Bayer, the maker of Alka-Seltzer, Claritin, and other popular over-the-counter drugs, has been in a rut, and its leader believes he has a plan to get the company out of it.
The idea involves slashing the corporate bureaucracy, giving employees more control, and, hopefully, as a result, allowing the company to innovate efficiently.
Bayer CEO Bill Anderson, who has been the chief executive since June 2023, even has a fancy corporate name for his un-corporate plan: “Dynamic shared ownership.”
“We hire highly educated, trained people, and then we put them in these environments with rules and procedures and eight layers of hierarchy,” Anderson said in an interview with Business Insider earlier this year. “Then we wonder why big companies are so lame most of the time.”
Anderson’s plan involves a radical new look for the workplace.
In a traditional corporate setting, the organizational chart flows upward: Lower-level employees have managers, those managers have managers, and so on until the top of the chain.
Anderson told BI that employees have expressed issues with this traditional structure, especially at large companies. According to Bayer, the company employs just under 100,000 people.
“People love the company; they love the sort of culture and the science and the commitment to patients, but they basically said: ‘Increasingly, we can’t get anything done,'” Anderson said. “It’s just too hard to get ideas approved, or you have to consult with so many people to make anything happen.”
Cutting the rules by 99%
Anderson has said the plan involves cutting the literal corporate rulebook — Bayer regulations that run more than 1,300 pages — by 99%. “That’s actually longer than ‘War and Peace’ and a lot less exciting,” he said in a video about the reorganization plan.
In comes a key part of Anderson’s proposal: Cut a big chunk of the middle managers and let employees choose the projects they want to pursue.
During a company training session in New Jersey, employees of Bayer’s consumer-health division got a preview of this new structure, The Wall Street Journal reported.
According to the report, employees were seated in a circle and were given an opportunity to stand in the middle to share an idea. If fellow employees 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 hasn’t disclosed how many managers will be cut. Thousands of US-based managers will be reorganized into different positions while other roles are eliminated, according to The Journal.
Anderson’s plan will cut organizational costs by about 2 billion euros, or about $2.17 billion, the German company said in a March press release.
The reorganization plans didn’t solely stem from employee frustrations. Investors are also demanding to see a fast turnaround from the pharmaceutical giant, according to The Journal.
In the past year, Bayer has seen its stock decrease more than 50%, from 60.40 euros to 27.64 euros. The company is also dealing with about 34 billion euros in debt, according to the Journal, and massive settlements after it acquired Monsanto, maker of the weed killer Roundup, in 2018.
Benefits of the shake-up?
A decentralized approach to the workplace environment 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 a paper in the American Economic Journal that looked at what kinds of organizational approaches could help companies respond better to “macro shocks.”
The paper found that “decentralized firms tend to do better in periods of rapid change as they can respond quickly,” Bloom said. “By stripping out layers, you increase response speeds, which is particularly valuable in turbulent times.”
Still, there are also benefits to a more centralized structure. Studies have shown that middle managers have a higher impact on a company’s overall performance and that there are limits to how many people a single manager can oversee, Business Insider previously reported.
But in times of uncertainty — say, two major wars and highly polarized politics — Bloom argues that being nimble could be critical.
“Think of football players losing 10 lbs,” he wrote. “Less muscle but more speed, and in a fast game, it’s speed that matters most.”
