Melanie Stern is Section Editor of Families in Business magazine.
Pharmaceutical giant Boehringer Ingelheim employed its former tax principal to see its next generation into leadership. FIB examines Dr Heribert Johann's unusual role as the first non-family chairman of the shareholders' committee and next generation mentor
From the top of a two-year old, seven-story glass building that is the atrium of family-owned German pharmaceutical company Boehringer Ingelheim's operations, Dr Heribert Johann orchestrates one of the most important changes in a family company's life cycle. As chairman of the shareholders' committee, composed of six family members split into three groups (conforming to the traditional German family business shareholding structure, 'Stamm'), Johann sits at the very top of the business hierarchy and is the physical interface between the business and the family. Responsible for managing communications between the family, the board of managing directors, an external advisory board and the rest of the business, Johann has also been charged by the family with the job of mentoring multiple younger family members through their jobs within the company, with a view to one of them succeeding him as chairman of the shareholders' committee in the not-too-distant future. For the family to select a strong successor to Dr Johann is all the more important as the company enjoyed rude health in 2002, and will look to expand on that going forward. Despite the challenges of a deteriorating global economy, Boehringer's entrepreneurial attitude to downturn saw the company expand its workforce by 3,863 people worldwide.
Johann's position is rare among the family business community, not least because many families would not consider placing a non-family employee in such an involved position. Reflecting on this, one can imagine the accolade and the inherent pressure that go with it for Dr Johann.
Potential and experience
Johann joined Boehringer Ingelheim in 1975, following a stint within the mineral oil and drum steel industries and at a time of considerable change within Boehringer and the world at large, to head up the tax department. Showing considerable potential to contribute more to the company than orderly books, he moved up through the ranks, becoming a member of the board for the German operations, later becoming deputy chairman of the company while still installed in his financial duties. In 1989 he was appointed a member of the board of managing directors for the global business, progressing to chairman of the board to replace third generation family leader, Hubertus Liebrecht, after his death in 1991. Erich von Baumbach, son-in-law of the founder's son, retired in 2000 from his role as head of the shareholders' committee. He, along with the family, chose Dr Johann to succeed him as the first non-family member of the shareholders' committee – and indeed, the first non-family member to enter the fold of one of Germany's richest families on such intimate terms.
The tasks of the chairman include meetings and phone calls with the shareholders, board of managing directors and external advisory committee, keeping everyone up to date and fully informed on one another's activities, all of which must filter into unanimous strategic decisions for the company.
Capabilities and qualifications
Aside from several members of the family working outside the business, there are three Boehringer family members working within the business at different levels, within finance, marketing and sales, both in the German and international businesses. The aim, according to Johann, is to give them a similarly varied and multi-level grounding. "They all have different backgrounds and individual responsibilities. The family has been looking for operational experience in addition to field experience." Johann explains that there is no specific plan set out for specific family members to do specific jobs in a certain amount of time, but that as mentor to those next generation family members working within the company, it will be a case of natural selection – whoever appears to have the right qualities for the job of controlling the business from the family seat or as a member of the board of managing directors. "The family wants to maintain Boehringer Ingelheim as a family business – but the question is who will do that in the future," Johann reveals. "This depends on the development and requirements of the business, as well as the capabilities and qualifications the individual can bring to the table in the role of chairman."
Past and future
As with all founder-companies the business direction, strategies and vision were defined by the owner since the company's founding in 1885. The strong development of the pharmaceutical business in addition to the food ingredient business a century ago was a challenging move in the right direction at that time. The same applies for the early decision to focus on export and the internationalisation of the business. After World War II, under Dr Ernst Boehringer's and his brother-in-law Julius Liebrecht's guidance, the company soon started to install operating units in strategically important markets. As a result, Boehringer Ingelheim became active in the Japanese market as early as 1955 and established Nippon Boehringer Ingelheim in 1961. Since then, the company has expanded throughout Europe, the Americas and Asia.
