Management Structure in Biotechnology Business

'Management' is a word that has come up several times in the previous sessions. Why is
this a crucial principal in successful biotechnology companies?
The scale of operations of a company is larger than in an academic research group. A
drug discovery and development company can expect to grow to 30-50 people in 18
months, to over 100 people in 3 years, all working on essentially the same product or
related groups of products. This cannot happen by chance--it must be organized. It must
also be focused on a very specific goal. Company funding is based on success not on
activity. If a line of research is not working someone has to make the hard decisions
about what to do about it including, in extreme cases, firing the scientists involved.
This needs professional management - people who know how to organize and run a
scientific program with such defined goals. Sometimes the scientists can grow into this
role. Sometimes they can accept it from an outsider recruited to the company specifically
to manage it. But filling that role is an absolute condition of setting up a company, and
companies without effective management almost always fail. Sometimes they take a long
time and a lot of money to fail, which is why investors look for good management as part
of the company team: without it, there is a very high probability that their money will be
wasted.
This imposition of management is sometimes resented by scientists used to academic
freedom, because they feel that they are 'giving up control' of their science. This is a
fallacy for three reasons:

They are not giving up control of anything - before the company was founded
there was nothing there to control. No one was developing the product, hiring the
scientists, performing the work.
It is not 'their' science. A successful company must be assembled from many
scientific and technical strands, for reasons outlined in the previous sessions. They
are a contributor, not a sole author.
No one person is in control of a small company, if it is to perform with the energy,
flexibility and enthusiasm that will carry it to success. It must be a team, not a
dictatorship.

Where is management?

Finding appropriate management is difficult. You need quite different sorts of people at
different stages of a company. The senior management, and particularly the Chief
Executive Officer (CEO), of a new start-up with 10 employees must be able and willing
to do everything, to do without formal reporting structures, and to know everything that
goes on in the company. The manager of a public company of 400 employees must
delegate nearly all of that and instead control a reporting and responsibility system that
has several layers between him and the bench scientist. As a company grows, the people
who ran the company very well at one stage have to give way to ones who are competent
to run it in the next. One of the skills of the entrepreneur who starts a small company is to

know when their skills should be replaced by someone suited to run a more mature
organization.
Finding people who can perform these tasks, and particularly the many-sided and
changing task of running a new start-up company, is hard. As in science, the only
evidence that you can do it is a 'track record' of having done it before. The CEO is
particularly critical, as he has overall responsibility for making the company work. CEOs
for new biotechnology companies come from a variety of backgrounds, where their
experience in management, in directing science and in relating to the needs and
concerns of the board of a company fit them for the role. Academic research does not
usually fit a scientist for such a role. Neither does being a management consultant
(criticizing how someone is performing is not the same as performing well yourself), nor
does 'experience' of business gained solely through an MBA (Masters of Business
Administration) course.
Critical tests for a CEO of a new biotechnology start-up could be caricatured as:

The 'Nature' Test - can they read the journal Nature and understand what they are
reading? This is critical, as the fundamental of the start-up is good science. (They
probably will not have time to read Nature but that is another problem.)
The Lightbulb Test - can they (and are they willing to) change the lightbulb if it
blows, i.e. do anything practical needed to keep the company running. There may
be no-one else around to fix it.
The Cat-Herder Test - can they convince a group of disparate scientists that what
the CEO wants them to do is more worthwhile in scientific terms than what the
scientists thought they wanted to do? (He or she can threaten to fire them but that
will not capture the creativity and dedication of which the best scientists are
capable.)
The Deal Test - can the CEO go out and make deals that will bring the company
money in return for a small amount of its technology of products? Such deals are
critical for funding, but also to show that someone else has faith in you.
The Suit Test - can the CEO put on a metaphorical (or literal) dark suit and
convince investors that he or she is really on their side, so their investment is safe
in his or her hands?

These general criteria apply to all the senior people in a small company. The 'head of
molecular biology' in a start-up may find themselves watching the pilot plant or
presenting to an investment banker who does not know what DNA stands for; there are
few well-defined job descriptions in such an environment. This is half the fun of it.
As well as people who run the company as a whole, a start-up will need more specialist
management functions such as financial and personnel management. Initially these will
be provided by someone outside the company, such as the venture capital company
backing the company, or by the CEO in his 'spare time'. As the company develops, a more
specialized type of manager with less concern for science and more concern for
management as a process and skill in its own right is needed. Scientists should note that

these people are needed: they are not hired purely to make your life at the bench harder.
Without them you might wake up one day and find that the company has run out of
money.
This brings us into the realm of general management theory and practice, which this
course will not discuss further. There are many books and courses on this available, some
of them relevant to the unique environment of a small, science-based company.
Directors and others

In law, every company must have a Board of Directors. These people do exactly what
their name implie - they direct the company so that its value to its shareholders is
maximized. There are stringent laws about what company directors can and cannot do in
general terms, and some financial scandals in major companies have involved directors
abusing their position for their own gain.
The directors should add substantial value to the company, in terms of contacts,
experience, advice, and business judegment. Their role should emphatically not be just to
rubber stamp what the CEO wants to do and for that reason it is considered bad practice
for the Chairman of the Board to be the CEO. A venture capitalist looking to fund a
company or a scientist looking to join it at a senior level will look at the Board to see
whether they are there as window dressing or whether they will really help the company
flourish.
Parallel to the Board, and often answering to it, most biotechnology companies have a
Scientific Advisory Board (SAB). It should advise the CEO and directors on any
technical aspect that the company needs guidance over and, specifically, provide
perspective, contacts and advice on all areas of science that might be relevant to the
company. For example, an agricultural genetics company might have an agrochemicals
expert and a farmer among theirs.