BAYER - S.O.S! (SINK OR SWIM!)

There’s HIGH IMPACT CHANGE and then there’s RADICAL CHANGE!

I’ve been watching the Bayer “internal slash and burn” programme since it kicked off with interest! Bayer’s plan is to realise €2 billion in cost reductions by 2026, which involves c.5,500 layoffs, mostly in managerial positions.

In place of managers, Bayer got rid of annual budgets and asked staff to organise themselves into 90-day “sprints” in self-directed teams. Anderson, Bayer's C.E.O promised the vast majority of his staff would be operating under this model by the end of 2024.

“Rather than a lumbering corporation, Bayer will emerge as agile and bold as a startup—but one with operations in more than 100 countries. I’m convinced that this dramatic change will accelerate and unlock the value creation in each of our businesses,” Bayer C.E.O., Anderson wrote in a commentary piece for Fortune in March, 2024.

As the company reports a $4.1 billion net loss and adjusts its profit forecast downward, their market cap has fallen more than 44% . The stock price hit a 20-year low last November - "Houston, we have a problem!"...

Typically, German companies are often known for their conservative approach, deeply rooted in cultural, economic, and historical factors. This reputation underpinned by:

·       Risk Aversion,

·       Focus on Quality and Precision

·       Hierarchical Structure

·       Financial Prudence

·       Long-Term Employee Relationships

·       Sustainability and Responsibility

This careful approach ensures (generally) sustainable growth and reduces exposure to reputational risks.

From what’s being said, pretty much a year down the track from when the new model should be reaping the so-called rewards, it seems Bayer's “struggle is real!”

A total overhaul of its leadership by "firing all their bosses", raises several key questions:

1. Strategic Reset

Has the dramatic strategic reset worked (so far)? Seems not - companies sometimes undergo significant leadership changes in response to financial underperformance, reputational damage, or strategic misalignment. Bayer has faced challenges, particularly with the “albatross around its neck,” aka, the acquisition of Monsanto and the associated legal battles over glyphosate.

2. Cultural Impact

Removing multiple top executives may well have attempted to “cut cost the company into prosperity.” However, what price has been paid on disrupting the company’s culture, either positively or negatively? A clean slate might inspire employees and stakeholders who are dissatisfied with the old leadership, but it could also lead to instability if not managed carefully.

3. Market and Investor Reactions

Investors often view leadership changes as a sign of either initiative-taking management or turmoil. The scope and communication of this decision will heavily influence market perceptions. If Bayer ties the move to a clear, compelling plan for the future, it could restore confidence – but has it so far?

4. Operational Challenges

Transitioning to new leadership/leadership style, particularly on such a broad scale, introduces risks. Institutional knowledge may be lost, and decision-making could slow down during the adjustment period.

5. Precedents and Outcomes

While leadership changes are common, firing all top executives at once is rare. Observers might compare this to other corporate restructures, such as at General Electric, Uber, though those involved fewer simultaneous dismissals. And of course there's Musk slashing of 6, 000 jobs - it's unclear how many of them were in management roles.

By Bayer implementing this RADICAL step change, it's shouting loud and clear to stakeholders that the company is in deep trouble and this change is the only option… S.O.S!

The success of such a bold step change depends on how it is executed, the calibre of the leaders left, ability of the “rank and file” to actually be able to “sprint” or are they “stuck in the starting blocks” …this year will be interesting as 2026 is looming!

MC