Control Mechanisms at Johnson & Term Paper

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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.

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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......

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