How the Right Governance Structure can maximize your Partnership Value

23rd August 2016 (Last Updated July 18th, 2018 09:44)

Dr. Yuri Martina, Vice President Clinical Operations, provides tips on how to put in place an effective governance model

How the Right Governance Structure can maximize your Partnership Value

In 2008, the CRO market counted for 20 Million USD in the US alone, which was approximately 30 percent of the overall development budget spent by pharmaceutical companies in the same year. Additionally, since the origins of Clinical Trials, the industry has witnessed an immense growth of partnerships and preferred service provider relationships between many CROs and their Pharma-clients.

In spite of these impressive numbers pharmaceutical companies and their CRO partners fail to reach the benefits expected by such partnerships. Development timelines have been increasing an average of 20 percent in respect to 5-10 years ago and similarly costs have reached more than 2 Billion USD per each new drug developed in a medium complexity situation. Also, it has been estimated that more than 80percent of partnerships fail to deliver more than 90percent of their expected value (e.g. savings, efficiencies, higher quality and shorter cycle times).

Five main factors are important to maximize a business partnership in Clinical Trials outsourcing:

  • Due Diligence and Contractual Negotiations,
  • Governance,
  • Goals, Metrics and their Definition and Measurement,
  • Program Management, and
  • Talent Retention

Among these, Governance is a critical one that is often underestimated by companies on both sides and used sparsely or not appropriately as an issue escalation tool.

In order to build proper Governance it is important to define the partnership goals and objectives as a first step. In this process, both companies need to openly recognize their different (and often contrasting) company objectives, such as profitability for the vendor and quick development for the Pharma-company.Once that is clear, both parties should look to establish how their singular objectives can be achieved while defining clear and unique goals for the partnership as a whole. What’s more, these new set of objectives should ideally be defined for the short, medium and long term (missions or visions).

Once the objectives for the partnership have been decided and agreed upon, the two partners should identify a clear set of performance and quality indicators as well as metrics to monitor the progress towards achieving the set goals. It will be critical to choose a set of metrics that measures all aspects of the partnership.It is often the case that metrics are designed to measure only the vendor performance rather than the whole team performance, so it’s important to create a set of metrics that are all encompassing.

With these two initial parts set, we can now build the Governance structure to oversee our projects and programs. Any Governance structure should be composed by three levels:

  • The Operational Management Group,
  • The Joint Operations Committee and
  • The Board of Advisors.

This structure is often represented as a pyramid with the Board of Advisors on the top. I prefer to represent this as an inverted pyramid, with the tip still constituted by the Board of Advisors, to underline that the Operational Management Group, which typically meets on a weekly basis, is actually the most important part of the Governance structure.

The Operational Management Group provides immediate resolution to project and program issues and ensures the partnership progresses towards the set objectives and goals. It is composed of peers from both parts and is entrusted with the day-to-day business of the partnership. It should meet formally on a weekly (or bi-weekly) basis, but more importantly, there should be ongoing and constant open communication among all its members cross-functionally, and also in the different regions to ensure a quick resolution of all possible issues and fast problem solving.

The Joint Operational Committee usually comprises of managers (middle and high management level) from the vendor and the Pharma-company. Usually meeting on a monthly basis, this committee should manage the overall service delivery as well as monitor the progress of the outsourcing relationship in its entirety.

Finally, the Board of Advisors is attended by senior executives from both parties and is entrusted to provide high level strategy, goals and objectives for the partnership as a whole. Additionally, it is in charge of transformation management, which aims to improve the overall project management, execution and efficiencies of the outsourcing partnership.

The three Governance levels should always be based on metrics analysis. In fact, metrics should go through all levels and suggest ways forward based on their trends and improvements or worsening. Clearly, different metrics will be used in different levels so that the metrics used at the Board of Advisors level will be measuring the overall partnership across different projects and programs and not look at the single and more detailed metrics at the project level which will instead be used at the Operational Management level. Metrics at the more “senior” levels should be based on the metrics at the project level and all should be rigorously comprehensive in measuring the three project dimensions: time, resources and costs (efficiency, effectiveness and quality).

In summary, a Governance setup, as described above, will allow efficient management of the partnership while foresting ongoing improvements. This will enable the partnership to achieve the goals it set out to accomplish: efficiency and cost reduction.

It will be, and, unfortunately, often still is, a big error to limit Governance to an issue escalation and problem solving structure.This will simply replicate what should be happening at the Operational level, achieving the only result to disempowering the project/program teams and impeding achievement of higher and longer term strategic outsourcing goals. However, almost unbelievably this is today the common and most diffused practice, understanding and use of a Governance structure (issue escalation). Without a substantial change in this way of thinking, outsourcing partnerships, regardless of their degree of integration and synergies, will keep failing to achieve the expected benefits thus costing Pharmaceutical companies enormous efforts in money and resources.