An R&D SME’s Cautiously Optimistic Journey Into The Land Of HR- A Report From BioNJ’s HR Conference, September 23, 2022

As a regulatory and clinical operations SME I was a bit of a fish out of water at September’s BioNJ’s Pharmaceutical Human Resources Conference.  Representing LifeSciHub, a network of independently incorporated experts from all across the drug development spectrum, I was there to better understand pharma HR challenges and barriers to working with independent experts more strategically.

The biggest take away was that R&D talent is the hardest to acquire and retain.  It is also the among the highest impact for the organization, which greatly amplifies the organizational pain of losing the R&D talent competition.  This came up again and again throughout the day, with universal agreement throughout the attendees. 

Ed Speidel, a Partner of Human Capital Solutions at Aon, presented fascinating results from Aon’s 8th HR Pulse Survey[1].  He articulated in data what the entire pharmaceutical industry feels on a daily basis, re: talent:

·       Product Development (R&D and Engineering) expertise cited as being among the most difficult to source

·       Turnover in US Life Sciences & Med Device is extremely high, between 16.3-21% voluntary/overall turnover

·       Who is leaving?  Experienced, technical, mid-career professionals in product development/R&D (55%)

·       Why are they leaving?  Several reasons cited, top 3:  better career opportunities (78%), better pay (65%), and lack of career progression (43%)

The adjustments drug sponsors are making in response include retention related:  offering more hybrid and remote working (94 and 66%, respectively) and flexible hours (86%);  and attraction related:  sign on bonuses (78%) and skills development plans (75%).

Aon gave strategic advice regarding how to compete for this extremely valuable talent:  “Focus compensation strategies around the highest impact talent,”  referring to R&D.  “Consider taking a defensive 75th percentile strategy.”  Ed added, “I don’t see how you have any other choice.”

I admit, coming from R&D, not HR, I had to google some of this stuff.  Apparently “75th percentile” means companies that aspire to pay significantly above the “market median” (50th percentile) for a given role.  A “defensive pay strategy” is designed to retain valuable talent at risk of being taken away by competitors.  Translation:  pull out all the stops to find and retain R&D talent.

And here we get to the heart of the matter.  In all the discussions that followed regarding HR’s hardest and most painful talent shortages, i.e., R&D, all proposed solutions were based on the traditional full time employee pathway, as if no other pathway exists. 

For example, the statistic that 78% are leaving for “better career opportunities” does not distinguish what those opportunities actually are.  In the room I sensed a strong implication/assumption that the 78% are leaving one full time role and going to another, as an FTE.    Subsequently all HR activities around attraction and retention focus on full time employee strategies, assuming the competition is another pharmaceutical company or CRO. 

But what if that’s not true?  What if instead of going to another drug sponsor, a good portion of these incredibly valuable mid-career R&D experts have instead decoupled from the linear career paths and the corporate ladder to become independently incorporated expert consultants?  What if it’s actually a surprisingly large percentage?  What would the impact of HR attraction and retention strategies need to be to engage this “new” talent pool?

 Quantifying the R&D Talent Shortage

Figure 1: Quantification of NJ R&D Resource Turnover

Applying some of the conference data to the 50,000+ biopharma employees in the state of NJ[2], LifeSciHub found that there are at least 4,000 high-impact, hard to acquire, NJ-based R&D professionals subject to high turnover, see Figure 1.

It is indisputable that some portion of that 4,000 has left full time employment a la the Great Resignation to become independent consultants.  To test the effectiveness of current HR attraction and retention strategies LifeSciHub conducted a brief survey of the small business independent workforce.   Table 1 presents the degree of responsiveness for two respondents.  Respondent comments are fully detailed in Table 3.  This indicates the independent workforce is overwhelmingly non-responsive to traditional HR attraction and retention strategies.

 Table 1:  Independent Workforce Responsiveness to Traditional HR-FTE Attraction and Retention Strategies- Summary

The “gig economy” is notoriously difficult to quantify, as evidenced by even the Department of Labor’s struggles[3].  Although we don’t know the exact percentage of the 4,000 R&D workers leaving the FTE path for independent incorporation, we know it is not zero.  Scenario Analysis is used to speculate, see Table 2.   In this model, the “Best Case” minimizes the number of non-responsive workers, using 2% as a conservative estimate.  Although 80 workers in the entire state of NJ may not seem like a very high number, this represents a rate which, considered over time represents a much larger pool of excellent, available R&D talent.

Table 2:  Scenario Analysis

Nothing here suggests that a drug sponsor should completely overhaul all HR strategies, only to suggest the addition of different strategies aimed at a different type of worker.  Competition compels all businesses to reach into new areas, and talent acquisition is subject to these same pressures.  So what innovative strategies should HR consider to attract this “new” talent pool? 

