Johnson & Johnson CEO: Decentralization Works
Decentralizing management is a good way to spark innovation and train corporate leaders, according to William Weldon, CEO of Johnson & Johnson, maker of Band-Aids and Tylenol. Weldon made the comments at a Wharton School leadership conference and a video of his comments is available online.
J&J, with revenues of $61 billion, has 200 operating companies that produce consumer goods such as baby shampoo and medical products. "We have over 200 operating companies; we need 200 great leaders," Weldon said. "I think the challenge is always developing great leaders who can run the businesses."
A decentralized approach helps innnovation "in that it allows different people with different skills, different thoughts, to bring together different products and technologies to satisfy the unmet needs of patients or customers," he says. One example happened when J&J brought together individuals from its medical products with its drug business. "They came up with putting a drug on a stent ... for cardio-vascular disease, which was a huge breakthrough," he says.
J&J also uses "internal ventures" as a way to let employees come up with new ideas.
Decentralization also helps with overseas operations. In Japan,for instance, J&J has local management run companies. "They understand the consumer, they understand the people they are dealing with and they understand the government and the needs in the marketplace," he says, adding "It's very hard to run it from the U.S. and to think we would know enough to be able to do this."