MANAGING ORGANIZATION BEHAVIOR IN AN ORGANIZATION

QUESTION

ResMed — Waking people up to sleep

By Denise Jepsen

Founding story

High-quality sleep is essential for good health. Pro­fessor Colin Sullivan and colleagues at the University of Sydney, who studied sleep-disordered breathing, developed the first non-invasive treatment of obstruc­tive sleep apnoea (OSA). On the basis of that research, ResMed was founded by Dr Peter Farrell in 1989, specialising in products for sleep-disordered breathing. While more than 20 million people in the United States are estimated to be affected by OSA, tens of thousands of patients throughout the world now lead healthier lives thanks to ResMed’s inno­vations. A face mask worn at night, providing con­tinuous positive airway pressure (CPAP), is the core device that established ResMed in the market.

Current situation

ResMed is a global biotechnology organisation, listed on both the New York Stock Exchange and the Aus­tralian Stock Exchange. Headquarters are split between two countries. In the United States, the San Diego office hosts corporate and legal support, while the company’s Australian roots are maintained in Sydney. The 1340 employees are spread as follows:

• Americas — approximately 330
• Asia–Pacific — approximately 650
• UK and Europe — approximately 360.

Revenue in 2002 was US$204 million,¹ reflecting annual revenue growth of 32 per cent in 2002. ² ResMed export about 96 per cent of its Australian manufacturing output to more than 50 countries through offices in the US, the UK, Finland, France, Germany, Sweden, Switzerland, Singapore, Malaysia, Japan and Australia and network agent distributors in other countries. While a number of its competitors are diversified into other medical products, Dr Farrell has clearly steered ResMed towards a single focus: the diagnosis, treatment and management of sleep-disordered breathing.³ Investors are advised by Dr Farrell to be in for the long term, not a dividend return^,4 as profits are reinvested back into the company for research and development.

ResMed’s successes have been recognised by awards for exporting, such as the DHL Australian Exporter of the Year Award for 2002 and the NSW Exporter of the Year for 2002. For six years in a row ResMed has made it to the Forbes 200 Best Small Companies in America (most recently in 2002), and in 2001 it was included in Fortune Small Business magazine’s America’s 100 Fastest Growing Small Business Companies.⁵ Dr Farrell was named Ernst & Young’s Australian Entrepreneur of the Year, recognising entrepreneurial success and benefit to the Australian economy.

The culture

ResMed’s culture is reported as being ‘high-energy entrepreneurial’⁶ and is deeply steeped in Dr Farrell’s personal values. The ResMed Corporate Values are : ⁷

• Demonstrate ethics and integrity.
• Be apolitical and a team player.
• Be a self starter.
• Have a sense of urgency.
• Be instinctive.
• Be imaginative and creative.
• Be an active communicator.
• Show commitment to continuous improvement.
• Show self-esteem.
• Be value-driven.

ResMed operates in a fast-changing technology environment in which cycles times are constantly being reduced and the useful life of key technical knowledge is forever shrinking. The fast-reactive culture of ResMed comes not just from Dr Farrell’s vision, drive and commitment, but from the intellectual capital and innovation of its people, the sustained global growth in a market of unmet clinical needs and the support of the investment community. The sense of urgency is paired with a sense of optimism and a pioneering spirit.⁸ ResMed sees itself as growing at break-neck speed in terms of activity, revenue and employment. Even the Annual Report reflects growth over the past ten years, not just over the traditional two-year growth period.

As reflected in its corporate values, ResMed’s employees are expected to compete with their colleagues for space for their ideas. Known as an opinion culture,⁹ there is a healthy respect for intellectual abilities. The company wants ideas to come to the surface and ‘fight for airspace’.

The contradiction in having a reactive culture in a regulated environment is acknowledged by the organisation and managed accordingly. The ResMed Quality Assurance mission statement states the need for ‘active monitoring and prevention’ of systems. ¹⁰ The Quality Assurance system governs the design, development and manufacturing of their products.

Different subcultures are apparent in different parts of the organisation. The manufacturing group, for example, without dedicated individual computer access, tend to meet in large groups to receive messages from the CEO and other executives. On the other hand, the professional and support groups, who have their own computing facilities, receive their corporate messages by email and rarely meet together. Three or four times a year Dr Farrell conducts ‘inspirational’ meetings for employees in the Sydney premises car park. He gives them his thoughts on the business, shares anecdotes and comments on financial results; sometimes he might share the results of clinical studies; he tells of key new hir­ings and creates the vision for the next year (or five). Employees respond positively to these opportunities to hear from Dr Farrell directly.

The Australian workforce

The ResMed workforce is educated, experienced, culturally diverse and stable. Reflecting the tight statutory requirements for the manufacturing of medical devices and the strong focus on research and development, the Australian office has many employees with double and triple degrees. There are around 47 nationalities represented in its workforce, with excellent racial tolerance and harmony.¹¹ The workforce has been growing annually at around 27 per cent (compound) in the past six years. ResMed also boasts low employee turnover, so a growing stable workforce

is supporting the organisation’s Australian operations.

