ROBERT W. JOHNSON & ROBERT W. JOHNSON II

JOHNSON & JOHNSON

For most of the twentieth century, one of America’s most distinguished corporations was Johnson and Johnson. The company was a financial giant in the health care industry and a paragon of corporate ethical excellence. The two men most responsible for this accomplishment were a father and son team – Robert Wood Johnson and Robert Wood Johnson II. Partial credit also belongs to James Johnson, brother of the father. The historical sketch which follows relies heavily on Lawrence G. Foster’s Robert Wood Johnson.

ROBERT WOOD JOHNSON

Robert Wood Johnson was born in rural Pennsylvania on February 15, 1845. He was the eighth child born to Sylvester and Louisa Johnson. His family’s 151 acre farm provided such a modest existence that the father took a variety of odd jobs to support the family.

Robert attended a Methodist boarding school for three years before being sent to Poughkeepsie, New York where he became an apprentice in a local apothecary. His place of business was owned by his mother’s cousin James G. Wood. He lived in the Wood home.

James Wood was an excellent mentor for young Robert. He insisted that the apprentice begin doing the menial chores and gradually promoted him to jobs requiring specialized knowledge. A breakthrough event occurred when James Wood taught his young relative the difficult art of making medicinal plasters.

Robert Wood completed his apprenticeship in 1864 and moved to New York City where he took a job as an order clerk at a wholesale drug firm. He was nineteen years old.

By 1868 Robert was ready to start his own business. He secured a desk at 36 Platt Street in the downtown business area of New York and opened for business as a broker and importer of drugs and chemicals.

Robert soon became friends with another broker, George Seabury. The two talked about forming a partnership and eventually did so as equal partners in 1873. They called their firm Seabury and Johnson. Seabury took the job of president and Johnson became secretary and sales manager. Johnson also began to experiment with the making of spread plasters. He eventually learned how to produce a marketable product which then helped Seabury and Johnson to experience significant growth. The firm’s growth eventually required a move to a larger facility in South Brooklyn.

Over time the relationship between Johnson and Seabury became strained. The strain showed up in contentious partner meetings. One of Johnson’s biographers suggests that a basic difference was Johnson’s stronger propensity to try new ideas ( Foster, p.31). And the same biographer alludes to a need to be in control as a prominent feature of Johnson’s personality if not also of Seabury’s. The tension increased when Seabury successfully proposed bringing a brother into the firm. Johnson responded by bringing in two brothers – Mead and James. James demonstrated a talent for operations management and was eventually put in charge of the firm’s manufacturing operations. It is possible that his success was an additional source of Seabury’s ill will toward Robert Johnson.

Whatever the explanation, the fact of the matter is that the personality clashes escalated to the point where each of the two men took turns offering to be bought out by the other. Eventually, Robert Johnson won that contest of wills and was bought out by Seabury. The agreement called for Seabury to make installment payments to Johnson and for Johnson to agree that he would not participate in a competing business for ten years.

JAMES AND MEAD JOHNSON START A NEW BUSINESS

James and Mead Johnson were not covered by their brother’s non-compete agreement and the two brothers were, therefore, able to start a new business manufacturing plasters. They borrowed $1,000 and located in a vacant factory building which was available in New Brunswick, New Jersey. The starting work force consisted of fourteen employees. James was responsible for manufacturing operations while Mead handled sales. Because this business competed with Seabury, Robert was not able to participate in any manner.

The slow and uncertain progress of James’ and Mead’s new business called for the recruitment of someone with brother Robert’s leadership abilities. Robert, of course, was not available because of his non-compete agreement with Seabury. But Seabury began to have trouble making the required buyout installment payments to Robert. And so Robert signed a new agreement with Seabury, one which absolved Seabury of future payments and therefore allowed Robert to reenter the business.

Biographer Lawrence Foster tells us that Robert Johnson’s arrival immediately changed the firm’s prospects. As he puts it ( Foster, p. 46):

“Modesty was not one of Johnson’s strengths. He did not hesitate to say that his brothers had gotten off to what he described as “ a feeble start” without him, but he was now ready to change that. This new surge of spirit was quickly transmitted to the small band of factory workers in New Brunswick …They were well aware of his reputation for getting the job done and how determined he could be. As he established contact with larger numbers of customers, the orders began pouring in and the production line moved faster. Both the motivator and the money had indeed arrived.”

Within a year sales growth had caused the company’s employment to increase from 40 to 125 persons. The Johnson brothers felt justified in publishing a thirty-two-page catalog.

On October 28,1887, the company was incorporated with a capital investment of $100,000 . Robert Johnson held forty percent of the stock and was named president of the company. James and Mead each held thirty percent of the common stock. James was named general manager of manufacturing and Mead became the company’s secretary.

