Today, we're speaking with Joe von Rickenbach who, in October of 2019, became the chairman of ZAGENO’s board of directors. But arguably he is best known for co-founding and leading Parexel, which is a global provider of biopharmaceutical services.
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In the 36 years he ran Parexel, Joe oversaw more than 40 mergers and acquisitions as well as an IPO. And it's that experience that we want to tap into during today's conversation.
My questions begin with Parexel, which you launched during an economic downturn resulting from the oil crisis of the late 1970's.
What can you recall from that period?
Well, it was, of course, another world at that time. For people, today, it's hard to imagine, the world we lived in. No internet, no cell phones; email just became possible or, personal computing just became possible.
So it's a very, very different context but the point is it was a really, nasty downturn. And, you know, I have to say when I started Parexel I didn't really... it was not because of the downturn; it didn't really affect the start of the company that much, I would say. Of all the downturns and all the economic upheaval that happened over the decades this was probably the least impactful for Parexel at the time.
Yes, it was just the beginning. There was of course the economic disruptions in the early nineties, there was a downturn caused by the dotcom bubble bursting, the September 11th attacks caused economic disruption and of course the Great Recession between 2007 and 09 due to the subprime mortgage crisis.
And today, today we have a COVID-19 recession, which businesses are trying to understand and respond to. So, let me ask when all of these financial crises occurred in your tenure as the CEO of Parexel, what best practices did you lean on? What did you do to adapt your business?
We were always a growth company. So, Parexel grew every year that I ran it. There were, arguably, I have to say a couple of years where the growth was not huge. It was maybe $10,000 or $100,000 but still, we grew. Having said that, my biggest lesson basically is that you have to always, from a risk point of view, you have to always be in a position to live the next day through a recession.
... my biggest lesson basically is that you have to always, from a risk point of view, you have to always be in a position to live the next day through a recession.
The problem with recessions and crises is that they don't ring a bell when they come, they just show up. And so, you have to be prepared, sufficiently prepared that you can live through that.
So for instance, a good example of that is, you don't want to be overly leveraged, in other words, your balance sheet is really important and your financial partners are really important. Everybody is a great partner during good times. When things turn down, it's very important to be able to rely on your financial partners and to have a solid, balance sheet - critical.
Being a growth company, you always have to push the envelope a little bit somewhere, but you cannot take so many risks and basically dial up the uncertainty to the point where you can't see over the horizon. In other words, again, maybe the lesson is, if you look at over the 40 years, more or less time span, it's only a question of time until the next one happens.
So, nothing lasts forever, meaning the good times don't last forever. It will come and you have to basically make sure that overall the enterprise is able to survive a downturn. Of course, you never know how bad it is and on the way down it's always completely terrifying.
We're still in the midst of a pandemic. In some ways we may be in a dark room. There's a lot of unknowns, but based on what we do know do you see any similarities between what we're experiencing now and other recessions that you've navigated in the past?
There are some similarities, but there are also big differences. And I think that the big difference is that all the other ones, with the exception of 9/11, were essentially financial recessions.
As a society, as a business community, we have a fair amount of practice on how to go through a business recession. You know, there is a playbook basically and they didn't scare me, you know, as I said, it was really terrifying every single time, but, you know it's going to happen, you know it's a relatively short lived and eventually you would get out of it. But having said that, with 9/11, and now with COVID, it's really different. With 9/11 and we had the whole terrorism and you have to picture now, Parexel was a company with thousands of employees and at any one point in time we had about 1/3rd of our employee base traveling. And nobody wanted to travel anymore, because it was too unsafe or too scary basically, or, not allowed.
And so, for the company, this was really shocking and we didn't really know what this was going to end because it was always another shoe that was potentially going to drop. And as we now know, the implications from 9/11 echo to this day. People now don't remember how easy it was to travel before 9/11; you can just arrive at the airport five minutes before the plane left and walk in, basically. The whole security procedures that we now have to go through...so on and so on.
Many of the precautions that are the result of that and maybe also a certain anxiety that just lives in society at large, that just was not there. It's just an innocence that just was nixed through 9/11.
And now coming to COVID, I think it will be with us for at least a generation, if not two because this is such a traumatic experience for everybody. I'm going to say everybody... literally the entire planet; I mean the economic distress for many people is unbelievable.
