Daniel Milks

 How is Johnson & Johnson structured in terms of decision rights? What are potential
benefits and costs of this structure?
 Evaluate the planning and control system in use at Johnson & Johnson. What are its
strengths and weaknesses? What is its role in developing and implementing strategy?

Johnson and Johnson is managed on a very decentralized basis. They are a large organization
with many subsidiaries, but they have an interesting structure when it comes to decision rights.
Johnson and Johnson conducts business through their operating subsidiaries, which are all
autonomous operations. This means that the responsibility for each operating subsidiary lies with
that operations management. In terms of communication, decisions are made by the management
of the subsidiary. From there, either the President, General Manager, or Managing Director will
report to a member of the Johnson and Johnson executive committee. This allows each
subsidiary to act and strategize on their own accord. Some benefits that come with this structure
is each company can act with their own management with people who know that business well.
For example, if a subsidiary was bought out by Johnson and Johnson in 1995 but the CEO had
been in control since 1985, they have the experience and skills necessary to run that operation,
and J&J doesn’t need to actively control that organization. That allows the subsidiaries to operate
on their own, and keeps costs low for J&J. On the other hand, if a business is underperforming or
needs some serious help, this system of controls would make it difficult for them to intervene.
The planning and control system at Johnson and Johnson is also on a very decentralized basis.
First, annually, every subsidiary prepares 5 and 10 year plans. These estimate unite sales volume,
sales revenue, net income, and return on investment. Based on these estimates, J&J creates very
detailed annual budgets. During every year, budgets are closely watched by J&J for each
subsidiary. If needed, there will be revisions throughout the year that are presented to the
executive committee. Managers can change and revise their plans, it is just asked that they
communicate that to the Executive Committee. This again gives managers the freedom to change
and work around the budgets of each subsidiary because they will know what budgets work best.
There are a few cons to this, mostly coming with how hands-off J&J is. This could create conflict
and as was said in the case, conflict can be healthy, but too much conflict seems unhealthy. In
terms of J&Js role in implementing strategy, this comes with their review of subsidiaries budgets
They are very decentralized and often let managers do what they believe works best, but it is not
completely hands off. They still review budgets and work alongside managers and will step in
where they see fit.