Forgo the W2, embrace the 1099:  Many drug sponsor HR organizations are adamantly against paying by 1099 due to perception of worker misclassification risk.  However the data presented during this conference show that there is perhaps even more risk to bear if key, high impact R&D work remains undone due to a lack of fit-for-purpose talent.  It is important for HR to internalize that some portion of the workforce has fundamentally transformed from employees to businesses owners.  This renders the misclassification risk moot- none of these experts want to be full time employees ever again.  To attract this type of talent sponsors need to develop strategies that align more closely with vendor management than Human Resources.  Why does the independent workforce so adamantly prefer 1099?  Please see Table 3, +. 

“Taskify”:  Is defined by  Future of Work thought leadership[4] as constructing work and workers in terms of specific, not necessarily short term, tasks.  “Roles” on the other hand, which is an artifact of full time employment, implies a collection of tasks, generally defined in a short narrative which is then challenge to maintain as an accurate description as the demands of work shift over time.   The job description itself may or may not be in alignment with available talent.  Take a recent quote from the Head of Nonclinical Regulatory Writing at a top 20 global pharmaceutical company: 

“We have a weekly resource shortfall of 20 hours per week of senior level nonclinical expertise [must have:  PhD toxicologist, 20+ years direct drug sponsor experience], 10 hours a week of eCTD Module 4 document formatting, and 10 hours a week nonclinical systems and processes informatics.  Technically we can squeeze this into a full time role however it would be very hard to find a single person who can do all of this.  Also, it  doesn’t make sense to have such a senior person spending time on an administrative and technical tasks.  What we really need is to use 3 different experts for these tasks.  Oh, and the work actually varies quite a bit from week to week.  One week could be 5 hours, the next 25, and some weeks no work at all.”

Drug development has a great taskifying-advantage in that much of the operational work required is naturally structured in fairly clear tasks, see Table 4:  Examples of Pharmaceutical “Taskifying”.  The benefits of taskifying include the ability to apply laser-focus skills  to exact high-impact tasks, greater flexibility and organizational resilience, and precise human capital ROI metrics. 

There is no pressure to engage an independent expert in 40 hour workweeks for long periods of time.  Independent experts usually work on 3 or more projects at a time, varying hours per week per their own discretion.  The above example is one of many demands for increased resource flexibility that the traditional FTE pathway can no longer perfectly address in all instances.

The Independent Workforce can be a Talent Pool Like No Other:  5 hours here, 10 hours there, onboarding, zero project delays due to contract issues, experts that hit the ground running- no training required, on boarding and off boarding at a moment’s notice- all this and more is possible using a independent workforce talent pool.  Powerful Future of Work innovation!  Here’s how it works:

For every “task” project owners line up 3-5 independent expert providers (Eps), fully vetted, contracted and compliant via the LifeSciHub platform.  One EP may have full time availability- perhaps they are between projects or just coming off a project hiatus.  Perhaps 2 are not available at all for the next 3 months.  The others can probably liberate 5 hours or more a week to get started right away, and can calibrate their other project commitments depending on your project needs, adding more time as necessary.  You, or someone else in your department/company, will likely require work on that “task” again in the future.  Once again, some in the already-established and utilized “Talent Pool” will have availability, others won’t.  But between the 3-5 EPs you will be able to get exactly what you need, on-demand.

This doesn’t work in traditional, HR-based staffing, which is predicated on the belief that all workers want to be employees, and work full time.  Whilst true for the majority of workers, it inadvertently frames all resource solutions as rigidly JIT- Just in Time.  You may know of a resource need 6 months from now but there’s no use checking ahead, it will only make sense to check at that particular moment in time who is available, who is looking for work.   This is totally unnecessary with the independent workforce.  The trade off is that you may not get a perfect, long term 40 hour work week right from the start, because independent EPs all have other client commitments they need to honor.  This is a radically different way of addressing talent needs. 

Contracts are made easy and delay-free by this approach.  Since the Consulting Agreements have already been put in place between your organization and LifeSciHub (preferably a Master Services Agreement), as well as between LifeSciHub and each EP, all that is required to onboard is an SOW.  SOWs can be written in a variety of ways depending on each party’s needs and preferences.  It could be a block of hours over the course of a year, to be utilized at the discretion of the parties.  If there is no need, then the Hiring Entity doesn’t pay for those hours.  Flexibility is the goal, and the promise.

Innovate Legal, Too:  The digital era and pandemic sent seismic forces roiling across every aspect of the business world, and legal is no exception.  The sharing and gig economies have created new types of contracts to reflect new economies, new understandings of risk, and deliver vastly different benefits.   These innovations challenge the classic legal strategy: de-risk by driving spend towards large suppliers only so that we can maximize potential damages recovered in the event of a breach.