Among the new products added by Johnson and Johnson was a line of antiseptic dressings. This product line incorporated the controversial thinking of Dr. Joseph Lister regarding infections. Lister was a British surgeon who believed in and did something about Louis Pasteur’s theory that bacteria caused infections which often led to death following surgery. Lister’s solution was to kill the bacteria by pouring carbolic acid on the open wound or surgical incision and then covering it with a dressing also saturated with carbolic acid.

Lister made a lecture tour in the United States in 1876, Robert Johnson attended one of the lectures and became a champion of the concept. He also saw a business opportunity. The surgical dressings available in that time offered substantial room for improvement and Johnson developed a vision of being a major contributor to such improvements.

The new line of dressings in Johnson and Johnson’s 1887 catalog represented the latest chapter in that effort ( Foster,p.49). The dressings offered improved absorbency by using cotton (Foster, p.49). Robert Johnson, himself, “ … developed an ingenious disposable sponge, or dressing, made of layers of absorbent cotton, and coconut and manila fibers, with a small capsule containing an antiseptic hidden in the center” (Foster, p.49).

In 1887 Johnson began to spend less time in his New York City office and more time at the New Brunswick office. There, “ He immersed himself in every aspect of the business, even opening the company’s mail every morning – a ritual he followed throughout his business life” (Foster, p.52). That statement needs to be qualified with the observation that in later years Johnson would spend extended periods of time traveling while still serving as the company’s chief executive officer.

It was also in 1887 that Johnson met local New Brunswick pharmacist, Fred Kilmer. Kilmer operated the Opera House Pharmacy and, while still a young man, had already become a prominent member of his profession. He had served as president of the New Jersey Pharmaceutical Association in 1886 (at the age of 35). And he was a leader in local efforts to tackle public health problems. It was Kilmer who persuaded the mayor to create what was to become New Brunswick’s first Board of Health.

The two men developed a close friendship based on their mutual interest in opportunities to improve health care through research and education. Before long they agreed to launch a joint effort to promote Listerism. As explained by Foster ( p. 57):

“During his frequent visits to the Opera House Pharmacy, Johnson would talk about the need to develop a broad educational program for physicians in support of Listerism, a subject on which Kilmer was both knowledgeable and sympathetic. The two men ..began to devise a plan. Kilmer would start corresponding with a group of well-known surgeons who were believed to be advocates of Listerism. and their experiences with the sterilization method would be compiled into a manual and distributed widely to physicians and hospitals. Meanwhile, Johnson and his associates would work on improving the surgical dressings that would be required in the operating room in support of Lister’s concepts.”

In 1889 Johnson hired Kilmer as the company’s Director of Scientific Affairs. Kilmer would remain with the company for 45 years and would become one of Johnson and Johnson’s most important assets.

By the end of 1891 Kilmer’s laboratory had discovered the technical knowledge needed to mass-produce sterile cotton and gauze dressings. Kilmer was not shy when it came to evaluating the significance of this development. In his words (Foster, p.60):

“ Lister’s first methods were crude but they were founded upon science and upon art…. From Lister’s great conception was born modern surgery. It is acknowledged that the introduction of Johnson & Johnson dressings marked the real beginning of antiseptic surgery in this country; in fact, it placed reliable antiseptic dressings within the reach of every practitioner. This the Johnson’s did at a time when many of the profession were still in doubt about accepting the doctrine and theory of antisepsis.”

At about the same time Kilmer’s lab played a major role in Johnson and Johnson’s introduction of first aid products and somewhat accidentally developed what was to eventually become the famous Johnson’s Baby Powder (Foster, pp. 60-63).

The new line of first aid products originated from Johnson’s chance discussion with a railroad’s chief surgeon. The surgeon made Johnson aware of a potential market for first aid kits to be used by surgeons in the field ( Foster, p. 60). A kit was developed; Kilmer became involved in writing a first aid manual; and soon Johnson and Johnson first aid kits were being sold to businesses of all kinds as well as to household.

As was true of other Johnson and Johnson products, the first aid kits used a “Red Cross” symbol. The symbol was not trade marked. In fact, many other companies also used that symbol. But use of the symbol was challenged when , in 1895, the United States Congress passed a bill prohibiting any group other than the American National Red Cross Society to use the symbol. Johnson opposed the bill on the grounds that his company had been using the symbol since its founding. President Cleveland refused to sign the bill, leaving the issue unresolved. Johnson then negotiated a deal with the founder of the American National Red Cross, Clara Barton. The Red Cross agreed to allow Johnson and Johnson to use the symbol for a payment of one dollar. Thus, when a similar bill was later signed by President Theodore Roosevelt, the company’s right to use the symbol was protected.

