Today, multinational organisations are challenged by the complexity of international processes that they must apply to create a share for themselves in the world markets. Companies often face more demanding economic conditions on their way to success because of the need to adapt to the rapid market changes, so as to protect themselves from the risks within such environments. Managers, in particular, have to address the increasingly complex challenges that face their organisations as a result of the severe competition and the growing demands of customers (Vadastreanu, Maier & Maier, 2015).

Moreover, the sophistication in the process of creating foreign market space is that it involves coordination of different cultures and aligning them from the periphery to the centre of the company’s strategic focus. The major issue of concern has thus always been to develop a mindset that accommodates the in advance the perspectives of intercultural and internal communication between the domestic setup and the foreign branches. It is thus advisable that organizations consider the cultural differences among their employees since this gives the concerned company a competitive advantage (Walker, Walker & Schmitz, 2003). Many current organizations have managed to comply with diversity by adopting individual and culture-oriented communication approaches along with managerial strategies. However, some companies still implement strategies that only favour the nationality within the investors’ homeland.

The Wall Street Journal (2016) mention that the outcome of the scandals and crises that organisations faced in the 2000s revealed that ethical and compliant culture would secure organisations from business risks. In this regard, culture is no longer a mere concept as it has been undergone measurement and improvement. The Wall Street Journal, for instance, cites US Federal Sentencing Guidelines which defines culture as the organisational perspective with regards to facilitating its culture so that ethical conduct is advanced and aligned with the regulatory law. Moreover, the Organisation for Economic Co-operation and Development’s Convention on Combating Bribery of Foreign Public Officials in International Business Transactions acknowledges the usefulness of a stable organisational cultural ethics. Vadastreanu et al (2015) thus states that managers are sometimes tempted to adopt a simpler way that would enable the company to meet its objectives and stay ahead of competitors. However, the authors explain that the simpler strategies would always involve violation of the established ethics as well as the deontology in the business. From the managers’ perspective, the researchers questioned the ability of businesses to adhere to business ethics when they very well know that competitors have better competitive advantage as a result of non-compliance. At the same time, they question the ability of ethics and compliance to enable an organisation performs as good as or even better than competitors. The current research also investigates these similar areas with a special focus on business ethics mindset at Novo Nordisk.

1.1  Problem Area

Business ethics is part of social ethics and is thus continually influenced by the ethics of the given era. Traditionally, the world and people, especially leaders of world countries, did not pay attention to ethics and morality that in turn impacted the later periods. According to Salehi, Saeidinia & Aghaei (2012) the history of business is traced from the period of slave trade, colonisation and the Cold War. However, ethics is only related to the post-war and post-colonial periods. The researchers clarify that the need for business ethics started gaining attention in 1970s but firms only began highlighting their ethical structure towards the end of 1980s and 1990s. This practice was given importance during this era because of the economic and natural disasters that resulted from unethical conducts of businesses. At present, it has come to the global attention that ethics in business is important for success, profitability and sustainability of organisations (Salehi et al, 2012). There is continuous rise in issues and ethical trends that not only impact organisational operations but also affect customers. Today, establishment of proper ethical behaviour is the key to avoiding lawsuits related to business ethics. Global expansion by multinational organisations, which seek a share of the foreign markets, raises concern of investors regarding ethical behaviour of officers and employees. These areas greatly affect the ethical cultural values of the organisation. There are thus two main concerns of businesses across the globe: 1) How business ethical values can effectively be communicated to the employees; and 2) the most appropriate communication channel to use.

Researchers have discovered that the traditional Ethics and compliance design is no longer effective in addressing business ethics issues. This calls for establishment of more formalised ethics and compliance strategies. In fact, regulators have realised that absence of cultural integrity might make organisations to consider their ethics and compliance programs as hindrance to achieving business goals (The Wall Street Journal, 2016). This paper investigates the ability of the BE Mindset to enable the Novo Nordisk to handle the three major challenges its business faces and achieve its organisational objectives. The three challenges that the organisation currently faces include: i) the increasingly complex compliance requirement such as serious fines and market exclusion; ii) global expansion of the company, so as to accommodate 7,000 to 8,000 new employees and managers, and iii) Organisational pressure due to the need to achieve financial targets, by meeting the expected sales level (Novo Nordisk, 2017). The third challenge is further complicated by the increasing cost of creating awareness across the organisation, and rising risk of BE non-compliance and financial misconduct. These factors make the organisations’ values very difficult to maintain.