On the other hand, managing thousands of small, individual contracts is a costly, risky endeavor as well, which, up until now, has led organizations to widespread subcontracting.  In the 2000’s Merck became (in) famous for this in the vendor ecosystem by reducing it’s “preferred provider” list to under 100, and eliminating almost all spend outside of that preferred provider list.  “If you want to do business with Merck, go through this Preferred Provider as a subcontractor”.   The preferred provider was free to select and impose mark ups at its own discretion.  Part of Merck’s Governance of this model assumed the preferred provider would seek and demonstrate competition among its subcontractors, which, in theory, served as an invisible, cost-controlling hand.  Only Merck can say whether or not that proved to be effective.  One fact is universal:  even if it is more cost effective to contract with all entities directly, it is a great struggle for all pharmaceutical companies to manage contracts.  Looking at the proliferation of independently incorporated micro-businesses, such as the independent R&D workforce, any organization would feel daunted. 

A “platform”[5] approach solves this problem by consolidating contracts efficiently and transparently.  Risks are addressed differently than traditional B2B contracts.  Legal tends to see anything different as a risk to be avoided at all costs, but as the heat of competition forces all of us out of our comfort zones, pharma legal needs to adapt to the “B2P” (Business to Platform) relationship.  It is important to emphasize, to legal, that the benefits afforded by B2P are significant.  Though new to life sciences, most other verticals already have and are reaching mid-maturity, even highly regulated, technical & scientific, and high risk industries such as aerospace.[6]

Quantify Your “Hidden” Costs of Subcontracting:   If you are a drug sponsor it is very likely you are already engaging with the independent workforce, you’re simply paying for layers upon layers of middlemen in order to do so.  The exact costs are hidden, because the supply-side costs are never disclosed.  Many an independent experts discovered this firsthand upon embarking on the independent journey.  “JD”, a biostatistician whose last industry title before leaving to become independently incorporated was Vice President of Biometrics for a mid-sized US based pharma, relates his experience:  “As VP of Biometrics I hired contractors all the time, so I know exactly what drug sponsors are willing to pay for this expertise- between $300-400/hr.  Once I became independent these same middlemen I used to hire through have been trying to recruit me for project work.  They say they can’t go higher than $180!  I’ve told them to stop calling me, I will never work through them, it’s a joke.”

One of the greatest, and most tragic, hidden costs of subcontracting is the net-negative impact on expertise quality.  So long as the middleman controls all information, they are incentivized to increase the delta between demand price and supply cost- that is how they make their profit.  Since it’s unlikely to convince the hiring entity to pay more per hour, they have no choice but to drive the supply side down.  As JD’s experience shows, if the middleman stands to lose money, they simply will not forward candidates to the hiring entity, or worse, will continue to forward low quality talent and then claim that’s all that’s available.  That is simply not true, as evidenced by the growing independent workforce.

A great benefit of working with a two-sided marketplace platform is the radical transparency it provides.  Both demand price and supply cost are not only fully disclosed, it enables a truly competitive market that dictates the talent financials.  The platform charges a flat percentage based on the agreement made directly between the two parties. 

Conclusion

The shifting sands of uncertainty and competition force new processes and pathways upon businesses and individuals, often in unexpected ways. There once was a time when drug sponsors conducted all drug development work in-house.  It was unthinkable to do such critical work as manufacturing, discovery or clinical trials “outside”.   However starting in the 1980’s, drug sponsors started to dip their toes into outsourcing.  By 2022 nearly 50% of drug development work is now outsourced.  The organization’s culture adapted accordingly.  No longer does a drug sponsor define itself by how well it manufactures product or runs clinical trials, but by the primary metric of improving patient care. 

At the moment, many pharmaceutical companies still claim deep and meaningful cultural ownership over “its people” as if there is something extra special about the organization because of its specific employees.  However with a nearly 20% turnover rate, is that idea logical or sustainable?   What exactly is the drug sponsor’s “core competency”?  A certain number of full time employees of a certain duration, or saving lives and improving patient safety and care?   Seen in a historical perspective, a deep embrace of non-FTEs might be the next step on the path of the pharmaceutical industry’s inevitable evolution.  As Darwin said, ”it’s not the strongest that survive or even the most intelligent, but those that are the most adaptive to change.”

Table 3:  Independent Workforce Responsiveness to Traditional HR-FTE Attraction and Retention Strategies- Proof Points

Table 4:  Examples of Pharmaceutical “Taskifying”

[1] Aon, 2021.  Global HR Pulse Survey Managing the Great Resignation and What’s Next.  Aon Insights.

[2] PhRMA, Teconomy Partners.  The Economic Impact of the U.S. Biopharmaceutical Industry: 2020 National and State Estimate. 2020.

[3] National Bureau of Economic Research.  Measuring the Gig Economy:  Current Knowledge and Open Issues.  NBER Working Paper Series.  2018. 

[4] Jesuthasan, R.,  and Boudreau, J.  Work Without Jobs:  How to Reboot Your Organization’s Work Operating System.  MIT Press, 2022.

[5] Parker, G., Van Alstyne, M., Choudary, S.  Platform Revolution: How Networked Markets Are Transforming the Economy―and How to Make Them Work for You.  W.W. Norton & Co, 2016

[6] The Future of Work.  NASA, https://blogs.nasa.gov/futureofwork/