Another fruit of Fred Kilmer’s research department was the development of “kola products” derived from the coca plant and cola nuts. These products were marketed as aids to stop nausea, increase stamina and promote digestion among other effects. Kilmer and Mead Johnson then became interested in products that might be developed by using papaya fruit. The time Mead spent on this project became an issue with his brothers. Therefore, in 1897 Mead decided to sell his stock in Johnson and Johnson and start his own pharmaceutical company, Mead Johnson and Company.

Johnson and Johnson’s famous baby power product was the result of a letter received by Kilmer. A physician wrote that medicated plaster could cause skin irritation. Kilmer sent to the doctor a container of talc to be used to soothe the skin if needed. The incident was discussed within the company and it was decided to start packing plasters with a container of talc included. Eventually the talc became a separate product known as Johnson’s Baby Powder ( Foster, pp.63-64).

Kilmer and Robert Johnson were both committed to high standards of product safety and effectiveness. To them this was both a moral requirement and a long run source of competitive advantage. The wisdom of their approach seemed to them to be borne out with the passing of the federal Pure Food and Drug Act of 1906. While less scrupulous firms were forced to change methods and products, all of Johnson and Johnson’s products and processes met the new regulatory standards (Foster, p. 96).

It was also in 1906 that Robert Johnson created the company’s Welfare Work Department. This was his pioneering way of practicing his belief in an employer’s social responsibility to employees. Here is how the new department worked (Foster, p.97):

“Workers were given advice on health matters, referred to physicians and, in many cases had their medical bills paid. Legal advice was provided, and counseling on marriage and family problems. The only subject the Welfare Department was not permitted to advise on was religion. Classes were conducted in hygiene, gymnastics, millinery, embroidery, and English – the latter because many workers were Hungarian immigrants. A mutual benefit organization was formed to provide financial support during illnesses. Hospital and retiring rooms were set up for those taken sick on the job, and later became the company Medical Department”.

Johnson also initiated pension and medical plans for some employees and encouraged the women employees to form a social and educational club.

It was also during this time that Johnson revealed his thinking regarding two threats faced by all businesses – recessions and competition. Johnson’s approach to a recession was to maintain employment while cutting hours and lowering pay. That is what he did when tested by the severe recession of 1907.

With regard competition, Johnson’s primary strategies were innovation, quality and productivity. But he was not above acquiring a potentially troublesome competitor. That is how he dealt with the J. Ellwood Lee Company which produced medicinal plasters and practiced sharp price cutting. In 1905 Johnson and Johnson acquired the Lee company, putting an end to that competitive threat.

Robert Wood Johnson’s family life was colorful and somewhat unorthodox. He married twice. He had a daughter by his first marriage and two sons and a daughter by his second. He was forty-seven years old at the time of his second marriage and his bride, Evangeline Brewster, was twenty years younger. Foster cites evidence that her age prevented Evangeline from being accepted by New Brunswick society but he also reports that neither she nor her husband seemed to care ( Foster, p. 67). Foster paints a picture of Johnson as a father who paid attention to his children on a daily basis. He partnered with Evangeline in creating a nurturing family environment. And he made sure that the children were aware of their good fortune and attendant social responsibilities (Foster, pp.82-91).

Johnson’s idea of the good life included substantial time devoted to recreation. “Like other wealthy people of his day, Johnson’s vacations sometimes stretched into weeks and months. He owned an island in southern waters where he would shoot in winter, and belonged to a fishing club in Labrador that held exclusive rights to a long stretch of river…. But the real focal point of his life was Johnson & Johnson, and anything or anyone who threatened the company’s success had to face an aroused ‘R.W.’ “ ( Foster, pp.70-71). In spite of his long absences from company premises, Johnson managed to inspire employee commitment and provide continued strategic vision.

On January 31,1910 Johnson began to feel sick and left his office early. A week later, on February 7th, he died, a victim of Bright’s disease. Among the tributes offered at the funeral was one by Fred Kilmer which included the following statement (Foster, p.109):

“ When once convinced that an article which he could manufacture would save life and prevent suffering, he caused it to be manufactured and placed before the (medical) profession irrespective of any consideration of profit.”

JAMES JOHNSON

Johnson expected to be followed as Johnson & Johnson’s head by his oldest son, Robert Wood Johnson II. But Bobby, as he was then called, was only sixteen years old when his father died. And so, on February 18th the Board of Directors made James Johnson to succeed his brother. James, of course, was one of the original company founders and had played a prominent role from the start. Yet many within the firm felt he lacked the leadership skills necessary for the job. Were it not for the fact that James controlled a decisive block of stock, the job might have gone to someone else. The late Robert Johnson had placed his company stock in a trust for the children of his second marriage. That stock was to be divided among the children when the youngest reached age twenty-five (Foster, p.110).

