has studied over 25,000 employees in the Indian pharmaceutical industry using its culture baselining and assessment approach. The study highlights areas where Indian companies lag global peers, these are: lower importance of quality vis-à-vis cost and productivity; the fear of escalating issues or bad news because of a disconnect between the leadership and the shop floor; silos amongst vital functions like manufacturing, quality and R&D, which need to be working together; gaps in quality governance and performance management; and low capability, which is compounded by high attrition. 

Organisations which have successfully transformed their quality culture, say there are four interventions that have made it possible. Many Indian companies have begun adopting these practices.

Telling a compelling change story: Leadership needs to foster understanding through the organisation using good and regular communication. Leaders should provide simplified instructions through standard operating procedures. Companies are using forums such as the company intranet, annual days, and town-hall meetings to communicate the importance of quality. They conduct daily shop floor dialogues with workers to reinforce the importance of quality. 

Role modelling: Leadership should role-model quality in daily behaviour, and invest time and resources to improve facilities and infrastructure. Companies have their leaders spend time on the shop floor through “Gemba walks” to reinforce quality and solve complex issues.

Setting up reinforcement mechanisms: Introduce rewards and recognition to celebrate quality achievements. Companies have introduced quality-focused result metrics, with weightages for all functions that impact quality, such as R&D, manufacturing, engineering, procurement and supply chain.

Develop skills for change: Build quality capability at all levels — technical, managerial and behavioural. Companies are redesigning their recruitment, new-hire training and employee capability building systems with emphasis on “right-people for the right job” and adult-learning principles. 

Building a culture of quality is a journey. Most of the interventions have a long gestation period and require a long-term commitment from the management. But once in place, culture could be the single-biggest lever to take India’s pharmaceutical quality to world-class levels.

(To be concluded next week)

Vikas Bhadoria is senior partner; Jaidev Rajpal is partner; and Vivek Arora is associate partner of McKinsey & Company