Control Mechanisms at Johnson & Term Paper

The "Tylenol Scare" of the 1980's resulted in a rededication to J&J's core ethical values. As stated in its corporate responsibility section:

Each Johnson & Johnson business unit or facility is required to measure, monitor and report on its environmental performance and evaluate its Environmental Management System for effectiveness (J&J, 2007).

J&J maintains a small central administrative and finance staff at its headquarters, called "the Tower," in East Brunswick, New Jersey. The top members of the Executive Committee are all operating managers -- each has a group President role for about one-fifth of J&J's companies. Each interacts regularly, with their offices next to one another in close proximity. Thus, the key value at J&J is operating excellence, not the ability to play politics.

From an anthropological point-of-view, J&J's "tribe" supports operations, not staff. J&J top management emphasizes the elements of control which matter most to the corporation:

Put control where the operation is: J&J's division Presidents make most of the operating decisions, with the central HQ acting as "referee" and "scorekeeper," not director.

Uses "real time" controls: Despite approval during the budget process, the division must come back to corporate to renew approvals for capital approvals, deviations from business plans, or major hires.

Builds on trust: Like many 'excellent' companies, J&J entrusts its divisional managers with a great deal of operating authority, then monitors the results.

Strong peer norm culture: There is a strong rivalry amongst J&J divisional managers. Part of this is informal -- all are performance-driven. Some is formal -- they compete for resources from corporate in order to support their divisions.

Incentive systems support teamwork: J&J has an incentive system which is strongly based on divisional and group attainment of goals (Snell, 1995).

Drawbacks

J&J's strong clan culture inhibits the cultivation of long-term thinkers and those from outside the company. J&J has a strong tradition of home-grown managers, which may have resulted in some setbacks in key businesses (spine, cardiovascular, IV solutions) as compared with major competitors such as Baxter and Medtronic.

Any company J&J's size risks bureaucratic slowdowns. Despite J&J's attempts to maintain freedom of action, it can be very frustrating for an action-oriented division President to wait for corporate approval for an expenditure above $25,000, or a crucial acquisition which can disappear before HQ can react.

Finally, J&J's tradition of moving around division Presidents every 2-3 years results in the "GM syndrome," meaning that managers can make decisions which are short-term oriented, or not have to live with the results longer-term.

Conclusion

J&J joins a few other Fortune 100 companies in being able to encourage strong financial and ethical performance while continuing to grow and strengthen. Although now a behemoth with $50 billion in sales, it is still a haven for operations-oriented managers who wish to move ahead. One can thank its "loose-tight" control networks for allowing these managers their freedom of action.

Bibliography

Atherton, E. a. (1998). Practices of the best companies in the medical industry. International Journal of Health Care Quality Assurance, 173-176.

J&J. (2007). Governance. Retrieved October 22, 2007, from J&J: http://www.jnj.com/community/governance/index.htm

Snell, S. (1995). Human resource management and firm performance: testing a contingency model of executive controls. Journal of Management, n.p.

This is a relative term: J&J has been criticized for its bureaucratic approach, particularly when related to joint ventures and acquisitions.

Control Mechanisms