As it turned out, the company did well during the years of James’ 22 years of stewardship. It is true that he was inactive for the last ten years of his tenure. But by then Robert Wood “Bobby” Johnson II had assumed a significant position of leadership. James Johnson’s tenure may have provided the space needed for Bobby to grow into the job of company leader.

ROBERT W. JOHNSON II

Robert W. “Bobby” Johnson II was born on April 4, 1893. A second son, Seward, was born in 1895. But there was never any question that the oldest son would become the successor manager. The two boys got along well together. As adults they realized their father’s ambition with Bobby serving as president and Seward assisting him cooperatively and ably.

Bobby’s father was anxious for his son to grow up and join the company. At home the father met daily with Bobby to prepare him for his future life as a socially responsible businessman. This mentoring took hold. Bobby grew up with the ambition of following in his father’s footsteps.

At school Bobby was expected to apply himself to his studies. Those expectations were not totally realized. One year, as a teenager, he repeatedly ran away from a prep school in Princeton, New Jersey where he had been placed. He ended up having to repeat his junior year at Rutgers Prep in New Brunswick. There he settled down and developed a liking for the military drill team required for his course of study (Foster, p. 104). He also found time to make frequent visits to the family’s factory and while there to learn about the inner workings of the company. The adults with whom he interacted found him to be both curious and polite.

BOBBY JOINS JOHNSON AND JOHNSON

Bobby graduated from Rutgers Prep in June 1911. He wanted to skip college and go to work full time at Johnson and Johnson. But his mother and Uncle James persuaded him to work part-time and take postgraduate courses at Rutgers Prep. It wasn’t long before Bobby changed his mind and was hired to work full-time in the lowest level job in the Johnson and Johnson factory’s powerhouse. His supervisor, foreman Walter Metts, reports that Bobby was anxious to learn everything about the powerhouse. Once he felt that he had learned enough, Bobby managed to get a job in another department. And so the pattern unfolded. As summarized by Foster ( p.113):

“ Moving from job to job in the factory, Robert developed an easy rapport with the workers, a trait he retained throughout his life. He was at ease with them and they with him. They called him Bob, or Bobby, and adopted him as one of their own, especially the ebullient Hungarians, many of whom came to America because a job opportunity awaited them at Johnson and Johnson.”

After work Bobby spent a great deal of time drinking with young friends. His drinking became common knowledge in town and a concern to the company’s leadership. On once occasion he arrived for work drunk. That was the last straw for his Uncle James who told Bobby that James would sell the company if Bobby didn’t stop his excessive drinking. Bobby immediately changed his ways. Convinced that he had grown up the Board of Directors made him one of its members on April 15, 1914. The youthful Bobby had become a sober and serious Robert Johnson II.

It was clear at that point the Robert would in all likelihood eventually become the company president. He was known to harbor the ambition and at age 25 he would take possession of the largest block of company stock, left to him by his father. But the senior men who ran the company weren’t about to let Robert become president until Robert had thoroughly proven his abilities. The board initiated his long period of apprenticeship in 1915 by appointing him head of a department in the factory. Robert was twenty-two years old at the time. Then, in 1918 Robert was named General Superintendent in charge of manufacturing.

THREE IMPORTANT DEVELOPMENTS

Three other important developments occurred at this time. One was the development of a special relationship between Fred Kilmer and young Robert. Robert began visiting Fred Kilmer‘s laboratory. Soon he and Kilmer established a close bond with Kilmer playing somewhat of a father figure role.

The second development was Robert’s marriage to Elizabeth Ross on October 18,1916.

The third development was Robert’s successful effort to get his brother, Seward, to join the company. Seward left his command of a Navy submarine chaser and joined Johnson and Johnson in 1919. He joined the company with full knowledge that his brother would always outrank him within the company. As Foster puts it (p. 140):

“ The competition that one might have expected to develop between them in the family-owned business never materialized. Seward was content to allow his brother to assume the reins, and Robert did not resist. Their personalities were well suited to that arrangement. Robert was as naturally assertive as Seward was restrained, and in the coming years they developed an unusually close relationship that ruled out head-to-head competition.”

MAYOR ROBERT JOHNSON

When Robert recruited Seward he made it clear to his brother that his greatest passion in life was Johnson and Johnson. But Robert also found time to get involved in local public affairs. In 1918 he was appointed to fill an unexpired term on the Highland Park Borough Council. A year later he ran for the seat and won with the largest number of votes of any of the successful council members. The council named him mayor in 1920. His performance as mayor was very respectable. “ The streets were paved, the water system improved and the cost of local government reduced” (Foster, p.145). On one occasion a citizen called to complain about garbage that had not been picked up. Robert was at a party at the time. But without hesitation he left the party and , still wearing his tuxedo, picked up the garbage. Robert decided not to seek reelection because of his desire to spend more time on the business. But he did remain interested and active in politics and public service for the rest of his life.