1.2 Problem Formulation

Multinational companies are found to spend a large portion of their income on compliance every year. Even so, companies in industries such as health care and finance are reported to spend even larger amounts in when they hire several compliance officers to assist them with investigations (Griffith, 2012). Previous research, for example, reported that Siemens AG used approximately 1 billion on internal investigation following government inquiry into the company’s alleged payment of foreign bribes (Henning, 2012). The adoption of compliance program is recognised as tool for reducing such financial costs and elimination of related regulatory and legal procedures that are encouraged by ethical failure. Enforcement of anti-bribery laws and the corruption scandals that were witnessed under the US government regulations made many multinational businesses understand that unethical conduct has influence on organisational reputation along with profits (Sampson, 2016).Corporate managers are now driven by the belief that rigorous compliance has the ability limit the occurrence of misconduct among employees. The presence of effective compliance also defends the company before regulators in situations where certain wrongs are committed within the industry.

Each company strives to make the adopted strategy blameless but the best compliance strategies have showed their inability to block misconduct within the organisation as well as the interference by the government. According to Haugh (2017), for example, the Volkswagen AG’s compliance program reportedly failed to prevent employees from cheating during the emissions test. Similarly, Well’s Fargo & Company’s policies was not effective enough to stop employees from opening accounts that were unauthorised by customers. Haugh (2017) also reports that even today, little attention has been placed on determining the causes of such decisions by employees. Additionally, there is little knowledge of the psychological factors that promote the employees to engage in such unethical and illegal activities. Companies desire to effectively control ethical standards of their businesses and have established both formal and informal policies. Some are labelled as ‘ethics and compliance’ while others are called ‘corporate social responsibility’. Even then, little research has focused on determining understanding of the people who develop and implement the practices concerning the meaning and relations of the same to the business.

Managers of an organisation have the major duty of ensuring that ethical behaviour is properly implemented in an organisation. However, Downe, Cowell & Morgan (2016) report that researchers have ignored the relationship between leaders’ actions and formal ethics, and how these factors affect the overall conduct of business. Moreover, business codes are now widely used as management tools but the investigation into the effectiveness of the business codes have resulted in conflicting outcomes. Kaptein & Schwartz (2008) stated that the variations resulted from differences in definition of terms, inadequate data, and absence of theoretical framework. The present study aims to address these concerns when studying business ethics at Novo Nordisk.  This is supported by the realisation that the abilities of instruments applied during analysis to identify and clarify the concerned ethical issue have direct impact on the resulting ethical awareness, accountability and achievement of rationalizations in business processes.

Research Questions

The research questions are as follows:

  •  What are the advantages and disadvantages of the BE Mindset at Novo Nordisk?
  • Will the BE mindset assist the company in achieving global compliance, including global growth and its financial targets?
  • What strategies can improve the BE Mindset to ensure organisational objectives are achieved?
  • Do the managers possess the right knowledge and skills to enable them understand the organisational ethical practices that they are expected to pass across?
  • Does the company posses proper communication channels that will enable it to pass the ethical practices from managers to the employees?

2.      Case Presentation

2.1 History of Novo Nordisk

The origin of Novo Nordisk can be traced back to 1922, when Nordisk Insulin laboratorium was established by August and Marie Krogh. The two were a couple, where August was then the medical research professor at the University of Copenhagen and Marie was a researcher in metabolic diseases as well as a doctor. The two had visited the US as August wanted to present his lectures on medical research. During the stay, the couple came to learn about how diabetics were treated using insulin. This treatment was discovered by two Canadian researchers. The couple developed connections with the institute of Toronto where the insulin was produced and gained the permission to manufacture the same (History Novo Nordisk, 2011, p. 2). When they returned to Copenhagen, the couple worked alongside Dr Hans Christian H. who supposedly was proficient in regulation of blood sugar. They agreed to conduct further research into the treatment together. The researchers received funding from Danish pharmacist, August Kongsted, and were successful in extracting the needed insulin from bovine pancreas. The success was confirmed after the treatment of the first patient in March 1923 (History Novo Nordisk, 2011, p. 4). The team advanced and employed Harald Pedersen, who previously managed a mechanical shop, to construct machines for insulin production. Thorvald Pedersen, Herald’s brother, was as well hired to conduct chemical analysis during insulin manufacture. However, the brothers failed to cooperate and left the team.

