Monday, November 16, 2009

The Chaos At J&J

I recently had the opportunity to speak at length with a Johnson & Johnson employee concerning the recent massive layoffs at the firm. Some 7-8,000 employees were shed from the 117,000-person workforce at the large, diversified pharmaceutical firm.

Reading through the article which was the first result of a Google search on the term "J&J layoffs," I was struck, humorously, by this passage,

"J&J has long been touted as being one of the best-managed companies in the S&P 500. It's no surprise then that Chairman and CEO William C. Weldon is trying to maintain that image. "Johnson & Johnson has long adhered to a broad-based operating model and set of sound management principles that have driven our success," Weldon said. "Today, we are announcing a series of actions and plans designed to ensure that our company remains well-positioned and appropriately structured for sustainable, long-term growth in the health care industry." "

According to a friend with whom I recently discussed J&J's recent job cuts, this is all myth.

The conversation began when I commented that I assumed, given her silence on the subject, and general upbeat attitude, that she was unaffected. She confirmed that, while she had escaped, her secretary had not. For rather obvious reasons, I'm not going to divulge any details sufficient for a random senior J&J executive to identify her.

Suffice to say, though, that when I asked about the nature of the cuts- surgical vs. indiscriminant- she confirmed that it was the latter.

The layoffs were, in classic large-corporate fashion, sprinkled throughout the hundreds of operating units at the sprawling health care-related giant. To give some sense of the inanity of the company's actions regarding treatment of its research staff, she related the following tale.

A researcher of her acquaintance had her original area of study curtailed, but was offered the chance to remain with J&J by totally changing her field of study, and moving to a nearby state. Despite the woman's husband being on the faculty of a well-respected university, she consented, and they moved. The woman's husband managed to secure another faculty position in a nearby city in the new location.

Just six months later, the woman's new research assignment was also terminated. This time, they offered her another, unrelated job in the same geographic area. In order to maintain some stability for her and her husband, the researcher took the new position.

It, too, was eliminated, within the year. With no other option at J&J on offer this last time, she was dismissed from the company.

My friend bemoaned the generally harsh treatment of the company's research talent. Modest salaries and no bonuses, while senior executives not actually involved in value-adding positions received lush bonuses.

She mentioned that, only a few months ago, a recently-hired woman who had been given a multi-million dollar bonus retired at age 50.

When I related some stories from my earlier career, at AT&T and Chase Manhattan, my friend began to see the recent J&J moves as just average corporate incompetence.

I used the phrase "endemic," and she immediately seized on that, lamenting that the company just seemed schizophrenic in its management style. A senior level executive would say one thing, while the reality of what was occurring two levels below was in direct contradiction.

Then there was the discussion about budget padding. She opined that, while she was quite busy, her boss, who is talented and competent, has little to do. One of them, she mused, is redundant.

I offered that this is common practice in corporate America. A senior executive keeps redundant people on staff for several reasons. One is Hay points. When your own compensation depends upon the size of your group, you fight for budget and staff, regardless of your actual need.

Then there is forward-looking protection. If you run too lean, and have to cut staff, your performance is imperiled. If, however, you keep a few extra people around with important-sounding titles, then you always have at least one staffer to offer when everyone has to "give at the church" in mass layoffs.

My friend nodded her head energetically in agreement.

I then made a generalized statement, from my own experience of some 25 years, that many companies, from the outside, look omnipotent, well-run and unstoppable. Then you get inside and, within months, realize that their successes were mostly accidents. That management is the same as in other large, ponderous, blundering entities. Good results are a product of enough lucky occurrences among many groups to appear as seamless, superior management.

She again agreed, adding that this was pretty much her own experience at J&J. Having worked at smaller competitors in the past, she has seen the varied faces of risk as an employee.

She remarked,

'In a smaller pharma company, you are more at risk to the company's success, but at least you always know exactly where you stand. It's run leaner, so everyone knows just what is happening.'

Now, as is typical in a large corporate environment, she feels powerless. Though dedicated, intelligent and, from what I gather, quite competent, she knows that continued employment at the firm is, in large part, a matter of luck.

The recent job cuts were in no way reasoned nor calculated, other than the topline number. Down in the trenches, it was like a lightning strike or tornado. Capricious and sudden, with no obvious basis for selection of the victims.

Sorry to say, her stories made me feel a bit more comfortable. Large corporate America is the same, some 15 years on, as it was the last time I wrestled with such issues.

In my case, a very productive and interesting position at then-named Andersen Consulting was changed overnight from a research directorship focusing on the performance of financial institutions into an internal finance/accounting job.

Needless to say, I immediately began looking for another job.

Despite the outward signs of steady, calculated and focused management at J&J, with the recent layoffs as evidence of a focus on containing costs while maintaining performance, the internal reality seems much different.

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