ROBERT JOHNSON EMERGES AS A STRATEGIC PLANNER

With more time to spend on the business, Robert became somewhat of an unofficial strategic planner. In 1921 Robert became convinced that the United States was heading into an era of protectionism that would hamper the export business. He saw the establishment of manufacturing facilities abroad as a way to offset that threat. In 1921 he asked the company’s Board of Control to authorize him to travel abroad with Seward for the purpose of studying the feasibility of operating plants abroad. That was not an easy sell. Robert was not yet a member of the Board of Control. But company president James Johnson was on the board and he opposed the idea of foreign manufacturing on the grounds that it would hurt the company’s existing export business. So young Robert Johnson assumed the burden of lobbying for the trip against the opposition of his uncle. Eventually the board agreed to the fact finding trip. The report from the trip then led to the establishment of Johnson and Johnson’s first foreign manufacturing venture. A factory was leased in England and manufacturing began. Robert Johnson recommended leasing a factory rather than constructing one and gave the board the following reasons ( Foster, p. 159):

“ It would do until we learn how to run a plant in England, and prove that we can win customers … Leasing would let us get going at once, and it also would save the firm money if our experiment fails.”

Robert also analyzed the impact of the increasing size of the company on
Johnson and Johnson’s “family” culture. He concluded that the family feeling was in
danger of being lost. His solution was to establish an internal company publication that
would bring the employees closer together. Finding ways to maintain that close feeling
would be a recurring theme of Robert’s career at Johnson and Johnson.

Robert took these actions even though he was not yet a member of the Board of Control, the small group of executives who ran the company on a daily basis. This small group of executives recognized that they would ultimately cede power to Robert.Nevertheless, they were men of strong character with a commitment to prevent young Robert from doing something dangerously foolish while maturing to the point of being ready to assume the company’s presidency. One of the board members, Frank Jones, went beyond merely acting as a brake on Robert’s unwise plans. Jones, one of the company’s best managers, assumed the role of Johnson’s mentor.

So a certain tension existed within the company. The members of the Board of Control were opposed to naming Robert president too soon and they had the power to enforce their wishes. But Robert did have substantial bargaining power.His formal power base was his positions as a member of the board of directors and his title of Second Vice President. His informal power base was his ownership of a controlling block of company stock.

One interesting feature of this period of preparation for Robert Johnson was his periodic “vacations.” He and the board saw nothing wrong with him periodically absenting himself from the business for weeks at a time. Biographer Foster points out that ( p. 167):

“ In a period when the calendar rather than the clock was more important for measuring most business and leisure activities, six weeks spent sailing to Labrador was not considered an abuse of time.”

But, Foster adds, Johson’s trips typically excluded his first wife, Elizabeth, and put a strain on their marriage. Eventually they would be divorced.

Another element of Robert Johnson’s strategic thinking was his conviction that factories should be visually beautiful and functionally supportive of quality living for the employees. In 1926 the company supported that thinking by authorizing, “ the nation’s first modern, single-story textile mill “ (Foster, p 170). The factory was built on a large tract of land in Gainesville, Georgia. The company planned to build 200 modern homes for the mill employees on the same land. That housing development included plans for a school, a medical facility and a few churches. In praising this initiative, biographer Foster quotes the following letter from a mill employee ( p. 170);

“There was no child labor law then so as we got big enough, not old enough, we went to work. Spinners were paid 10 cents a day and doffer’s wages were 35 cents. We worked eleven hours a day. Then in 1927 we heard of the new mill at Chicopee, and moved there with our four children and my mother. We had a modern five-room house with all of the modern conveniences, and went to work in a modern mill where all was light and clean. A new life opened for us.”

Robert Johnson’s love affair with attractive modern facilities would be a hallmark of his remaining years at the company. He had a name for his vision – “ Factories Can Be Beautiful”. And he ended his career having constructed more than one hundred beautiful facilities. Johnson also had a practical rationale for his commitment to beauty. As biographer Foster puts it ( p. 172):

“ From the outset Johnson made it clear that he was not motivated simply by the movement toward modernism. To him, building attractive factories made eminently sound business sense. Attractive factories and pleasant working conditions generated greater efficiency and pride among workers. Well-maintained buildings promoted community acceptance of the company and reflected the integrity of the company and its products.”

