Decentralization Works at Johnson & Johnson Johnson & Johnson has relied on decentralization as a good way to spark innovation and train corporate leaders, according to William Weldon, CEO of Johnson & Johnson, a health-care products company that makes such brands as Band-Aids, Tylenol, and Splenda. Johnson & Johnson's commitment to innovative products has led to 76 consecutive years of sales increases, 25 consecutive years of adjusted earnings increase, and 47 consecutive years of dividend increases for shareholders. Decentralization has helped Johnson & Johnson develop leaders.Because managers know they can operate a business unit profitably,they try hard for the top jobs at the company's best businesses. Johnson & Johnson has 250 operating companies in 57 countries and generated annual revenues of $63.7 billion in 2008. All these separate businesses create a wide range of development opportunities for mangers at Johnson & Johnson. A decentralized approach helps innovation "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," according to CEO Weldon. One example of this kind of innovation happened when Johnson & Johnson brought together individuals from its medical products division with its drug business. The combined efforts of these specialists generated the idea of putting a drug on a stent to treat cardiovascular disease, which was a major breakthrough. DISCUSSION QUESTIONS 1. What are the advantages of using a decentralized organization structure at Johnson & Johnson? What is the basis of organizing employees into units at Johnson & Johnson? 2. Can you think of any inefficiencies or drawbacks to Johnson & Johnson's emphasis on decentralization? Sources: Based on Johnson & Johnson Web site, "Company Overview," 2010. www.jnj.com/company-overview.cfm; G. Colvin and J. Shambora, "J&J: Secrets of Success," Fortune, May 4, 2009, pp. 117-21; P. Galuszka, "Johnson & Johnson CEO: Decentralization Works," July 2, 2008.