Did too much autonomy lead to J&J recalls?

Johnson & Johnson's (NYSE: JNJ) highly publicized manufacturing troubles could stem from a management trend toward decentralization and business-unit autonomy, BNet Pharma reports, quoting sources. Back in 2005 and 2006, J&J operating company managers successfully fought to loosen the apron strings from their corporate parent, the sources said.

Apparently, pre-2005, J&J had a twice-yearly "Management Action Plan" reviews, in which a compliance officer met with operating company presidents to go over their progress toward certain compliance goals. The MAP system wasn't well liked; at an executive confab, the operating-company presidents complained that they couldn't deal with MAP and hit their financial goals, BNet reports. After that meeting, the source told BNet, the MAP system was abolished and the corporate compliance department's workforce was cut in half. The operating company presidents got the authority to self-govern their companies.

As BNet points out, this move toward decentralization is hardly unique on J&J's part. There's a school of management thought that favors operating-unit autonomy; executives at these business units are believed to be more invested in their unit's performance, and decentralization is seen to favor entrepreneurial thinking. But there are pitfalls, of course.

And J&J may have found itself in one of them. Sources are telling Congress that McNeil Consumer Healthcare--the J&J unit beset by recalls and manufacturing snafus--may not be properly overseeing all its plants. In a letter to the House Committee on Oversight and Government Reform, Rep. Darrell Issa (R-CA) asked that hearings be postponed so that J&J CEO Bill Weldon (photo) could attend: "According to credible sources, the McNeil manufacturing facilities presently under investigation may be 'out of control' and not following internal standard operating procedures, much less FDA regulations," he wrote. "The parent company must be held accountable." We'll have to wait until those hearings for the scoop.

- read the BNet post

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