ROBERT JOHNSON JOINS THE BOARD OF CONTROL

On February 1, 1927, Robert Johnson was finally admitted to membership on the company Board of Control. By then he had worked for Johnson and Johnson for sixteen years. He was still young, a mere thirty-three years old. And his mental attitude was that of youth. As he put it in a speech to his fellow board members, “ We are passing through a time when the management who made this business is letting go of the reins and the new management is beginning to operate” (Foster, p. 172). Bobby’s admission into the “company control room” marked the end of an era when the company operated without a strong executive. From 1920 to 1927 the company had operated without a strong executive. Uncle James Johnson held the title of company president during those years. But James had health problems so serious that he was not active in day-to-day management of the company. Nor was he active in strategic decision-making.

By the time Robert Johnson joined the Board of Control he was already acting as if he were the man in charge. And, that was not totally out of place, given his ownership of the controlling block of company stock. Yet a few more years would pass before he was finally given a formal title in keeping with his attitude and behavior. Finally,on February 4, 1930 he was named Vice President and General Manager of the company. Uncle James still held the title of president even though he was still not active in the business . Neither the board of directors nor Robert Johnson wished to remove James, so a one year wait ensued before James finally resigned the presidency in May of 1932. Robert Johnson waited a discreet period of time and then allowed himself to be named President and General Manager on October 15, 1932. By then Robert had worked for the company for twenty-two years. Almost six years later, on May 17, 1938 Robert Johnson became Johnson and Johnson’s first Chairman of the Board. He remained in that position for the next twenty-five years.

MANAGEMENT HIGHLIGHTS OF THE ROBERT JOHNSON YEARS

As Johnson and Johnson’s acknowledged new strong leader, Robert Johnson was driven by the desire to push the company to higher standards of excellence in many directions. He envisioned the creation of a decentralized management structure. He was obsessed with setting and achieving higher standards of quality. He envisioned what might be called a more humanistic approach to labor in general and women employees in particular. He had pet ideas for improved internal communications and company advertising. He was determined to make the company an international exemplar of high standards of business ethics. He strongly believed in the social responsibility of business and saw a role for Johnson and Johnson in several areas of American social policy.

But before he could focus on these futuristic dreams, Johnson had to deal with the problem of the Great Depression which began in late 1929. He began warning the Board of Directors of the danger in the middle of 1929. His warning was not taken seriously. Immediately following the stock market crash of October 29,1929 Johnson developed his plans to cope with the anticipated slump. His concern for rank and file employees showed in his methods. No Johnson and Johnson employees lost their jobs during the Depression. Instead, Johnson reduced the number of hours worked. Shifts were made shorter and three day weekends were adopted twice a month. This stood in sharp contrast to the more common business practice of laying off workers in bad times.

Once the threats from the Great Depression were contained, Robert Johnson was able to devote his full attention to his agenda for corporate renewal. Labor relations ranked high on that agenda and over the next few decades Johnson became an exemplar of the enlightened captain of industry. His thinking regarding attractive facilities was based in part on his interest in the well being of company employees. Johnson and Johnson factories included, “ modern cafeterias, lounges where (employees) pay bridge and ping pong – and a plant broadcasting system for dances and educational programs” (Foster, p.379). Johnson emphasized high levels of pay and benefits for all employees (He also championed a federally mandated high minimum wage). He used a variety of communication techniques to nurture a family feeling within the company ( He also believed in giving labor formal bargaining rights and was a champion of federal legislation to support union organization).

Johnson’s approach to labor relations was based on a clearly stated view of human nature and social responsibility. With respect to human nature, Johnson believed that ( Foster, p.352):

“ The fundamentals of human nature may not be ignored in human relations …There are (five) drives that profoundly influence conduct: man’s sense of ‘dignity’ …, the need for the’ esteem of others’ …, the basic’ instinct for survival’ …, the desire for ‘security, …,and ‘social instincts’ (the natural tendency) to associate with those who share their interests and to develop teamwork in pursuing common undertakings.”

This led Johnson to the following philosophy of labor-management relations ( Foster. p.352):

“ Human relations …are subject to moral and religious laws that are reflected in the conscience of mankind and which have been confirmed by the experience of men in all ages. If we accept the brotherhood of man under God, important conclusions follow. Each man has an inner dignity, with basic rights and duties. Life has an overall purpose. Men must judge their conduct, not merely in terms of personal gain or convenience, but also as right or wrong.”

Johnson developed his initial thinking before becoming familiar with the teachings of the Catholic Church on this issue. But he later discovered Pope Leo XIII’s encyclical “On the Condition of the Working Class” (Rerum Novarum) and Pope Pius XI’s encyclical “On the Reconstruction of the Social Order” (Quadragesimo Anno). And as his philosophy evolved he openly credited those Christian documents as sources for advanced versions of his philosophy of labor-management relations (Foster, p. 338).