The brothers later started their own facility and successfully competed with Krogh under the brand name of Novo Terapeutisk Laboratorium (History Novo Nordisk, 2011, p. 7). The two companies operated separately for about 65 years, during which both were successful and managed to expand. Innovativeness was prioritised by both sides and they invested heavily in in research and development with the purpose of outperforming the other with regards to production of new medicine for treating diabetes. The increased research started the two companies on a journey of differentiation since there was enormous growth in in the range of products from each side. Novo started to specialize in production of industrial enzymes, and became the largest global manufacturer of the product. On the other hand, Nordisk succeeded in producing drugs for treating haemophilia along with growth disorder. Towards the fall of 1980’s, the two companies decided to merge. They had become so established that each had international subsidiaries and information offices, with a constant export level rated at 90%.

When they merged, the new company name was Novo Nordisk A/S. This merger was very strategic as it provided the newly formed organisation with the resources it required to achieve further growth of the global market share. This was an advantage because the cost of research and development had greatly risen hence rapid product development and greater business amortized expenses were required for successful establishment (Kamper, Podolny & Roberts, 2000). The merger proved very successful despite the transitional challenges that it faced initially. In fact, Novo Nordisk emerged to be the global leader in manufacture of insulin. The company also gained global competitiveness. Novo Nordisk is now a Danish pharmaceutical company with established headquarters in Denmark. At present, it runs internationally with developed production equipment in 7 countries and has subsidiaries in other 75 countries. The company is also an employer to about 32,600 workers globally, with 43% of the employees within Denmark and 57% in other parts of the world (Novo Nordisk, 2017). NN is thus a properly established multinational company that must invest in creating constant awareness of ethical practices and performing regular inspection of internal communication between the domestic branch and international subsidiaries. So far Novo Nordisk has managed to coordinate its functions, thanks to Novo Nordisk Way (Novo Nordisk, 2017).

2.2 The History of Novo Nordisk Way

Novo Nordisk Way is an internal managerial framework that targets to realize homogenization of policies within an organisation. The main focus is placed on the vision, mission and organisational values. These are important in development of organisational commitment. For effective communication of the strategy, the organisation has written 10 essentials to describe the company and aid managers and employees in behaving in accordance with the NNW (Nordisk Novo, 2012). The NNW is formulated in such a way that it concentrates on values of Danish society. The organisation therefore views itself as a Danish based company and pays keen attention to a number of values, including: equality, confidence, reduced power distance, inclusion, flexibility, environment conservation, Protestant work ethic and aesthetics (NN, 2017). This implies that the overall NNW framework reflects a Danish business environment hence there are values that are valued over others. This specifically refers to the values already listed above. The factors are prioritised because of the societal perception that they define a successful business setting. However, these conditions are relatively challenging to the subsidiary branches since they operate within cultures that differ from those in Danish society. The challenges are very likely to affect the procedures conducted at managerial level.

The contradictions have made it generally difficult for the subsidiaries to adopt the standardised managerial strategy because it relates directly to the immediate nationality within which the main headquarters belongs (Vadastreaunu et al, 2015). The more illustrative example is the comparison between the Danish and American perceptions of the NNW values. The major question thus investigates the reason why Novo Nordisk continues its practices, knowing so well that managerial procedures are affected by the differences in cultural beliefs across their international branches. As had earlier been stated by Sorensen, the organisation management understands that the collapse of values would negatively impact the standard and quality of the company’s products. This would further destroy the organisation’s reputation, citing that the company would be accused for promoting individual cultures. Despite that the culture helps with recognition of Novo Nordisk brand all over the globe, the management understands that its promotion would destroy the organisational foundation. Even then, the overall opinion is that the management at Novo Nordisk has given little importance to the improvement of the organisational culture. This may affect the preservation of the values of the company during its future operations. This paper particularly focuses on the organisational values that are very likely to result in failure of the BE Mindset in achieving global compliance as well as company expansion and attainment of the already established financial goals.