But expansion of the business is only part of Boehringer's success story. Demonstrating openmindedness not found in many family businesses, the company also began expanding 'beyond the family' in employment matters. Early on, the family assumed a policy of inviting talented professionals with an entrepreneurial spirit into the company. They felt that new approaches and experience gained 'outside' could contribute positively to the development of the company. In 1953 Dr Walter Mayer-List became the first non-family member on the board of managing directors. As deputy-chairman he also was in charge of finance of the fast growing business. However, it took until 2000 for the first non-German board member to come on board. Dr Alessandro Banchi, from Italy, has been responsible for pharma marketing and sales since then. "The family has been encouraging the further internationalisation of the management at all stages and I am convinced that this will also be a critical success factor for the future success of the company," Johann explains.
Boehringer's open attitude and approach to running a family business doesn't stop there, however. In order to gain as much knowledge as possible, the company has established an advisory board of up to seven external experts. These experts meet regularly and bring to the table experience and talent from different areas of critical importance for the company, be it science, finance, legal or entrepreneurial and business knowledge. The road to be pursued in order to realise the future success is agreed upon in close cooperation between the board of managing directors, the shareholders' committee and the advisory board.
Community and philanthropy
Johann notes that a key reason he is proud of working within the Boehringer family and its business is the company's rich contribution to the local and global communities. In its home town and part namesake, Ingelheim, a small farming town outside of Frankfurt famed for growing white asparagus, producing red wine and being an administration centre of King Charlemagne of the Franks, a large chunk of the 30,000 inhabitants are employed by the company as their descendents were before them. The company has long provided for its staff in many ways, including being one of the first companies in Germany to provide paid holidays (the one request the company made was that the vacationer sent a postcard to the company – to ensure they were really vacationing and not working a second job in the local fields, as was often found) and pensions; it has a special company fund to be accessed if an employee is in distress of some kind. And to cap it all, there are tennis courts on the Ingelheim complex and a paddock with stables, where employees can house their own horses and go riding at their leisure for a small fee.
Taking its interest in philanthropy and global communities on an international scale, Boehringer was in the news two years ago for being one of a few pharmaceutical companies that offered assistance to Africa for the AIDS pandemic. In 2000 Boehringer teamed up with the World Health Organization to provide its anti-HIV drug, Viramune®. The company also reduced the price as one element of an anti-AIDS cocktail by up to 85% in developing countries. Boehringer succeeded in supplying Viramune® to 42 countries by setting up its own administration system, the mother-to-child transmission programme, where a single dose is administered to an HIV-positive pregnant women at the onset of labour and a single dose is also given to the newborn child immediately after birth. Dr Johann finds real satisfaction in his involvement in this, and additionally sees it as part of the family's long-term goal in research and development, in which it invests roughly 18% of its annual net sales. "Boehringer Ingelheim has been in business now for almost 120 years. This means a long time of continued success, and a growing company handed over from generation to generation in a business environment that is worth every endeavour," Johann says. "We have been and still are investing billions of euros in research and the development of drugs to treat diseases. The lives of many people depend on our drugs, and this is a very rewarding experience for me. Germany used to be called the 'pharmacy of the world' – Boehringer has been part of that traditional role and expects to play a major part in the future."
Challenges and change
Pioneering pharmaceutical research and development while maintaining the family's long-term view forms the backbone of the company's future. Indeed, providing the solutions to ongoing challenges like expiry of patents and new medical conditions is really what the future of Boehringer rests upon, not just as the driver of its whole being, but also because competition in this field is so stiff. Dr Johann knows this only too well and sees this as part of his responsibility. "Maintaining the company as independent and family-owned will require further successful development of our business based on innovative new products," the chairman believes. "So product supply as a result of innovation in research and development and successful marketing of our existing products will be two of the major challenges I will personally face in the next couple of years."
Johann seems to be ideally placed to meet such challenges in the context of his role as head of the shareholders' committee and its impact on the business – he is calm and collected, comfortable in his relationship with the family and the trust between them, and has both a worker's and a director's view of the business going forward. What would his advice be to someone working for a family business who might move into a similarly important role? "Make sure that you really know the people and the problems you have to deal with," Johann believes, "but the key element is mutual trust."
What is in store for Johann once his job is done and the next generation of the Boehringer family is successfully installed? "Retirement," he quips. It will be a well-earned break.