Am-Pharm Case Study, Part 1 BACKGROUND:

Author’s Comments

I’m creating a case-study (案例）for readers and learners who visit this blog.  As of today (2010-March-13), there are almost no visiters to this blog other than personal friends… Taikongren’s Advice is only 2 weeks old.  But maybe in the future someone will stumble on this and take note.

This is a real-life case study.  But this is a study about a catastrophic management failure. I can write about the successes I have had. However, I feel talking about failures is often more instructive.

For reasons which will be obvious as you read it, the names of actors, and even locations have been changed.  This is more than just a case-study for me.  This is a story about my friend’s life, and the hardships he goes through as he develops and grows in a career-environment which is…messed-up.  So this is personal.  I’m not objective here.  I won’t pretend to be objective (I always feel that when people say they are objective, it often comes off as hypocritical).  But I hope this can help some learners of business in China.

PS. For my best friend “Hiro”…if you read this, please forgive me.

PPS. For the stupid, pretentious, and petty people who read this and recognize yourselves in this case-study… I don’t care if you forgive me or not.  I only hope this moves some neurons in your brain(s).

Extended background
[ this is more info than I'm putting in the case which I will use for the workshop]

Am-Pharm is a venture-capital start-up focused on developing a low-cost, USA- FDA- approved drug manufacturing operations in China (FDA = Food and Drug Administration… the government body which overseas drug and food safety in the United States). Am-Pharm hopes to become the second approved drug manufacturer in China. They employ 35 people in the Suzhou factor, and 50 people in an older, recently acquired Hangzhou factory.

Am-Pharm’s Board of Directors, following the advice of some American consultants, purchased the foreign-owned API manufacturer factory in Hangzhou.  Actually, the factory is NOT in Hangzhou, but rather 1 hours outside of the city, in a small, poor suburb township which is attached to Hangzhou.  The goal was for this factory to supply medicine to the Suzhou dosage-ing factory.  But the original owner and management team are still around; they need to achieve certain milestones in order to maximize the purchase value.

AmPharm manufacturers the Active Pharmaceutical Ingredients (API) in its Hangzhou factory from raw chemical inputs. The API formulas are licensed from big brand-name companies (if its patent protected), or else it consists of generic, non-patent protected formulas (like aspirin). It then ships API to its Suzhou factory, where the ingredients are processed into ingestible medicine.

Making the API into a tablet, pill, or some other ingestible form is not easy; each tablet or pill of medicine must have the exact consistency of API. The FDA must certify each medicine produced as well as both factories. Needless to say, everything in a pharmaceutical factory must be…perfect. If there is one mistake… if there is any hint of mis-recorded data, the FDA will not certify Am-Pharm. If that happens, Am-Pharm’s China operations will close.

Actors

My best friend’s name is Hiro.  That’s not his real name and my friend is not Japanese.  Hiro is really the name of a character we both like in a book we read.  Hiro is a really really smart guy.  American from New York.  30 years old.  Speaks Chinese a little better than me.  And reads and writes Chinese.  OK.  He speaks a lot better than me.  He learned the language and learned it well.  I happen to speak better than he does though, IMHO.  That’s because its important for me to express myself, while its not important for him.

And that’s why he is sort of a screw-up.  He does not express himself well.  Its not a language problem…its a mindset problem.  It takes him a while to get down to “the bottom line” when he talks.  He is lazy… like me.  But he is passive.  He does not defend himself.  He does not brag too much.  He “goes with the flow.”  He is proud to “go with the flow”.  He is not particularly pro-active.  He is not someone who will jump to take ownership of new projects.   Maybe there is sort of a Daoist strength in that.   But this does not “translate” into strength at the office.  My friend does not hit back when he is attacked…he does not even see the attack.  Metaphorically I mean… Hiro is actually physically very strong and is a black-belt in Karate (or maybe TaiQuan Dao… I forgot).  Hiro is MBTI type – INTP… for those of you who understand the Meyers Briggs Type Inventory.