2.2.1 The Novo Nordisk Way Challenges

After the merger, there followed challenging years that almost destroyed the organisational operations within the US market. This was due to the wide range of requirements that the US Food and Drug Administration (FDA) imposed on the market. Novo Nordisk was actually unable to meet the requirements within the established duration. This difficulty was advanced by the organisation’s failure to recognize the newly established regulations until when it was too late. At this point Novo Nordisk had no other choice than to refer its customers to the larger competitor it had in the US, Eli Lilly (Kamper, Podolny & Roberts, 2000). However, further research revealed that some stakeholders were actually aware of the situation and even discussed it with others during particular organisation’s forums. This was not a good sign for the organisation that was recognised with values that encourage transparency, honesty and empowerment. The realisation of such a failure called for immediate changes in styles of internal management. One of the proposed solutions was to ensure that the organisation allowed employees who were not part of top level management to contribute in decision making. Conversely, this too would require the organisation to invest in ensuring accountability and readiness of employees to share their practices. This led to the development of The Novo Nordisk Way of Management.

2.2.2 The Novo Nordisk Way of Management

This strategy enabled the organisation to improve its place in the global market since it allowed for creation of special task group. The group included internal consultants that were than identified as facilitators. These were previously managers at Novo Nordisk hence were experienced and also ISO 9000 certified. The facilitators were used to would monitor the extent to which the organisational performance was in accordance with the established company values. They also assisted other branches to align their practices with the respective values, and completely follow them in all operations of the company (Novo Nordisk, 2011, p. 55). The assessments were always performed using the value-based framework of the NNoM whose major elements included:  The Vision 21, The Fundamentals, The Global Policies, and Novo Nordisk’s Quality System. These explained the manner in which employees at Novo Nordisk exercised the values.

The facilitators gathered data during in depth interviews with employees found within the domestic and international subsidiaries. The vision policies were employed to describe the procedures that the organisation used in normal business operations (NNoM, 2012). It was also made the main value-based framework of governance that lasted for over 10 years. During this time, the company expanded its employee base from 13,000 to more than 30,000. This also reduced the overall number of employees that represented the Danish society to two-thirds in 1997, and below half the total employee population by the year 2000. The period had also seen a growth in turnover rates and the business remained concentrated in above 180 global countries. The growth in business expansion necessitated the adoption of a new framework in 2010. The framework was required to match the expansion and internationalisation of the company. It was recommended that the new strategy focuses on the then business principles and values as opposed to new ways of conducting business. The development of the new strategy thus started in the year 2010 as a qualitative process that was named ‘Novo Nordisk Way tour 2010’.

2.2.3 Novo Nordisk Way tour 2010

The framework’s mission was to provide contributions from over 750 stakeholders from global countries. This process of consolidation produced ‘a revitalisation’, but not an actual change. The focus of the strategy was on the employees realising the level of understanding that the employees had developed regarding the framework. This strategy was backed by ten essentials that could assist the mangers and employees when assessing the ability of the organisation to act the NNW. In this case, therefore, mangers and workers performed the role that had earlier been given to the facilitators under NNoM (2012). By July 2012, Novo Nordisk had approximately 4,400 employees in the US and gained an increase in its US workforce by about 15%. The company also concentrated on research and development within an inflammation centre it had established in Seattle. The increased investment in R&D facilities in other locations such as Clayton actually supports the further expansion of the company.  The company also continues the development of clinical facilities for example the Princeton, New Jersey branch that also serves as the US Novo Nordisk headquarters.

2.3 The Novo Nordisk Business Ethics Mindset

The Novo Nordisk mind set concentrates on determining ways for ensuring motivation during its internationalisation processes. This also applies to the analysis of the relations between the headquarters and the internationally established subsidiaries. The two organisations that formed Novo Nordisk had originated from the same country but divergence in organisational culture happened gradually as years continued to advance. The type of analytical management employed by the organisation represented a top-down decisions scheme throughout the organisation’s hierarchy. The organisation also expressed a strong control over culture, which actually influenced the activities of managers. Nordisk as well had an international mentality as shown in its struggle to achieve business efficiency through standardization. The company established a domestic headquarters, where all organisational decisions are established then later communicated to branches that operate abroad (Novo Nordisk, 2011). The company has also managed to maintain its culture abroad by appointing managers that share a cultural background, of Danish society. The organisation also ensures that the managers only concern themselves with local sellers, dealers and those that distribute the standardised products to ensure that no cultural influence occurs in any international location.  At the initial stages, before merger, Novo exercised a more democratic business culture in which decisions were discussed in depth and only agreed upon decisions would be implemented (Novo Nordisk, 2011). This was because the organisation believed that consensus oriented decision making was more beneficial to the organisation. It made the Novo subsidiaries to run independent of other branches and the foreign subsidiaries would be managed by the local managers as opposed to Danish practitioners, in the case of Nordisk. The style of management thus was similar to the Walker, Walker, & Schmitz (2003) approach to international operations. The model is based on modification of products, strategies as well as management practices to match those of the country of operation.