Governments are challenged, states are challenged, companies are challenged, everybody's challenged. It's a shared experience, like none that I can think of in my lifetime.
Governments are challenged, states are challenged, companies are challenged, everybody's challenged. It's a shared experience, like none that I can think of in my lifetime. The implications and the kind of the repercussions into the future from 9/11 will stay with us a long time.
It's a great segue into my next question, which is what organizations could do to ensure the well being of their people and the safety of their productive assets in the event of a crisis.
Many people are looking to their business leaders, their employers for some direction, some certainty. What can leaders do to help assure their employees?
Well, in general, just as a matter of good practice, I think during the good times, during the normal times, one should put in place what I would call business continuity plans. So business continuity plans are essentially, plans, not playbooks that outline what should be done if certain scenarios happen.
And the reason why that's a good exercise to go through, during the good times, is because when you're in a crisis, it's very difficult to figure out and people often have to make very quick decisions and are already challenged emotionally and otherwise, just by the environment. And so I have to say over the decades, that planning got significantly refined at Parexel.
So, people knew what to do, people knew where to go, and the chain of command, basically was clear... who had to make what decisions and so on. I think that's call number one, to make sure of that.
Luckily we (ZAGENO) are essentially a technology company and so the ability to work remotely, to work with technological tools and resources came relatively naturally. And so, in the big scheme of things, we probably fare better than most companies.
Our business already is relatively virtual and so, the safety of the employees was, essentially through working from home. And the business continuity basically happened, I think, as a result of the nature of the business. I'm contrasting this, for instance with a restaurant or barbershop, which is very hands-on in location, and you can't really virtualize that. It's a service that is delivered, hands-on, quite literally. I really feel for those people because, for them, there is no working from home.
As a board chairman, how would you recommend whether it's ZAGENO or any company communicate to stakeholders of a business, whether it's a board itself or customers, partners and other parts of a company's community?
... my first piece of advice would be communicate, communicate, communicate.
Well, first of all, I would say in a second you have an unusual situation, let alone a crisis, the need for communication dials up exponentially.
And so my first piece of advice would be communicate, communicate, communicate.
Even if you don't have much to say, that is particularly new, people just like to know what's happening, what is not happening. People want to know that things are okay; whatever small thing you can say, just say it.
By the way, I have to say, at Parexel, we had a company specific crisis in the middle of 2006, where 10 healthy volunteers in a clinical trial were exposed to, what ultimately turned out to be, basically a toxic drug and nearly died. And so we had a huge challenge as a result of that; it's everybody's worst nightmare basically and ultimately the big lesson is you have to communicate, you have to communicate to all stakeholders all the time. And, just be aware of that huge need. I think that's the single biggest recommendation that I would have for the leadership of any company or organization during a crisis.
If you put yourself into the shoes of one of these stakeholders, they want to know what's going on and the point is, if you don't say anything, they always assume the worst. So even if you just essentially repeat what you already said, it's still reassuring.
Interesting. So as we wrap up questions related to business operations what questions must business leaders be asking to determine if their model is resilient enough to recover from the impact of a crisis like COVID?
I think you need a business continuity plan for these crises. I mean, this is something, of course you've been able to over time. The most important thing, especially for the leadership of the company is that you're always vigilant. You never know what can happen. In this crisis, the businesses that were relatively virtual that were relatively digitized did better, and this is of course true.
But imagine the scenario where we have an attack on our cyber world, or let's say the grid goes out for days or, things of that nature - these are all things that can happen. To imagine these scenarios or things that could happen or can happen, even if they seem extreme, is relatively useful… not to invoke scary situations but to just see what would happen and what one could do so when you get into the situation, you're not completely at sea. You basically have at least theoretically grappled with.
And I think management teams who know and run their companies with this in mind are better prepared to go into these crises and come out of it. By the way, if you were well prepared, often opportunities present themselves on the way out because a number of your competitors are probably not as well prepared.And so if you have strength, you can actually competitively improve your picture.
... if you were well prepared, often opportunities present themselves on the way out because a number of your competitors are probably not as well prepared.And so if you have strength, you can actually competitively improve your picture.
That concludes part one in our discussion with chairman of the ZAGENO’s board of directors, Joe von Rickenbach.