CEO Bob Butchofsky knows what it feels like to ride a rocket of success. He also knows what it's like to plummet just as quickly when it all starts to unravel.
“It was certainly exciting,” says the top boss of Vancouver-based biotech company QLT Inc. (TSX: QLT). “But when you go through a slump and you have a reduction in force it's tough.”
For Butchofsky and his team, recapturing a spirit of innovation and excitement amidst a time of dramatic downsizing has been a challenge. Up until 2005 the company's flagship drug, Visudyne, dominated the world market for treating age-related blindness. Global sales topped US$480 million in 2004. But when rival developer Genentech introduced Lucentis, superior to Visudyne in several ways, sales took a huge hit.
By 2006, revenues had fallen by more than half to US$176 million. That fall, coupled with a troubled lab acquisition and shareholder actions, forced QLT to shed about 250 employees.
Linda Lupini, VP of human resources, says that from the beginning there was an acknowledgement that continued product innovation was the key to QLT's success. Voluntary downsizing was the answer. QLT kept the people who really wanted to stay and gave others the option to take a package.
“We wanted to maintain people's passion and keep people motivated, and that came by giving people a choice,” says Lupini.
It also came, she says, by treating employees with compassion and without some of the usual heavy-handedness seen in other corporate restructuring. Pass keys weren't deactivated. Computer passwords still worked.
“We let people say goodbye to their colleagues, keep working for a while and transition in a more dignified manner.”
But by giving everyone the chance to take a healthy severance package, QLT ran the risk of losing some of its core people. Lupini says while that happened in some cases, by and large it worked. “The people that know they are clearly a key part of the company going forward, those people did not ask to leave.”
Career management consultant Peter Saulnier, in the Vancouver office of Calgary-based HR firm Toombs KWA, says some of his bigger clients are looking at following that unconventional lead.
“It's an enlightened approach that empowers employees to have some input into the downsizing and builds trust.”
Of course, no company loses half its workforce without disruption. Butchofsky concedes morale has been low. Outside consultants have been brought in to do detailed employee satisfaction surveys to help managers get a read on what people are really thinking.
Still, he insists QLT remains infused with the same risk-taking spirit that saw it become of one Canada's top drug developers and land a spot on the 2004 Report on Business “Best Companies to Work For” list.
After the downsizing, he says he made a decision to actively bring back that startup company spirit by holding small-scale group meetings with employees, encouraging them not to let the difficult changes hold them back. The messaging is that reasonable risks won't be punished. To this philosophy he attributes some early successes: from late 2006 through early 2007, QLT signed three new drug development deals, including one that focuses on child blindness.
Brian Bapty, analyst with investment firm Raymond James, says that while these represent some success, at under US$5 million each they're small and drug development takes time. Still, the company is now stable and has even managed to clean house by settling some longstanding patent disputes. The stock price has risen from an all-time low of US$6.70 in January 2006 to US$7.78 in March 2007.
“There has been some reason to cheer, [but] QLT will have to balance stock appreciation while still investing in long-term projects.”