The Structural Frame for Merck & Co., Inc.

In 1994, Merck & Co., Inc. hired Ray Gilmore as CEO to help survive the turmoil of the pharmaceutical industry. Gilmore followed a structural frame capitalize on the strong technical tradition of Merck & Co., Inc. who attained a powerful scientific engine.

While Vagelos acted as CEO, Merck maintained a strong structure frame through the domination of the company’s senior Research and Development (R&D) scientists with strong support from company CEO. When Gilmartin became Merck’s CEO, he replaced the two executive vice president positions with a larger Management Committee (MC). MC was directed to improve the company’s business processes to build cross-functional skills rather than restructure company organization. Gilmartin expressed his structural frame through the redefinition of employees’ roles and relations to rid the company of its functional and divisional barriers.

Gilmartin’s structural face could also be seen in his creation of Worldwide Business Strategy Teams (WBSTs) to expand individual managers’ thinking, planning and actions beyond existing functional areas. The teams were composed of members from all different functional divisions of the company.

Gilmartin’s structural frame activities improved Merck’s planning and resource allocation through cross-functional business processes.

The Human Resource Frame for Merck & Co., Inc.:

The human resource frame is evident in Merck tradition of high ethical standards since many of the company employees had a higher purpose to save lives. The company CEO proclaimed “We try never to forget that medicine is for the people. It is not the profits. The profits follow, and if we have remembered that, they never failed to appear.”[1] The company also maintained a cultural image in parallel with its academic image. Company scientists and clinicians were addressed as “Doctor.”

Gilmartin created his symbolic frame by interviewing employees across the company about their views on major issues facing Merck. He cleared the confusion and ambiguity concerning the lack of strategic thinking and clear vision.  He further enhanced employee communication by the initiation of a comprehensive internal review of the issues facing the company by interviewing 800 employees across Merck’s functional areas.

Gilmartin activities of human resource created a very positive view of Merck’s strategy among company employees. One manager said “We have a clear direction now.” Employees made much progress on management and leadership development.

Stakeholders of Vioxx:

A number of stakeholders were involved in the Vioxx medicine recalling incident of Merck & Co., Inc. in 2004. Internal stakeholders were Merck & Co., Inc. Company employees and Merck & Co., Inc. company shareholders. External stakeholders were the patients who took the medicine, and the United States Health Department.

Negative Impact of the recall of the Vioxx drug to Stockholders:

The Merck & Co., Inc. stock was considered dead money in 2004 in expectation to the number of lawsuits filed against the company over safety concerns of the drug. If Merck & Co., Inc. loses the cases, it faces a potentially huge cost from the reimbursements to patients as well as payments for ongoing medical monitoring of people who took Vioxx.

The recalling of Vioxx caused an annual decrease income of $2.5 billion. Following the of the announcement of the recall, investors dumped Merck & Co., Inc. shares causing a 30% decrease to reach the lowest closing price in more than eight years. The recall would cut the $1.52 annual dividend and shave at least 50 cents a share, or 16%, off the $3.14 share analysts expected the company to earn in 2004.

Recommendation to Mitigate the Recall of Vioxx:

Merck & Co., Inc. should seek the production and marketing of innovative products to increase its sales in response to the decrease caused by the recall of Vioxx. In an attempt to improve its public image and ethical stance, Merck & Co., Inc. should relieve some of its senior management who might have been responsible for production of Vioxx. The within punishment of its own top management would convince the public of the commitment to higher ethical standards.

References

George W. Merck, the son of the company’s U.S. founder quoted in “Merck Sharp & Dohame, A brief history,” Merck & Co., Inc,. 1992, p. 18.