Social distancing during Covid created unprecedented personal space in the modern era and welcomed people to let their appearance go.
But other trends spawned by the pandemic fed the market for Merz Aesthetics’ cosmetic-enhancement products: the Zoom boom, a greater emphasis on personal fitness, and the paring back of other options for spending discretionary income.
Under CEO Bob Rhatigan, Merz Aesthetics also reshaped its culture over the last five years to create an entity whose values and norms aligned with and more effectively met the needs of its customers — a success that could serve as a model for many companies.
As a result, Merz’s own business is booming, and that means the company’s manufacturing operations in Wisconsin, Switzerland and Germany are turning out fast-growing volumes of cosmetic fillers and other products, including Xeomin, which Merz markets as an improvement on Botox. Sales of Xeomin improved by high double-digit percentages in the United States last year as Merz’s global business experienced mid-double-digit growth over the last fiscal year.
Merz’s boom has come not only because of Covid but also in the wake of a major restructuring of the lines of business of the German parent company, Merz, along business verticals instead of geographically. Rhatigan joined Merz five years ago as CEO of North America after a 17-year career with Allergan, where he helped launch the Botox brand, and then became CEO of Merz Aesthetics globally after the parent company’s realignment.
“We moved to an independent, standalone business just before covid hit the U.S., but we made sure we leveraged and executed our strategy,” Rhatigan told Chief Executive. “We doubled down during that period. Businesses and customers were in a tough spot, with many countries shutting down elective medical procedures.
“But rather than take a hiatus, we took the strategy of making sure we invested all the time and energy we needed to help customers and employees get through that challenging period with the hope that we would have a strong rebound on the back end. And that has materialized for us.”
Under the restructuring, Rhatigan assumed responsibility for about 800 U.S. employees of Merz, mostly at its plant in Wisconsin and its headquarters in Raleigh, North Carolina, as well as about 900 more employees elsewhere in the world. And he brought worldwide manufacturing, commercial, finance, HR, R&D, administration and IT operations under his control.
But that was only the start of the transformation of Merz Aesthetics. “I came into a pretty challenging spot before the restructuring, with a lot of employee turnover, poor morale, and the loss of customers,” Rhatigan said. “We oriented to trying to stabilize the overall business and make sure we first built and established a culture.”
The strength of the culture the company built subsequently, he said, is that “we have defined values and operating norms and really reinforce and require people to adopt those.” These principles include assuming positive intent from colleagues, and collaborating cross-functionally. “These aren’t terribly mind-blowing in uniqueness or cleverness, but it’s very important to codify these things,” Rhatigan said. “That has helped us turn the corner in terms of the employee culture. It helped us retain people who were drawn to a purpose-driven company that has clearly articulated a set of values and operating norms.”
Turnover now at Merz Aesthetics is under 10%, compared with a 20% to 25% level at peers in the life-sciences industry, Rhatigan said, despite the much-ballyhooed “Great Resignation” of employees in the wake of Covid.
To come up with the right and effective values and norms for the culture, Rhatigan said, the company blended “base [values] that had been in effect at Merz for more than 105 years,” lessons from Rhatigan’s experience as a leader at Allergan and Procter & Gamble, and the power of collaboration.
“When we said we had to define our operating norms, we did that with a group of leaders as well as of people who spanned all different levels of the organization, to come up with tenets we found that would be most impactful,” he explained. “It wasn’t, ‘Here are our values’ from the top down.”
And to make sure this collective effort didn’t get bogged down in the typical muck of a committee process, he said, “We used a white board and didn’t over-engineer it. If you do that, you can pretty quickly come down to central tenets relative to your organization. You can do it in days or weeks, maximum, instead of months, and pretty quickly come to a level of consensus.”
As Merz Aesthetics and its physician customers and end consumers came out of covid, he said, the company confronted the moment by creating a white paper aimed at helping medical aestheticians’ offices ease patients back to a comfort level with appointments and rolling back the alarm that had been created by pandemic shutdowns. “That was a very significant barrier to customers taking treatments,” Rhatigan said. “We helped frame and develop a white paper for how [offices] could put patients at ease and ensure a safe environment.”
Other trends that emerged from covid have helped lure people to medical aestheticians and to Merz’s products including Xeomin, which Rhatigan said is a healthier alternative to Botox. There’s the “Zoom boom” as “people who now sit in front of some sort of screen all day see themselves, and they look different than they feel, and it’s something they want to take care of.”
Also, the elimination of many leisure options for much of the duration of the pandemic freed up disposable income that many Americans, especially younger ones, decided instead to devote to looking and feeling better.
“They’ve redirected those funds toward self-improvement and self-care, which has been a big stimulant” for Merz’s business, Rhatigan said. Medical-aesthetic treatments “have become a much more socially commented upon part of the discussion, versus something that people used to keep to themselves.”