This article, the first in a two-part series, examines the work environment of small start-up biotech firms and the potential problems that scientists used to relative research flexibility in larger companies or in academia may encounter. Next week, in the second installment, we'll discuss the criteria for success in the start-up environment.

Are scientific careers in the biotechnology industry traditional? Not at all! Given the nature of biotech start-ups, employees can expect to work in environments with greater uncertainty, career risk, job ambiguity, and change. On the other hand they will be stimulated by higher degrees of excitement and the potential for greater rewards downstream. A company's focus may be on developing a compound in a certain therapeutic area and then conducting four levels of clinical trials. From molecule to market, the odds are against their success. So in order to survive, the company must develop an increasingly supportive relationship with employees and external capital markets to secure future private placements, initial public offerings of shares, and stock evaluations that will provide sufficient capital. But tension is created when spending for speed to market and cost control to reduce the "burn rate" of the cash on hand is unbalanced, as it could destroy the valuation and the ability to raise capital. As a result, the principal scientific employees as well as management must be lean.

Lean start-up entrepreneurial environments can create frustration for the career scientist. The essence of R&D is to solve a number of problems in a number of different cycles from preclinical formulation to product launch. This process represents a unique set of problems requiring different skills at each stage. Translated, this means that the individual in a biotech start-up will see his/her role evolve with each phase of the project--versatility is the name of the game.

Some scientists may enjoy the rare opportunity to participate in a complete drug development cycle, from R&D to scale-up, manufacturing, product registration, marketing, and sales. Others may prefer to be a vertical specialist rather than a horizontal generalist, and are not happy to see his/her job shift away from their core scientific interests. An added frustration for scientists in a lean start-up environment can be the limitations of the research. In order to preserve the cash burn, many small companies are forced to develop one compound or one drug to get ahead of the game, and scientists are often asked to put their other discovery initiatives on hold. In the case of larger, more established companies, raising capital is not a big issue and their research interests are generally more diversified.

Many people believe that working in a small company has its benefits in terms of personal growth and rewards for good performance. This is not always the case. More often than not, biotech start-ups are faced with limited management resources. In that situation, individual performance planning and appraisal processes are considered HR luxuries. A start-up's managers are usually senior scientists with no training and little experience in professional recruitment, behavioral interviewing, and performance and career management of subordinates. These areas are sacrificed for lower short-term cost and, unfortunately, can sometimes be self-defeating.

The focus of the entrepreneurial start-up is work completion--not individual performance or career needs--and what may have been required at the point of hire may be quite different just months later! The career scientist may realize that the job has shifted away from his scientific interest acquired through a Ph.D. and experience. The morphogenic nature of the small biotech's R&D project may lead to frustrating role ambiguity, which can lower productivity and morale and elevate turnover. That is a problem for both employees and employers. The scientist loses their job and the start-up loses key personnel, generating turnover costs that can be as high as the whole project.

"To lose one or two members of that development team not only costs you 2.5 times as much to replace them, it also costs you the lost productivity for the rest of the team members," says John Reid, president of the Canadian Advanced Technology Alliance in Ottawa. Stock options may keep employees from leaving, but "golden handcuffs" will fail to motivate and inspire as much as the unmet need for personal achievement. Besides, as more and more biotech firms offer stock options, they fail to differentiate the firm when attracting new talent. How, then, can we minimize this problem--if not overcome it--and transform it into a win-win situation, where scientists will see the project through to completion, thereby lowering the "burn rate" and optimizing speed to market? This issue will be examined later in Part II: Is it your cup of tea?

About the author:

With a Ph.D. in social theory and an MBA from the Ivey School of Business, Doug Treen is a VP with GenPharm, a subsidiary of E. Merck KgaA. He also recently taught MBA students at the Schulich School of Business and advises Queen University's Center for Enterprise Development.

(Article derived from one originally published in Biotechnology Focus , September 2000.)