Two years ago, Hiro resigned from a Chinese-owned private pharmaceutical research company.  All the usually bad things happened to him: unclear directions, no support, other’s taking credit for his work, etc.  Then his visa ran out right before the Olympics.  He had to leave China in a hurry and had a really hard time to get back.  He felt he was a total failure.  I guess he did fail.    But on the other hand, he spent 4 years in China, learned fluent Chinese.  Got a masters degree IN CHINESE from a university in Shanghai in organic Chemistry.

When he got back I helped him get a job with a start-up pharmaceutical company near Hangzhou.  And then the trouble started.  But before I get into that “trouble”, I’d like to give some background about the other characters, and the start-up pharmaceutical company.

Jerry Quelch is the American Chief of Operations of the start-up company, which I will call Am-Pharm (note: I did not look up if there really is a company called Am-Pharm…if there is, it has nothing to do with this case-study).  Jerry has 25+ years in Big Pharm industry and extensive experience in China.  He is a gruff, no-nonsense guy.  He raises his voice to people when he thinks they act stupid, but he does not hold grudges.  Very knowledgeable about factory set-up and pharmaceutical industry processes.  Very hands-on style.  Jerry does not like people who talk too much.  He prefers to give general instructions to people, and then have those people figure out how to implement those instructions.  Often people don’t implement in the way Jerry envisions they should, so Jerry often works on issues on behalf of his subordinates.  Jerry’s personality type is also INTP, just like Hiro’s.  (Introverted, Intuitive, Thinking, Perceptive)

Mike Kerrigan is a new Deputy GM in the Hangzhou factory.  Mike has 30 years of American chemical industry experience in R&D, sales, and technical services, but not in manufacturing / production. Mike is basically retired.  He has 3 years of China experience, but he does not really speak Chinese.  Mike likes to delegate everything.  Mike knows Jerry because they drink together in the same expat-bar.  Mike is working for Am-Pharm just as a means to secure additional retirement money and pay-off debts to his ex-wife.  His (much younger) wife and child live in Thailand.  He is ENTJ personality type (Extroverted, Intuitive, Thinking, Judging) ,   He constantly talks, often without having any knowledge about the content of his speech.

Ben Barker, from England, is the Hangzhou factory QA Manager and “Acting GM.  Bob has 8 years of China-experience working for a large pharmaceutical company, but speaks almost no Chinese.  Ben is quite; he prefers to stay in his office and talk to as few people as possible.  Personality type is ISTJ (Introverted, Detail-Oriented, Thinking, Judging)

Jack Fields – 54 year old expat QA Director, hired into Am-Pharm 6 months ago. 30 years big-pharmaceutical company experience. Does not speak Chinese. This is his first overseas job and first small-company job. Personality type ISTJ

Patrick Demsy – 53 year old expat Engineering Director, hired into Am-Pharm 6 months ago. 30 years big-pharmaceutical company experience. Does not speak Chinese. Like Jack, he is introverted. This is his first international job. Personality type: INTJ

Sally is the HR Manager.  A native of Suzhou, Sally has 8 years of HR experience, mostly in Suzhou factories.  Sally a typical HR Manager for the Suzhou region.  She is responsible for both Administration and HR.  She is not particularly strategic in her orientation, but is more of an administrator of HR.  Her personality type is ISTJ.

And so it begins…
Two years ago, in April of 2008, Jerry Quelch had a problem. He just came on-board Am-Pharm a year before. He was having a lot of problems getting the Suzhou factory compliant and operational in preparation for FDA certification. However, the Hangzhou factory seemed to be in a much worse state. Jerry feared there is a lot of hidden things going on in Hangzhou. Furthermore, the management team of the Hangzhou factory was still reporting to the previous owners, who are still involved in the business of that factory. He wanted to send someone to Hangzhou to keep an eye on things, as well as make sure that the supply chain was not bringing in poor quality chemicals.

I – Jesse Covner – called on Jerry to try to sell consulting services.  After listening to Jerry’s problems, I forwarded Hiro’s resume to Jerry.  They liked each other and soon Hiro was hired.

That’s when everything went to hell.

Part 2 comming next week.