The company has yet to place a woman on its Board of Directors, however, a point increasingly noted in the Australian business media.¹²

ResMed recruits to fit the team requirements. The behavioural qualities of new employees will depend on the role — whether as a key employee or specialist, or in a position filled by people with transferable skills. Assessing for fit in both the team and the organisation is essential, as indicated by the fact that usually six to eight people attend interviews at different times for a new staff appointment. Appointment is made by consensus. In return, ResMed offers employees benefits such as stock options, salary continuance, life insurance, income protection, and rewards and recognition programs.

The problems

The growing stable, intelligent workforce brings with it problems not apparent at first. How do you manage intellectually curious scientists or researchers and keep them as long-term employees?

An internal prize for innovation is offered to individual or team employees in the product development area or elsewhere in the business. The John Wickham Memorial Prize for Innovation was named after a late employee who ‘was always known to see smarter and simpler ways of doing things and often came up with a practical and superior solution and, therefore, a better commercial solution for ResMed’. The prize is to promote, encourage and inspire those qualities in ResMed people.

Adopting another technique to keep the workforce inspired and motivated, ResMed brings the university to its employees. The Australian Graduate School of Management has run Executive MBA management and leadership programs in-house, and other programs are planned.

ResMed applies a number of other strategies to motivate and retain its key employees, including probationary periods to manage new employees and developmental programs to extend existing employees. It maintains high levels of performance through a recently expanded performance management system.

Innovation in product

ResMed spends around 7 to 8 per cent of its net revenue on research and product development.¹³ As at January 2003 this has resulted in 339 patents and designs granted, and 381 pending.¹⁴ ResMed is not the only provider of products that diagnose and treat sleep-disordered breathing, so the company must constantly work on improving its market position. One way of doing that is by product innovation, which requires a workforce that is both creative and scientific while being meticulous and realistic. The irony here is that while the product innovation requires these expansive qualities, the particular field in which the employee is required to be creative is strictly limited to the sleep-disordered breathing market.

Routine work in the remaining parts of the organisation needs to be managed at a steady rate. With medical authorities constantly monitoring the quality of ResMed’s products, it is imperative that precise attention is paid to every aspect of the manufacture to comply with statutory requirements and maintain the company’s integrity in the medical products industry.

Innovation in process

Process innovation refers to creating efficiencies in work practices. ResMed continually strives to meet the challenges faced by a high-tech, innovative industry. One example is the World Class Manufacturing (WCM) conversion program aimed at reducing operating costs for high-volume products. Launched in ResMed in June 2000, WCM (or agile or lean manufacturing) aims to continually produce the lowest-cost unit at the desired quality level in the shortest possible lead time. Initiatives in this program include product-focused teams, minimum stock levels and lead times, dedicated manufacturing cells, and simple visual cue systems.

Developed by Denise Jepsen, The Encouragement Company Pty Ltd. This case is intended as a basis for class discussion to illustrate either effective or ineffective handling of any situation.

SOLUTION

Effective or Ineffective handling of any situation at ResMed:

ResMed is one of the most growing small business enterprise. They are the most effective and integrated value driven organization, as per the case we can easily understand the kind of corporate strategy and environment they are following within the organization and that is resulting in the development and growth of the organization in an effective and competitive manner. The founder of the organization Farrell is very much concerned about his organization and keeps on making new objectives and mission for the organization that is working as a source of integrity in the ResMed.

As far as the various situation concerned in the case, we can easily see that there is a conceptual and integrated handling of each and every situation for the effectiveness and competitiveness within the organization.

1. Objective or the Company: To come up with an innovative kind of device that can reduce the issue of sleep-disorder among the people. That is one of the most important concerns among the youngsters nowadays. To reduce this sleep-disorder, they have come up with a device (CPAP) that provides continuous positive airway pressure and helps the people to take a healthy sleep.

They came up with an objective of “Waking people up to Sleep” and which is actually the need of the day in most of the developed countries such as USA and Australia.

1. Situation of the company: The ResMed is a small business enterprise with 1340 employees across three regions, America, Asia- Pacific and UK- Europe. They are having a compact grip over their employee and workforce. ResMed is growing with a fast speed, it can be seen from the data provided in the case, and they have gained a revenue growth of 32 percent in 2002. This is really a good growth at this time of high competition in the market. They have also received various awards for the fast growing small business companies in Australia. Dr. Farrell was names as Ernst and young’s Australian Entrepreneur of the year and many more other awards are also being rewarded to the company. These aspects really indicate that the organization is doing their efforts positively and with energy to make them self more focused towards the objective, mission and vision in an effective and efficient manner. That is resulting in the competitive advantage and integrity of the organization.
2. Culture of the Company: The ResMed Company has a great and effective work environment and the main reason behind their integrity and growth is their culture and transparency among their employees and the organization. They are value driven and very much concerned about the culture of the organization.

