Case Study VIII | Leading the Largest Foreign Investment into Cambridge, MA. US $ 4.0 Billion

Mr. Gonzalez joined Novartis on March of 2000 after + 9 years in PepsiCo. After a year in the Consumer Health Business, Dr. Dan Vasella asked Mr. Gonzalez to join him becoming the Head of Human Resources for Research and Development. As Dr. Vasella presented the offer, there is no better place to be at than where you are wanted, in this case Pharma which is the center of Novartis and R&D which is at the epicenter of the success of Pharma. In addition, Dr. Vasella asked Mr. Gonzalez to write his own economic offer for the role, option Mr. Gonzalez did not accept

Situation:

Dr. Vasella had hired McKinsey to perform an analysis that would guarantee Novartis would keep the top spot on Drug Discovery and Drug Development. Their recommendation was that the Company needed to move the R&D group to the US to either the West Coast, San Francisco or San Diego or the Boston area. This was more complex because Novartis needed to preserve its Swiss Tax status that gave the Company a 10 percentage point advantage to its US competitors.

Actors:

  1. Dr. Dan Vasella

  2. Board of Directors of Novartis A.G.

  3. Head of Research

  4. Head of Development

  5. Head of Pharma

  6. Head of HR Novartis

  7. Head of HR Pharma

  8. Every R&D department head that would have to relocate

  9. President of Harvard

  10. Major of Boston

  11. President of MIT

  12. City Manager Cambridge

  13. Senator Ted Kennedy

  14. Senator John Kerry

  15. Swiss Government

  16. US IRS

Solution:

Mr. Gonzalez had moved Novartis Consumer Health from the US to Switzerland so he had built a relationship with the head Tax lawyer for Novartis US, in NYC. So he resolved the Tax issues first.

Mr. Gonzalez was the head of HR for R&D. As such, he built the staffing plan to hire the 1400 scientists to staff the new Novartis Institute for Biomedical Research. The initial Plan called for 400 scientists but that would make Novartis me too in Boston. The staffing work was the same for 400 as it was for 1400 scientists so the only change was the amount of the investment from US $ 400 M to Us $ 4.0 Billion.

Once the project was determined there was no one executive in Novartis willing to take it on. Mr. Gonzalez knew this was a life changing project. He took into account the agenda of each Actor and determined he was the best player to undertake this challenge. He went to Dr. Vasella and offered to run the project. He became the COO for Research and started the project. He moved to Cambridge while his family stayed in Switzerland. He flew back and forth to Basel as needed and his family came once to visit him in Boston.

Mr. Gonzalez had built his staffing team in Basel and he used the remote team to scout the market to identify the talent to work in the new Institute yet to be built. At the same time he negotiated with the city and the State to get tax incentives to reduce the cost impact. On one of his trips back to Basel, he was informed the President of Harvard and the Major of Boston had come to Basel to get an answer as to why the Company was choosing Cambridge instead of Boston. The CEO Dan Vasella a Graduate of Harvard was not going to meet with them and it was up to Mr. Gonzalez to deal with this conflict which was a potential big staffing issue as Harvard was to be a major sourcing ground for the Company.

Mr. Gonzalez met with the two dignitaries and sent them back home without success as the project was already underway because Boston did not have as great a location as Cambridge did. Additionally the move to buy the Nekko Factory building a historical site in Cambridge would stop the expansion of a competitor Millennium which at the time was the largest Bio Company in the area. Boston did not offer any of these advantages and besides we were just across the river from Harvard and the major medical centers in the city.

This has been the largest game theory project Mr. Gonzalez has handled. He started by clearly identifying everyone’s agendas. He then constantly looked for the Nash Equilibrium for each step of the project. There were many steps:

  1. Turning around the Board decision from US $ 400 M to US $ 4.0 Billion

  2. Convincing Dr. Vasella to bet on him instead of bringing a new Mega Project Manager

  3. Fighting the intra wars with the other HR Executives

  4. Obtaining the support of the Head of Pharma, even though he would lose the Research Group and significantly change his job

  5. Dealing with the President of Harvard and the Major of the City of Boston

  6. Bringing Senator Ted Kennedy to the initial announcement of the US $ 4.0 Billion investment, the same day that the Catholic Church was accepting its role in the child abuse scandal in Boston

  7. Obtaining a favorable ruling from the Swiss and US tax authorities to retain the Swiss Tax treatment over the compounds discovered which still takes place in Basel.

  8. Relocating the key scientists from Basel to Cambridge and building the appropriate relocation packages to make these moves non-contentious and maximize the output of each executive and scientists.