Bayer, the maker of Alka-Seltzer, Claritin and other popular over-the-counter drugs, is in a rut, and its leader thinks he has a plan to get the company out of it.
The idea is to reduce company bureaucracy, give more control to employees and, hopefully, thus enable the company to innovate effectively.
Bayer CEO Bill Anderson, who has been its chief executive since June 2023, even has a fancy company name for his non-corporate project: “Dynamic Shared Ownership.”
“We hire highly educated and trained people, and then we put them in these environments with rules and procedures and eight hierarchical levels,” Anderson said in an interview with Business Insider earlier this year. “Then we wonder why big companies suck so much most of the time.”
Anderson’s plan involves a radical new look for the workplace.
In a traditional corporate environment, the organizational chart moves up: lower-level employees have managers, those managers have managers, and so on to the top of the chain.
Anderson told BI that employees have expressed problems with this traditional structure, especially at larger companies. According to Bayer, the company employs just under 100,000 people.
“People love the company; they love the kind of culture, the science and the commitment to patients, but they basically said, ‘More and more, there’s nothing we can do,'” Anderson said. “It’s just too hard to get ideas approved, or you have to consult so many people to get things done.”
Reduce periods by 99%
Anderson said the plan involves cutting the company’s literal rules — Bayer’s regulations that run to more than 1,300 pages — by 99 percent. “It’s actually longer than ‘War and Peace’ and a lot less exciting,” he said in a video about the reorganization plan.
That’s a key part of Anderson’s proposal: remove much of the middle management and let employees choose which projects they want to pursue.
At a corporate training session in New Jersey, employees of Bayer’s consumer health division got a glimpse of the new structure, the Wall Street Journal reported.
According to the report, employees sat in a circle and had the option to stand in the middle to share an idea. If colleagues were interested in the concept, they could join their colleagues in the middle of the circle.
“You’re going to self-organize,” a corporate trainer said during the session, according to The Journal.
The company has not revealed how many managers will be cut. Thousands of U.S.-based managers will be reorganized into different positions while other roles are eliminated, according to the Journal.
Anderson’s plan will reduce organizational costs by about 2 billion euros, or about $2.17 billion, the German company said in a March press release.
Reorganization projects are not only born from employee frustration. Investors are also demanding a quick turnaround from the pharmaceutical giant, according to The Journal.
Last year, Bayer saw its stock fall by more than 50%, from 60.40 euros to 27.64 euros. The company also faces about 34 billion euros in debt, according to the Journal, and massive settlements after acquiring Monsanto, maker of the weedkiller Roundup, in 2018.
Advantages of the redesign?
A decentralized approach to the workplace could prove beneficial for a company facing turbulent times, Nicholas Bloom, an economics professor at Stanford University, told BI in an email. In 2021, Bloom published an article in the American Economic Journal that examined what types of organizational approaches could help companies better respond to “macro shocks.”
The paper finds that “decentralized companies tend to be more successful in periods of rapid change because they can respond quickly,” Bloom said. “By removing layers, you increase response speeds, which is particularly valuable in turbulent times.”
However, a more centralized structure also has advantages. Studies have shown that middle managers have a greater impact on a company’s overall performance and that there are limits to the number of people a single manager can supervise, Business Insider previously reported.
But in times of uncertainty – for example, two major wars and highly polarized politics – Bloom says being agile could prove essential.
“Think about football players losing 10 pounds,” he wrote. “Less muscle but more speed, and in a fast-paced game, speed is what matters most.”
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