Johnson & Johnson: Using a Credo for Business Guidance

CASE STUDY—JOHNSON & JOHNSON

Johnson & Johnson: Using a Credo for Business Guidance

Johnson & Johnson, founded by Robert Wood Johnson and his brothers James and Mead in 1886, has grown into the world’s most comprehensive manufacturer of health care products and related services for the consumer, pharmaceutical, and medical devices and diagnostics markets. Today, Johnson & Johnson consists of more than 250 operating companies, employing approximately 121,000 employees, with more than 50,000 of those in the United States. Johnson & Johnson has operations in 57 nations and sells products all around the world. Johnson & Johnson’s product categories include, but are not limited to: allergy, colds, and flu; baby care; cardiology; dental care; diabetes care; first aid; medical devices and diagnostics; oncology; prescription drugs; skin and hair care; and vision care. The company’s sales have increased every year for since 1946, and in 2006, global sales were $53.9 billion and net earnings were $11.1 billion. Moreover, Johnson & Johnson was ranked ninth on Fortune’s 2006 “America’s Most Admired Companies” list and fourth on Fortune’s 2006 “Global Most Admired Companies.”

        The worldwide success of Johnson & Johnson is widely attributed to an unwavering commitment to a business philosophy that puts customers first and stockholders last. Robert Wood Johnson II first articulated this business philosophy in 1943; it was called the Johnson & Johnson Credo. Like his father before him, Robert Wood Johnson II could be dogmatic, autocratic, and prone to micromanagement. Yet, he was not as inflexible as many people thought; in fact, he encouraged innovation in every part of the company. There was, however, one thing about which Robert Wood Johnson II was inflexible ⎯ adherence to the Johnson & Johnson Credo. Even after the company went from being family-owned to having public ownership and trading of its stock in the early-1960s, the Johnson & Johnson Credo has provided fundamental managerial and operational guidance to which the company has unwaveringly adhered.

The key points of the Johnson & Johnson Credo address the company’s four responsibilities. In descending order of emphasis, these responsibilities may be summarized as follows:

• The company’s first responsibility is to meet the needs of everyone ⎯ doctors, nurses, patients, mothers, fathers, and others ⎯ who use the company’s products. Johnson & Johnson does this by providing quality products that are reasonably priced, and by ensuring that suppliers and distributors have the opportunity to make a fair profit.
• The company’s second responsibility is to the company’s employees throughout the world, treating them fairly and with dignity, seeking to involve them, and providing them with competent and ethical management.
• The company’s third responsibility is to the various communities where it operates, seeking to improve those communities and sharing in the burden of such improvements.
• The company’s last responsibility is to the stockholders, seeking to make a sound profit in order to provide a fair return to the owners and to enable the company to innovate and grow so that fair returns are maintained in the future.

        The full Credo was in a format that people could understand, and Robert Wood Johnson II demanded that people adhere to it. Very importantly, the company created appropriate organizational mechanisms to bring the Credo to life, and to support and reinforce it. The Johnson & Johnson Credo “may sound a bit corny ⎯ and so may J&J’s devotion to it: It’s posted in every J&J facility around the world and carved in an eight-foot chunk of limestone at company headquarters in New Brunswick, N.J. But Johnson made sure everyone bought into it.”