Johnson’s approach to labor included a concern for the problem of monotony. He wanted jobs to be structured so that every worker could find challenge and joy at work rather than monotony. His motivation was partly based on the desire to increase productivity. But there was another motive as revealed by the following Johnson statement ( Foster, p240):

“Having always enjoyed my work, I can imagine nothing more serious than facing a lifetime of workday monotony. If industry hopes to win a fuller measure of good-will, ways must be found to break the monotony or relieve it.”

Decentralization was a Johnson management practice which grew directly out of Johnson’s concern for labor force welfare. Manufacturing facilities were deliberately kept small enough to allow for the development of a family feeling. Decision-making authority was pushed down to lower levels first and foremost to improve productivity and effectiveness. But Johnson saw this form of empowerment as a way to address the human needs of the decision-makers themselves.

Biographer Foster claims that Johnson’s belief in decentralization and delegation was crystallized by a specific incident in 1933. The company encountered a problem in manufacturing plasters using what was supposed to be an improved formula. Solutions were not forthcoming. Johnson decided to get involved. He called a meeting of those working on the problem. Seventeen people came to the meeting. And immediately Johnson decided that the problem was that too many people were involved. He cancelled the meeting and assigned the problem to a single individual. The problem was soon solved. And Johnson’s belief in decentralization was strengthened into what was almost a religion.

Johnson’s practice of decentralization evolved into what became known as “The Johnson and Johnson Family of Companies.” Product lines were assigned to independent units with their own management team. The company and Johnson himself became recognized as strong advocates of decentralization (Foster, p. 203). A 1949 Reader’s Digest article lauded Johnson in this regard. It argued that decentralization was the wave of the future even though not yet widely practiced in American industry. It described the favorable features of a Johnson and Johnson mill in Georgia. And then it added (Foster, p.381):

“The experience of Johnson and Johnson indicates that the problem of labor unrest can be solved within the framework of modern technology. That the solution does not have to be imposed by government. That the solution can be found by management and labor working together. And that the key to it is the worker takes satisfaction in his job and in his way of life … The (Johnson and Johnson) mill in Georgia is one man’s contribution toward the solution of the most deep-seated of all labor problems – an attempt to make the factory worker feel that he counts and that management knows he counts.”

Women’s rights represented another interesting aspect of Robert Johnson’s approach to labor relations. More than half of his own work force consisted of women and, “ He repeatedly took measures to improve their lives and give them opportunity to grow (Foster, p. 328).” He also championed women’s rights in the political arena through articles he wrote and speeches he gave.

Active engagement in public policy advocacy also represented an interesting aspect of Robert Johnson’s approach to labor relations in general He understood that some of his dreams for a better life for workers could only be achieved if the “rules of the game” were changed. In other words, the legal environment of business had to be changed. It was for that reason that he became engaged in a fight to raise the minimum wage in the 1930’s and supported labor unions.

Robert Johnson did more than advocate public policy from outside of government. He took the next step and volunteered to work as a public servant in special circumstances. The most notable and controversial such episode was his tenure as head
of the U.S. government’s Smaller War Plants Corporation during World War II. His challenge was to find ways to get small businesses to participate in production for the war effort. Most of his client small businesses were in danger of failing due to the shrinking of the domestic consumer economy. Opposing him were some 252 large corporations that held a high percentage of existing war contracts. Also beginning to oppose him was the military hierarchy. Johnson had entered public service with an appointment as a colonel in the U.S. Army. When opposition to his efforts appeared in the military hierarchy, President Roosevelt elevated Johnson to the rank of Brigadier General (of Army Ordnance). Henceforth, Johnson would be known as General Johnson.

Johnson achieved some success. He was able to provide war work to 1,285 small businesses that had previously been shunned. But his opposition grew, in part due to the strong public statements he was prone to make, statements criticizing inefficiencies in government operations. Eventually his enemies succeeded in getting him to resign out of frustration with the criticism of his efforts. Summing up Johnson’s accomplishment, Foster says ( p. 271):

“ (He) had worn himself to a frazzle, physically and emotionally. His march on Washington was now about over. It had been neither a supreme victory nor a crushing defeat. He had focused national attention on the plight of small businesses and diverted substantial war work their way, but he fell short of the billions of contracts he had promised in the early days as chairman of the SWPC. He never came close to that goal.”

