Zum Hauptinhalt der Webseite
Division of labor

Shadow Players

  • Luca Melis
  • Sebastian Barnutz
  • Sunday, 9. October 2022
Shadow Players
© George Becker

Every organization is home to a shadow operation—one that functions beyond the boundaries of formal structures. Compliance managers must come to terms with this functionality.

As senior leaders define and pursue longterm goals and strategy, as middle managers address the gray-area challenges of day-to-day operations, and as various departments and roles respond to the demands of other stakeholders and of the outside world—their objectives often come into conflict. These clashes demand a resolution, and players at all levels of an organization adapt by developing informal practices that enhance the official ones.

These informal practices function as a fount of flexibility. Without them, an organization is unable to respond, pivot and innovate as today’s market requires. Indeed, the division of labor within an organization—along with the diversity of interests this division creates—is the very foundation of the organization’s strength.

Internal compliance efforts are structured to quash informality.

This is true in every industry, at every level. But companies face a problem: Internal compliance efforts are structured to quash this informality. Compliance managers set rules designed to monitor behavior. They require reporting and auditing, and they deliver sanctions. These procedures, however, are almost always designed as conditional programs, with strict if-then logic that significantly narrows employees’ room to maneuver. The programs are built this way for good reason: Their purpose is to prevent unlawful behavior. At the same time, they are highly dysfunctional for organizations.

Repressing incompliance can be a risk for the organization.

What if we were to recognize that informality is an asset for organizations? What if the staffers charged with defining compliance rules were to come to terms with the necessity of informality, even letting go of the assumption that they must monitor and observe all stakeholders at all times? What if instead of micromanaging every procedure, they committed to setting goals and giving their employees the freedom to decide how to reach those aims?

We would go so far as to argue that compliance officials must stop playing only by the book and should intentionally cultivate the space for incompliance to internal formal rules, while simultaneously devoting resources to ensure organizational players are not actually breaking the letter or spirit of the law. Without such a shift, they risk hobbling their organizations’ ability to adapt and innovate.

Adopting this approach would require such an extraordinary turnaround that the idea could reasonably be called farfetched. But let’s take a look at what one aspect of such a shift could look like, and perhaps by the end of the exercise, the idea will seem quite a bit less absurd.

Unwieldy Rules and Unintended Consequences

In most any pharmaceutical organization today, the internal regulatory structure establishing a firewall between medical and commercial departments is thought of as immutable—the only way to prevent medical development resources from being used to boost sales.

But in actuality, this Chinese wall often hurts more than it helps. It breeds dysfunction for the organization, necessitating highly bureaucratic procedures that waste energy and ultimately lead to new compliance “problems.”

Establishing Goals, Rather Than Setting Conditions

These regulatory efforts, built as conditional programs meant to control every possible eventuality through strict if-then requirements, end up metastasizing into unwieldy and complex procedures that do far more than prevent governmental laws from being broken. It begs the question: How can governmental laws be upheld without creating barriers to communication and functionality?

Dropping the firewall between commercial and medical departments entirely wouldn’t, in and of itself, break any law. But it would require companies to assess where such a change would make them vulnerable to external sanctions and to determine whether any such risks could be mitigated. Certainly, they would still need to address the elephant in the room: the conflicts of interest inherent in the division of labor of any pharmaceutical company that seeks both to help patients and maximize profit.

Currently, companies are seeking to combat these conflicts by imposing a network of regulations that essentially keep employees at every level under a stranglehold. In one pharmaceutical company, we recently observed the launch and quick demise of a program designed to better serve the needs of physicians and patients by forging open lines of communication across departments and functionalities. The program was immediately hobbled by the fear of tearing down the Chinese wall between medical and commercial departments.

All stakeholders must compete with each other.

One major concern was that the assignment of medical studies could be used as an enticement or reward for prescribing the company’s medications. But really, the conflicts of interest at play are more complex than that: Staffers responsible for the commercial side of the business must consider whether patients who would normally be prescribed the company’s drug should instead be directed into a research study. Both medical and commercial personnel know that physicians would rather use a treatment with which they have experience. Medical staffers need to make sure that treatment specialists are involved in drug development and participating in studies. Those responsible for clinical operations wish to match trial designs with hospitals to increase the quality of enrollment and documentation.

All of these interests are central to the pharmaceutical company, but they are also in conflict—and so all the stakeholders must compete with each other.

Welcoming Conflict, Creating Balance

To be successful, large organizations must find ways to balance such internal conflicts without creating systems that stifle flexibility and communication. In the example above, a solution could be to create forums, both formal and informal, in which all stakeholders could acknowledge and express their interests, and advocate for them in competition with each other. In part, this would involve the creation of formal interest panels, which would be required to approve study assignments on a case-by-case basis.

In the run-up to these formal panels, participants would need to be given an opportunity to discuss their interests with each other. Compliance officers could offer opportunities for these unmonitored discussions, thereby creating safe havens that would both open up communications and earn them the trust of the staffers involved. Trust is a powerful source that could further boost cross-functional cooperation and compliance managers’ effectiveness.

Without reforms, pharmaceutical companies will continue to find themselves not capable of innovation.

This system would make organizational conflicts visible and address them, freeing stakeholders to pursue their interests and essential goals while reducing friction and unwieldy work-arounds throughout the organization. It would be a significant departure from the current system, in which companies expect employees to deny or ignore conflicts that are unavoidable.

Without this kind of reform, pharmaceutical companies will continue to find themselves hampered by unnecessary bureaucracy and unable to build an innovation culture. The benefits are such that it is worth truly considering whether rules and practices we have believed immutable may actually be obsolete.

For a deeper dive on the topic: Barnutz, S. and Kette, S. (2019) Managing Compliance. Quickborn: Organizational Dialogue Press.

Luca Melis

Dr. Luca Melis

is a Managing Partner at Poliste, official Metaplan representative for Italy, and an expert in crossfunctional internal workshops as well as external advisory boards.

Show LinkedIn® Profile

Seastian Barnutz

Dr. Sebastian Barnutz

is a Partner at Metaplan and advises clients who are working to balance regulatory demands with a commitment to cultivating agility.

Show LinkedIn® Profile