Rough ride: DRL's Executive Vice Chairman & CEO G.V. Prasad (R) and MD & COO Satish Reddy (L) with the company's senior team in Hyderabad

Once every week for the last two months, Gunapati Venkateshwara Prasad, Executive Vice Chairman and CEO of the Hyderabad-based Dr. Reddy's Labs (DRL) has been holding late evening meetings, followed by dinner, with his employees in groups ranging between 50 and 100. If that looks like an extraordinary thing for a busy CEO to do, it's because India's No. 2 drug company finds itself under extraordinary circumstances. This year has been a long one of a series of bad news. Early this year, it lost an appeal in a us court to launch its first specialty product (amlodipine maleate), an innovation on Pfizer's Norvasc. What makes it worse is that there are no other new and significant drugs slated for launch in the short term. Also, its existing generic products in the US (like fluoxetine) are losing marketshare to competition. The latest blow has come from long-time partner Novo Nordisk, which announced late last month that it was discontinuing clinical trials of an insulin sensitiser molecule, Balaglitazone, that DRL had licensed to it in the hope of reaping millions of dollars in royalty. Just a few hours before the company conveyed the news to the stockmarket, it had reported a 44-per cent drop in second quarter net profits to Rs 51.70 crore. Its stock, which has been facing a near-free fall since January this year, is down by half to about Rs 750. "My plan is to communicate to all our employees our five-year plans, why these gaps exist and what is being done to mitigate the risks," says Prasad.

For starters, the company plans a switch in strategy. Henceforth, alliances will form a big part of its marketing. That means not only lower costs, but also lesser business risk. But the challenge for DRL is obvious: It must make the switch without panicking its employees. One part of that is about communicating-telling employees why the changes are required, and ensuring their support. The other part is about making the management system robust enough to take any shocks that may be created by the exit-if any-of some key executives.

In fact, over the last three months, Prasad and his head of hr, Saumen Chakraborty, have spent long weekends drafting documents, employee reference booklets and putting in place systems and processes that are benchmarked against the best. In January this year, the company moved from an SBU structure to a "3d matrix", based on geography, business area and functions (like finance and sales). Added to that is a slew of initiatives such as Rachana, which aim to make the company the world's most efficient product development firm. Once again, the idea is to unlock the leadership potential of its employees. "(Maintaining growth) is what managers do, but raising the curve to the next level is what leaders do," says Prasad. "That gap between the points on the curve is the leadership impact, and that is what we are trying to build."

If DRL ever needed such leaders, it is now.