More Organizational and Executive Changes at Johnson and Johnson- Where is the Accountability?

The Wall Street Journal reported today(paid subscription may be required) that Johnson and Johnson will embark on yet another  reorganization in the wake of significant manufacturing quality problems resulting in multiple product recall incidents  that stretch back to 2009. There have been 19 product recalls dating back to September 2009. J&J’s McNeill Consumer Healthcare Group is the primary manufacturer of cold, allergy and pain relief medicines under the popular Tylenol, Benadryl, Motrin and Zyrtec brand names which have been involved in various product recall incidents.

According to the WSJ article, the McNeill unit in the U.S. will be spun-out as a separate organization. The unit will be headed by Patrick Mutchler, a 35 year veteran employee who has had a variety of assignments on the consumer business side.  Also reported was that executives Marc Robinson, who had overseen J&J’s OTC worldwide businesses, and Peter Luther, who had been president of the McNeil  unit, have been given other roles.  These moves were apparently motivated to give more focused attention to quality and compliance needs as well as restoring consumer confidence in J&J consumer brands.  Supply Chain Matters commented in late December on a series of previous executive promotional appointments at J&J which were designed to assure more focused accountability and attention to company-wide manufacturing and supply chain process needs. These included the promotion of executives Alex Gorsky and Sheri McCoy, who were speculated to be in line for succeeding current Chairmen and CEO William Weldon.  We communicated in that commentary our hope that the newly elevated executives would put personal competitive instincts aside and come together with a unified plan of action to address the ongoing quality crisis. (As a side note, Mr. Weldon was granted a 3 percent base salary increase for 2011, but his 2010 bonus was cut by 45 percent.  The increase was reported to be based on Mr. Weldon’s handling of the product recall crisis.)

As these new appointments were announced, another J& J product recall announcement came yesterday involving 34,000 bottles of Tylenol 8-Hour Extended Release caplets after continued consumer complaints of musty or moldy odor. Readers might recall that similar complaints, tracked to chemicals applied to wooden pallets, existed in certain 2010 recalls. In this occurrence, the presence of trace elements of the chemicals TBA (2,4,6-tribromoanisole) and TCA (2,46-trichloroanisole) were linked to the recalled product, which is different than previous recalls. J&J also as a precautionary measure, widened a wholesale-level recall first announced in January, adding 10 product lots comprising 717,696 bottles of various Benadryl, Tylenol and Sudafed products. A review of past manufacturing methods found cases where equipment cleaning procedures were insufficient or not adequately documented.

While J&J is taking organizational action to resolve its ongoing quality crisis, one has to wonder about the clarity and speed of management actions.  What does a spinoff of McNeill accomplish?  More importantly, where are the accountability efforts across all of J&J’s manufacturing and supply chain activities?  It was previously noted that Mr. Gorsky was given responsibility for proactively addressing company-wide manufacturing and supply chain quality measures while Ms. McCoy had oversight of the consumer business units. There have, at least to our knowledge been no high-level executive firings, other than announcement last September of the early retirement of Colleen Goggins, the former lead of the consumer business.

As noted back in October, no company, not even J&J, can rest on a previous reputation of quality and responsiveness. J&J needs to fix its quality and supply-chain problems fast. It is unclear that adding more executive layers of focus and responsibility will help in this effort. What J&J needs is a complete transformational strategy that encompasses accountability, process, technology and change management components.  Time is of the essence along with clarity of communications and action.

Bob Ferrari

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