Their corporate values show their integrity and growth perspective itself:

1. Ethics and Integrity: They are vey much concerned about the corporate ethics and values and stick towards the ethical aspects and in return they are gaining integrity and growth in the market. They have made their organizational values and concerns ethical and transparent that is helping and supporting the organization in situation handling and also working as strength for the organization.
2. Team work: They believe in team work, that is again a kind of effective strategy for the organization point of view. They have made their strategies and values in such a manner that all the issues and problems get resolved at the starting point itself and even there is no space of any kind of inefficiency and issues within the organization.
3. Innovative and imaginative: Innovation is the focused concerned for the company to make the employees more competitive and innovative that will help them and the organization at the same time.
4. Effective communicator: Employees should be effective and active communicator to perform their task effectively and efficiently and this will also help in passing their message to the people.
5. Commitment: All the employees and stakeholders are very much committed towards the objective and values of the organization. That is helping in resolving any kind of issues in a combined manner.
6. Self-esteem: The organization has a self esteem concern among all the employees that is making a kind of positive kind of attitude among the employees and helping them to be competitive and energetic at work place.
7. Value driven: ResMed is value driven organization. That can be seen and derived from their approach and the kind of growth and market share they have. These aspects are really a kind of add on advantages for the organization and leading to the growth and development of the organization.
8. Workforce: They have the effective workforce and they make them competitive and effective starting from the day one in the organization. The employees are well educated, experienced, culturally diverse and stable. This is a kind of effective and integrated workforce that is being encouraged and developed by the organization for the betterment and long term sustainability in the market.
9. Issues and the remedies: although there are diverse workforce and that is leading in issues and problems in the organization sometimes. But they are very much conscious about these kinds of issues and proactively handing these issues.

They have encouraged employees with various kinds of motivational factors such as additional perks, add on features and advantages to the employees, Stock options, insurance schemes and others. These aspects are attracting the employees and making a new dimension for the better approach and improvement options in the organization.

Various kinds of training and development programes is being introduced such as integrated MBA programs in collaboration with the Australian Graduate Business School and other programs. ResMed is also implementing other various kinds of integrated strategies for the overall development of the workforce within the organization. To keep them inspired and motivated and energized they are continuously working over their employees satisfaction and development.

1. R & D in products and process: These aspects are clearly showing that there is a strategic and competitive planning behind each and every step of the ResMed. The whole organization is totally devoted towards the one objective to make the organization more competitive and integrated. As a result they are growing in an effective and efficient manner.

ResMed produces product which treats sleeping   disorders, but there are already companies in the        market which are producing such products, so it is required   by resmed to continuosly innovate    its producy    and do the necessary modification as and when required. For this require employees who are scientific thinkers and will do the necessary   modifications.

Innovation either  in product or prcocess is mainly defined by three factors:

a)Capacity-what are the new ways to deliver service to customers

b)Capability-it includes the new services i.e. what we can deliver

c) Relevance-what are the new ways to meet customer needs and demands, how their services and customers needs match.

So the major driving forces of product innovation  in    ResMed are:

Customer needs, wants and demand keeps on changing and as customer is the king, a company has to innovate their services in order to meet the new demand of customers

Technological change- new technology have come up which has made the services more efficient and effective

The client interface- innovation in product   takes place by the effective and changing role played by firms with the customers

Competition- standardization of services have become a completive strategy of many firms

Demography plays an important role in innovation.The socio –economic demographic character of each country decides what is the living style of people, whataretheirtrends and on the basis of this they can identify the key products which is is unique according to the living style and standard of people, so a company has to consider the changing patterns of living in order to introduce new changes in Products

Resumed focuses on innovation, because it is the root cause for the invention. Since, innovation is the generation of new idea and based on that idea, the new invention is done. In other way both are mutually dependent on each other. First the innovation takes place and then the process of innovation.Product   change will decide waht is the process to be dollowed to bring about  the change.For this it has established various labs  which produces the best quialty products in the shortest possible time

So research and development process in ResMed is such it can continuously fulfil   customers demands as weel as increase its revenue   also without increrasinging its operating cost

Conclusion:

ResMed has today grown as one of the biggect growing firms for producing the sleepdisorder medicines and this is becuse it follows an   integrated approach forits management be it for, people, process or product.it has taken all steps tomake its product a wellknown brandin themarket and fight the rising competition.the excellency awards received by it are becauseof it continuos effort to achive its mission and objectives.

ResMed is an example of  how  small company can grow if it continuously focus on its goals and objectives and take the necessary steps as and when required to fight the tough  competition.ResMed is also an example of how success can be achieved by continuous effort, as today it is one of the best biotechnology  firms in the world.

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