Another high ranking item on the corporate renewal agenda was business ethics. During the 1930’s General Johnson formulated various company ethics statements. That activity eventually resulted in what became known as Johnson and Johnson’s Credo. Johnson’s 1944 statement of the Credo read (Foster, pp. 336-338):

“We believe that the first responsibility of business is to its customers. Products must always be good, and manufacturers must strive to make them better at lower prices. Orders must be promptly and accurately filled. Dealers must make fair products in order that they may give good service. The second responsibility of business is to those who work with it: to the men and women in factories, stores, and offices as well as in service establishments and on farms. They must have a sense of security in their jobs. Wages must be fair and adequate Management just, Hours short, and Working conditions clean and orderly. Workers should have an organized system for suggestions and complaints. Foreman and department heads must be competent and fair-minded There must be opportunity for those who are qualified to advance as workers and as people. Each person must be considered an individual standing on his own dignity and merit. The third responsibility of business is to its management: Our executives must be persons of talent, education experience and ability. They must be persons of common sense, endowed with full and trained understanding. The fourth responsibility is to owners and stockholders: Business must make a sound profit, since, in order for it to continue Reserves must be created, Research must be carried on, Adventurous programs developed and, Mistakes made and paid for. Bad times also must be provided for; High taxes paid, New machines purchased, New factories built, New products launched, and New sales plans developed.”

The Johnson and Johnson Credo continued to be a force for ethical conduct at the company after Robert Johnson’s death. This was dramatically illustrated in 1982. Someone laced Tylenol capsules with cyanide poison and seven innocent persons were killed. The company’s top executives acted quickly with the Credo explicitly informing their actions. Tylenol was withdrawn from the market. The company went out its way to be totally open with the press and, therefore, the public. Johnson and Johnson suffered a short run revenue drop. But the company’s reputation as an ethical paragon was strengthened ( Foster, pp. 617- 638).

One topic omitted by the 1944 credo was the corporation’s social responsibility in areas of public policy. That issue was not overlooked by General Johnson. He was a firm believer in a corporate responsibility to promote public policies related to the company’s areas of competence. Johnson and Johnson was a member of the health care community. And so it was only natural that Johnson would lead the company into public policy activities related to health care either directly or through his personal involvement.

Under Johnson’s leadership the company funded America’s first School of Hospital Administration at Northwestern University in 1943. After World War II the U.S. dropped a war time nursing education program. Johnson got involved in lobbying for the resumption of the program. He also provided stipends for nurses taking refresher courses. Johnson became deeply involved in restructuring the management of a local hospital and he encouraged company executives to volunteer time working with the hospital. That effort was subsequently expanded to other hospitals in the area.

Other small scale examples abound. But the one truly sensational contribution of General Johnson to American health care was a bequest. In his will he designated his huge holding of Johnson and Johnson stock as a gift to the Robert Wood Johnson Foundation. Johnson had created the foundation years earlier using personal funds. And the foundation had been making grants to local hospitals and medical school students. But the principal was small compared to the $300 million the foundation received from Johnson’s estate. The Robert Wood Johnson Foundation would become one of if not THE world’s premier health care philanthropies.

There was one corporate reform that Johnson did not plan to make at the time he became the company’s president – going public. Johnson was well aware of the restraints the public ownership would put on his plans. Nevertheless he took a chance in 1944 when the company went public. Johnson remained the largest stockholder, and, despite his occasional grumbling about public ownership, the change did not seem to alter his management style nor his effectiveness.

MANAGEMENT STYLE

Robert Johnson’s management style contained paradoxical elements. He could be a micro manager. Yet most of the time he gave others a great deal of autonomy. He was tolerant of mistakes. But woe to the employee who was a repeat offender. He believed in hands-on behavior by top management. His unannounced plant visits were legion and legendary. Yet he would spend weeks at a time away from the business. He believed in and practiced relationships in which he made it clear that he regarded employees as his equal or peer. Yet, particularly in later years, he seemed to encourage being addressed as General Johnson.

One aspect of his management style was his passion for open and effective communication. He was constantly reaching out to communicate with employees and that meant listening as well as speaking ( Foster, pp. 367 ff). He also took an interest in external communication. He was particularly concerned about truth in advertising ( Foster, 310-313). And in his later years he became a writer of some note. This was due in part to his stature as head of a major American corporation and as an apparently liberal business leader. But it also had something to do with his ideas. After World War II Johnson authored several books and numerous magazine articles in which he set forth his views on business and public policy.

CONCLUSION

General Johnson assumed the presidency of Johnson and Johnson with an attitude of stewardship. His role, as he saw it, was to improve upon his father’s work and to then hand the enterprise over to the next generation of stewards-managers. It was his hope that his son, Robert W. Johnson, Jr. would eventually be that successor steward. And in 1947, when junior joined the board it looked like that might be the case. But junior did not live up to the father’s expectations. And so General Johnson put the interests of the company above the interests of the family and arranged for an alternative successor management. That plan worked and the company’s greatness was continued by the first two successor managers put in place by the General.

In 1967 Johnson’s health began to deteriorate. He died of liver cancer on January 30, 1968

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This article was written by Dr. Richard Hattwick.

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REFERENCES

Foster, Lawrence G. Robert Wood Johnson. State College, Pennsylvania: Lillian Press, 1999.