These differences were the source of internal conflicts that marked the transition period. This actually revealed in cases where employees would disagree of some aspects of the same roles within the newly adopted business structure (Kamper et al, 2000, p. 8). The two organisations thus had to establish a common mentality. The final strategy had to solve the problems that the business encountered while representing the previous views of both organisations. The companies agreed to undertake a temporary re-empowerment of the central managerial monitoring. This would offer adequate time for the management members to collect resources that were required to shape the culture of the new entity. The period would also allow for research and development efforts that focused on determining the power that the management owned with regards to making decision. It was time for the organisations to search and understand the operations, beliefs and values of each other to enable good understanding as well as development of sound policies. The strategy would help Novo Nordisk to operate independently and still withstand foreign completion. The organisation finally managed to achieve independence together with the ability to select and retain values that it admired most. The mentality that the organisation created and operated with differed from both national and international perspectives. However, it still reflected a variety of elements that pointed to global mentality. It had employed a strategic approach which required the organisation to centralise assets and resources and support these practices through common decision making procedures. In a global mentality, business coordination and monitoring is more centralised. Moreover, managers in such an organisation perform global responsibilities. Such organisations also ensure that R&D efforts along with manufacturing processes are performed at the company’s headquarters. Decisions that are strategic to the business are also made at the headquarters.

The mindset, however, had both advantages and disadvantages on Novo Nordisk. The temporary adoption of global mentality as the empowerment of the central headquarters saw subsidiaries loss freedom to establish and pursue independent strategic decisions. This type of mentality can be blamed for the failure Novo Nordisk to respond to the requirements of FDA on time. In fact, the managers within the US market did not know how they could respond to the situation. Since the outcome of the condition was harmful to the organisation, it is only through creation of Novo Nordisk Way of Management that more flexible terms could be incorporated in the previous framework to enable similar situations to be addressed appropriately. This framework returned the prior freedom of subsidiaries to operate independently since strategic resources and assets were coordinated at national levels. The study of Novo Nordisk management style reveals tendencies to readopt some of strategies that were considered during the early operations, especially in mid-90s. This is for example seen in the recent adoption of NNW and the focus of ‘empowerment’. The supposed empowerment has been achieved in the business through increased recognition of the importance of average employees as being key stakeholders. This has helped the company to achieve multinational mentality since it encourages employee empowerment. The organisation has also adopted flexible strategies at international level in favour of managers in foreign locations (Novo Nordisk, 2017). The re-establishment of the global mentality as well points to the re-adoption of the model of global leaning since recognition of new ways of generating organisational values is promoted through learning of one another. However, this model is still problematic in that it leans more towards the Danish values that are not understood appropriately by the American employees.

3.      Business Ethics Compliance

Corporate responsibility is now considered an important part of corporate global strategy. It directs various organisational actions such as market expansion and promotes entry into various international markets. The major concern of companies as explained by Brown & Knudsen (2017) is the ability to increase business efficiencies while minimizing chances for changing the organisational culture. The organisations that want to work successful must consider the conditions in both local and international contexts. This study focuses in determining the strategies that Novo Nordisk had employed in various markets in China and the US where the business has subsidiaries. The study is driven by the belief that a common set of organisational values are important for successful operations locally and internationally. Even then, it is important that the implemented corporate responsibility be sensitive to the local settings of the business. Companies are, however, likely to become more compliant if they get involved in situations that expose them to risks that could have been avoided through strict compliance and adherence to business ethics.

