Bayer CEO: Corporate bureaucracy belongs in the 19th century. Here’s how we’re fighting it

I was no stranger to the tensions at Bayer when I joined as CEO last June. Multiple complex challenges face our business. There’s the ongoing–and unjustified–litigation around glyphosate, an essential herbicide that environmental regulators in every major country have assessed as safe. We have a high debt, and we are experiencing the loss of patents on some of our most important medicines.

We’re at a crossroads in our 160-year history. Bayer has a portfolio of strong and meaningful businesses in health and nutrition–but the problems outlined above are real. They’ve come to a head in my first year with the company. Adverse jury decisions and a pipeline setback have sent the share price to a nearly 20-year low. 

It’s clear we need to get back to value creation. That means resolving the litigation, addressing the debt, and rebuilding the pipeline. Those are essential to-dos for my management team and me.

However, there’s another sinister force weighing on the company’s strategic options. Bureaucracy has put Bayer in a stranglehold. Our internal rules for employees span 1,362 pages. We have excellent people, with expertise in a range of disciplines and exceptional commitment to our success. But they are trapped in 12 levels of hierarchy, which puts unnecessary distance between our teams, our customers, and our products. There was a time for hierarchical, command-and-control organizations–the 19th century, to be exact, when many workers were illiterate, information traveled at a snail’s pace, and strict adherence to rules offered the competitive advantage of reliability.

Today, the opposite is true. Our workforce is highly skilled and educated. Communication happens at the speed of light. And today, the most reliable companies are the most dynamic. A company’s value stems from its ability to innovate. In our sectors, that means better medicines for patients, better seeds and supplies for farmers, and better self-care products for consumers. To succeed, we need an environment where people and their ideas can thrive–not be stymied by red tape.

We often hear talk about fighting bureaucracy–in companies and governments–but rarely does anyone make lasting progress. I’ve been trying to understand this phenomenon for the past decade.

Consider this question: If workers are hobbled by 1,000 rules, does it make a meaningful difference to reduce the rules to only 900? This is why most efforts fail–and why lasting progress requires eliminating all of the rules and then starting fresh with a new approach. 

At Bayer, we have begun a massive effort to redesign every job and every process, with a radical focus on customers and products. Most importantly, we’re putting 95% of decision-making in the hands of the people actually doing the work. This means many fewer managers and layers, and replacing hierarchical annual budgets with 90-day sprints by self-directed teams. We have 300 of these teams with thousands of people already working in this model, which we’ve coined Dynamic Shared Ownership. By the end of the year, it will reach tens of thousands. 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.

In fact, we already have a prime example of what can be accomplished by working in this way. Take Vividion, an independently operated subsidiary of Bayer, whose technology enables us to target proteins previously thought “undruggable.” Vividion’s staff has been operating in small, autonomous, product-focused teams for the past two years, resulting in tremendous progress. After receiving permission from the FDA to test one of their lead drug candidates last summer, they were able to dose the first patient within six weeks. Vividion expects to continue at a steady clip, producing one or two new drug candidates for clinical testing every year.

In our pharmaceutical division, the internal transformation is progressing rapidly, but filling a pipeline with long development cycles will take time. Our new structure will position us to capitalize on the bold bets we have already made on innovative science. For example, since 2020 we have invested 3.5 billion euros to build a cell and gene therapy platform, and with it we hope to tackle diseases with immense unmet medical needs, like Parkinson’s disease. We have five potential blockbuster drugs in our pipeline in complex disease areas such as oncology, cardiovascular and chronic kidney disease, and women’s health for menopause management, and I’m confident there are more on the way.

Through our investment unit Leaps by Bayer, we are accelerating promising startups working on breakthrough technologies for both health and agriculture. One of these is testing a low-carbon gene-edited plant that could produce sustainable aviation fuel without competing with food crops. Another is a moonshot project to engineer nitrogen-fixing microbes into the roots of plants like corn, to lessen dependence on energy-intensive nitrogen fertilizer.

In our crop science division, we are launching autonomous customer teams, which will influence how and where we launch new products, in response to grower demand. We are already the leading private investor in agricultural R&D, funding efforts to design novel herbicides with artificial intelligence and field testing the first novel class of molecules to fight weeds in more than 30 years. With our new working model, we will unlock even greater impact from evolving science, with plans to roll out 10 blockbusters over the next 10 years. Talk about speed: Our scientists are already decreasing plant breeding cycles from five years down to merely four months with precision breeding. In the future, we will deliver innovations like this at an even faster clip.

Our consumer health colleagues also have teams up and running in the new system, and have accelerated timelines for new products in Asia by up to nine months. The results speak for themselves: Less than 60 days after getting started, they have already unlocked millions of euros of additional value.

Bayer has seen more than its share of negative headlines lately, and there’s no doubt that the company can’t continue with the status quo. Our radical reinvention will liberate our people while cutting 2 billion euros in annual costs by 2026. Consumers, patients, farmers, and investors are counting on us. That’s why the people of Bayer are all in for this journey, and we intend to make it count!

Bill Anderson is the CEO of Bayer.

More must-read commentary published by Fortune:

The opinions expressed in commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.

Subscribe to the new Fortune CEO Weekly Europe newsletter to get corner office insights on the biggest business stories in Europe. Sign up for free.

Leave a Comment