Philosophy for Success

When Raymond V. Gilmartin decided in 1961 to apply to Harvard Business School (HBS), his parents were supportive but "mystified."

He had a good job as an engineer at Eastman Kodak Corporation, where lifetime employment was the norm. He had recently graduated from Union College and had just married.

But a college friend convinced him to apply to HBS, a decision he has never regretted. Without his HBS education, he says, "I would not be where I am today."

Where Gilmartin is today is atop Merck & Co., the fastest-growing of the world's major pharmaceutical companies. Since joining Merck as CEO in June of 1994, Gilmartin has overseen an epic turnaround in the century-old giant. Last year, he led the $114 billion company to 45 percent return to shareholders, and Business Week ranked Merck number one in its industry--and sixth overall--among the Standard & Poor's 500 corporations.

Despite his impressive track record, Gilmartin, 56, remains modest. Reflecting on his selection as one of the top 25 managers for 1997 by Business Week, Gilmartin would not take full credit. "I think [the award] reflects that the company's been doing very well," he says. "The recognition is deserved by all our people, rather than just myself."

His success is especially significant considering that he had no experience in the pharmaceutical industry before becoming Merck's chief executive. Gilmartin's previous position was head of medical device manufacturer Becton-Dickinson and Company, which he joined in 1976 after serving as their strategic management consultant.

Gilmartin says Becton's market underwent a revolution similar to the one facing drug companies today. With the advent of managed care, drug companies now face powerful buyers and little pricing flexibility amid intense competition, characteristics paralleling that of the medical device market a decade ago.

It was this experience that Merck apparently needed, Gilmartin says, since he was the first outsider in history brought in to steer the New Jersey-based corporation.

At the core of Gilmartin's strategy is Merck's commitment to long-term research. Merck's much-vaunted research budget rose to $1.7 billion for 1997, a 14 percent increase from last year. Gilmartin's goal is research in 25 therapeutic categories by 2000, compared with 15 today.

Why such a gamble? Gilmartin says Merck has a tradition of solid research. "Despite all the changes in the health care system, it is clear to us that what will make Merck strong in the future is the same as in the past," he says. He paraphrases company founder George Merck: "Medicines are for the people, and not for the profits."

And strong research efforts over the past decade are beginning to pay off. Crixivan, a Merck product, was one-third of the promising "drug cocktail" released last year to treat AIDS. Merck also released Fosamax, a treatment for osteoporosis, which affects one-third of all women over 60. This year, Merck has already introduced nine drug products, Gilmartin said.

With additional high-potential drugs in the pipeline, upcoming expiration on the patents for several best-selling Merck drugs doesn't worry Gilmartin, despite expected competition from generic brands. "Generics play an important role in controlling health care costs," he says. "We see them as a positive influence."

Gilmartin chairs both the Pharmaceutical Research & Manufacturers of America as well as the Healthcare Leadership Council, a group of about 60 industry executives which advises Congress on such issues as uninsurance among Americans. So far the group has made few recommendations but is said to have the ear of policy makers.

When asked about the future of health care reform, he responds cautiously. "It's important to diagnose exactly what the problem is, so we can use the best treatment," he says.

Self-Made Man

Although now among the nation's most prominent business leaders, Gilmartin originally trained to be an engineer, receiving a B.S. in electrical engineering from Union College in 1963.

"I did well in math and science while in high school," he says. "Engineering was my logical choice."

The first in his family to go to college, Gilmartin went on to work for Eastman Kodak for two years before heeding the fateful advice of a friend who had been accepted to HBS on a full-tuition fellowship.

His friend's success inspired Gilmartin to apply. Gilmartin also received a full-tuition fellowship, which made business school possible. Gilmartin praises HBS, "...and not because of brand name," he adds. He says the case-study system at HBS taught him to solve real-life problems without clear-cut answers.

He calls his HBS education "directly relevant to what I'm doing today" and contrasts it with his engineering experience, in which "the answers are often in the book."

But Gilmartin says he also values his engineering degree. "[It] turned out to be just a strong basic educational experience," he said. "Education in any undergraduate field leaves open all the options. I never felt that my choice at the undergraduate level precluded my options down the road."

Today, Gilmartin plans to speak about his business school experiences. In addition, the CEO plans to discuss his philosophy of leadership. In business, he says, results matter, but so do the means one takes to achieve the end.

A business leader "should approach situations with ideas on how to make contributions without thinking of reward. I try to treat everybody around me with dignity and respect, especially those who work for me," he says. Regarding his management team, he adds, "If you strive to do the right thing, if you think about how to contribute and inspire confidence and trust, then they will help you succeed."