Novo Nordisk followed a long term business strategy in its Chinese market since 1994. The company was concerned with creation of strong relations with the Chinese society and cooperated with the local operators. The company constructed research and production facilities in China and worked alongside the World Diabetes Foundation. The organisation also worked with the local ministry of health as well as the local patient associations to encourage education of doctors and patients about the treatment of diabetes (Global CSR, 2013). Additionally, Novo Nordisk conducted campaigns about prevention of diabetes as part of its CSR activities in China. The company has also emerged as the leader in insulin manufacturing in Chinese market. The evidence of this prosperity is in the size of its market share and the company’s reputation. With regards to market share, Novo Nordisk operated 30% of the market in 2002 and saw a growth that made its sales to rise to 5 billion within Danish kroner in 2011.

The efforts of the company that aimed to strengthen local health care system created value for the business and benefitted the society as well. Global CSR (2013) gives an example of a case where Novo Nordisk reported that increase in education enabled growth in lifetime sales for each educated patient by 3400 DKK and that the same enabled the society to cut on costs by 13,000 DKK for every educated patient. The activities that Novo Nordisk conducts have also encouraged other pharmaceutical companies to invest in finding further mitigation, prevention and treatment for diabetes. The processes have thus generated value for the concerned stakeholders. Examples of the partnerships that had such benefits include the World Diabetes Foundation and Novo Nordisk, and the other with HE eye-care clinics (a local clinic chain of eye-care). The HE eye-clinic owner was actually attracted by the fact that Novo Nordisk partnerships encouraged educational experiences for teachers and patients that had diabetes, including the late complications. This was a relief to the ye-clinic owner whose customers developed complications as a result of diabetes. Furthermore, the HE eye-clinic owner did not have the competencies that were required to impart education regarding prevention and treatment of the diseases to the doctors and patients.

Novo Nordisk also participated in other partnerships that would ensure cost neutral attainment of reduction in emission rates of CO2. The company also had plans of establishing a market for renewable energy in its Denmark branch. In fact, the organisation is reported by Global CSR (2013) to have been able to save over 10% of the company bills from electricity in Denmark. The energy reduction projects that the company pursued also had an average period of two year before pay-back. These are some of the initiatives that Novo Nordisk has adopted to ensure environmental sustainability. Additionally, a partnership was established between Novo Nordisk and WWF in January 2006 based on commitment to reduce emissions of CO2 from Novo Nordisk’s production by 10% between 2004 and 2014. In May 2007, Novo Nordisk also established partnership with DONG Energy. This led to development of a fulfilling mix of energy reductions alongside renewable energy production. Through this alliance, DONG Energy assists Novo Nordisk with reduction in its energy consumption. At the same time, Novo Nordisk is able to save energy to enable purchase of certified green power from the Horns Rev 2 (Global CSR, 2013). This partnership was strategic for Novo Nordisk because the Horns Rev 2 was not yet fully established and besides, the company did not have adequate funds to finance its completion. The company would not incur any costs through this partnership yet the significant reduction in CO2 emission would help it finally achieve the goal of constructing the renewable energy market in Denmark. Wind power is generally more expensive compared to conventional energy but the partnership was a good business.

Novo Nordisk understood how the absence of business could harm the business following the events of 2000’s. The company had been badly affected by the Oil-for-food scandal. The United Nations had established the Oil-for-Food program in 1996 to allow Iraq sell its oil in order to achieve humanitarian objectives. The UN reported in 2005 that Novo Nordisk was among the 220 companies that had been affected by the program, which were to pay $1.4 million. Novo Nordisk made payment in 2009 with the US Securities Exchange Commission. For the Novo Nordisk, the case resulted in new business strategy with ethics that emphasized that bribery and corruption were not acceptable, and that business ethics had to be maintained (Ryan, 2017). This new strategy contains procedures that illustrate expected ethical business conduct, serious training programme for the employees, improved governance, proper auditing, reporting procedures, and a compliance hotline. The compliance hotline enables employees and external stakeholders to report on violations of company policy with respect to business ethics (Novo Nordisk, 2017). The company also understands the growing demand for compliance in the healthcare industry since many organisations are unable to remain compliant. The organisation believes that the system they have is very good for future operations of the business. However, the current study is concerned with determining the effectiveness of the BE mind set. The main areas of concern during the study are: the strategic features of the initiative with regards to the company’s position; and the ways in which the strategy leads to fulfilment of the internationally developed and accepted principles for realising sustainable development.