Hans Peter Geht Nach Hause

Johnson & Johnson relies on decentralized management system and its autonomous operating subsidiaries to compete in high-competitive health care markets. The planning and control system has benefits and detriments.

The system creates a decentralized culture which is necessary for their success. The center of the control function is the Executive Committee comprising the chairman, president, chief financial officer, vice president of administration, and eight Executive Committee members with responsibilities for company sectors. In some ways, each subsidiary reports to a member of the Executive Committee. However, each company develops its own plans and strategies. In addition, those strategic plans remain fixed over a five-year period. Therefore, the managers are not only effectively delegated but also strongly accountable for their actions. They set their targets by themselves. Then, they move toward the goals based on their own decisions. So, there is no excuse for them to miss the objectives. That's why Roy Black states that decentralized management is "unequivocal accountability for what you do."

Five- and Ten-year plans at Johnson & Johnson let them have long-term views and learning opportunities. It is in the fast-moving, complex, high competitive health care businesses. It is hard to make a prediction for the future and so the view point is likely to be short-tem focus. It might have adverse effect on long-term corporate performance. At Johnson & Johnson, however, each subsidiary has to develop a five- and ten-year strategic plan and use it as a guiding vehicle for short-tem profit plans and budgets. Its long lasting performance proves effectiveness of the system. Using the five- and ten-year planning concept, Johnson & Johnson requires managers to include in their plans an explanation of how and why their estimations have changed over time. This allows the company to adjust their thinking over time and to achieve ex-post learning.

Tied with subjective and qualitative compensation systems, highly decentralized planning and control system at Johnson & Johnson enhance innovation within the company. The company delegate strategic planning to operating subsidiaries. It asks each subsidiary to report the plan and review the result with the corporate. By controlling output rather than process, it allows the subsidiaries to seek innovative ways to achieve the corporate mission.