[Singing Kumbaya] Roche’s Account of the Genentech Acquistion

We all do it – change stories to adopt a narrative we’d like to remember rather than what might have actually happened. Years ago a close friend had a scare with lung cancer, which turned out to be some form of fungal infection. His state – which was scared s___less, morphed to a revised version of calm bravery in the eye of death after a couple of years of telling the tale.

The same sort of revisionist history looks to be in play from how the folks at Roche – at least CEO Severin Schwan as told to a Financial Times reporter – tells the tale of last year’s unexpected hostile takeover of the balance of Genentech Roche didn’t already own.

The the story behind the story provides an insight into pitfalls to avoid on any quest to becoming a great leader.

The FT story How Roche and Genentech Fell Out and Made Upis a great example of how high (and lingering) anxiety has morphed into an account akin to sitting around the campfire and singing Kumbaya.

It happens: folks in the senior suite where I work tell a story often enough that it starts to take on a life of its own and you come to think of it as the truth. But it’s probably not. It is hard to prevent this sort of “spinning” unless you practice high candor, and even harder to root out.

Unfortunately, (or perhaps fortunately, depending on your perspective) employees don’t full believe the spun tale. And worse, the new adulterated account breeds cynicism – employees remember the original happening and account, and someplace in their consciousness know there is a disconnect.

Here’s CEO Schwan’s account from the FT story: “The biggest question both externally and internally in July 2008 was [whether there would] be an exodus of scientists,” says Mr Schwan in an interview in Roche’s headquarters in Basel. “I’m happy to tell you the result is beyond my expectations. We lost not a single scientist in research and early development.”

The FT story adds: “Meeting with top executives at the end of the day, he [Schwan] recalls: “I told them I had just realised during a whole day of lab visits, the word ‘integration’ didn’t come up once. The scientists just got back to work.”

Nice account and I hope it holds.

What Severin did not mention is Genentech spent over $300 million for employee retention bonuses when Roche’s unsolicited bid was announced, the second half payment of which is made in March 2010.

The blogosphere has it share of accounts of Genentech employees shopping their resumes and looking for other “just in case” options.

Third, the financial market turmoil in the past year has significantly impeded progress and investment in early stage biotech companies – the very places those Genentech scientists would – and will – go if they desire. As the NY Times notes in an article titled “Broader Financial Turmoil Threaten’s Biotech’s Innovation and Cash“:

“Some 113 biotechnology companies, up from 68 in the first quarter, now have less than a year of cash at their current spending rates, according to Rodman & Renshaw, an investment bank. That is about one-third of the publicly traded biotech companies it tracks. Lack of access to credit is not the main problem for small biotechnology companies, which are considered so risky that even in boom times they cannot borrow much money from banks.”

The proof of the pudding, as the saying goes, is in the eating. The proof of Roche’s ability to retain scientists as well as a host of other employees will be told after March 2010, and after the current ice jam in the equities market breaks up – if it does – for smaller biotech companies.

And as for the senior suite, a place where I’ve worked and where I now coach executives and work with their teams?

Jim Kouzes and Barry Posner note in their extensive research (and to be found in their book The Leadership Challenge), the foundation of effective leadership is credibility.

And credibility begins with frank honesty.