Novo Nordisk CEO Named ‘Best-Performing’ By Harvard Business Review

The Harvard Business Review just released their annual list of the world’s ‘Best-Performing CEOs”, and Lars Rebien Sørensen – CEO of the pharmaceutical powerhouse Novo Nordisk – secured the number one spot. According to HBR, the system of ranking CEOs has been updated since last year’s list, leading to very little overlap between the 2014 and 2015 rankings.

While 80% of what each company is measured on are financials – including market cap changes and shareholder return – the remaining 20% is based on newly-added metrics measuring each company’s environmental, social, and governance (ESG) performance. Changes in this year’s ranking system also included data on which CEOs have been in their position with the same company for at least 10 years.

Though the HBR’s ranking system includes a number of parameters, it is far from being comprehensive. For instance, the analysts have no way of taking into account individual leadership traits – such as ‘strategic vision’ – which help drive the success of a business.

In his interview with HBR, Sørensen provides his opinions on what actions and traits make for a great CEO in the life sciences industry. While critics have questioned the company’s decision to focus their efforts almost exclusively in one therapeutic area, he defends the strategy and explains why it works so well.

“Outsiders sometimes come in and say, ‘You’re dependent on diabetes for 80% of your revenue—you should diversify’,” said Sørensen, in his interview with the HBR. “But I’ve always believed that you should do things that you know something about, that you’re good at. We’ve tried a lot of diversification strategies in the past, but we’ve failed because of the inherent scientific and commercial uncertainty and our own naïveté. So our expansion has been completely organic.”

Part of Novo Nordisk’s success can be attributed the widespread distribution of diabetes around the world. During his interview with HBR he was asked what the fate of the business would be if diabetes was ever cured. Sørensen answered:

“After I became CEO, in 2000, I predicted we would cure diabetes in 15 years. We’re still 15 years away. But that is the big goal. I tell my employees, ‘If we wind up curing diabetes, and it destroys a big part of our business, we can be proud, and you can get a job anywhere.’ We’ll have worked on the greatest social service of any pharmaceutical company, and that would be a phenomenal thing.”

Due to the changes in ranking metrics this year, a number of biopharma CEOs from last year’s list were absent this time around. The CEOs of Allergan, Valeant, Actavis, DaVita, Perrigo, Edwards Lifescience, and Actelion were all missing from the 2015 list, and the CEOs from Bristol-Myers, Shire, Regeneron, and CVS Health were all new additions to the rankings this year.

When asked what makes a great business leader Sørensen responded, “It’s very contextual. It depends on the nature of the company, its history, its ambitions, its financial resources, its other resources, and the social context.”

Sources:

• The ‘best-performing’ CEO in the world is a pharma chief – http://www.biopharmadive.com/news/the-best-performing-ceo-in-the-world-is-a-pharma-chief/407263/
• Novo Nordisk CEO Lars Sørensen on What Propelled Him to the Top – https://hbr.org/2015/11/novo-nordisk-ceo-on-what-propelled-him-to-the-top
• The Best-Performing CEOs in the World – https://hbr.org/2015/11/the-best-performing-ceos-in-the-world