Ecision Rights: Bundling Tasks into Jobs and Subunits + Attracting and Retaining Qualified Employees + Incentive Compensation
1. Question. Based on your answers below, why is country knowledge so important for Johnson & Johnson?
One of the key roles in J&Jas success across the globe lies in the fact that they have a decentralized organizational structure. The credo of J&J lays down the essentials of how to please a customer and to achieve their organizational goals, but not limits and restricts managers on how to achieve it. The transition which has occurred from the traditional functional units towards units that have decision rights has resulted in increase of success rate for J&J. The advantage of decentralized decision making is that it provides the lower level managers to perform at their maximum level of efficiency, thereby allowing them to take risks in a controlled manner. Though there are standardized regulations laid by J&J which need to be followed, it is their belief that managers across the world need to be empowered with the decision rights as they understand their local culture best. J&J encourages the lower level managers to exploit this specific knowledge and are driven by compensation based on the effective utilization of this knowledge and its successful implementation. The other most important advantage that J&J has exploited is that empowering the lower and middle management with decision rights enables the top management to focus their attention on the bigger picture of business such as strategic formulation, optimal architecture of business and effective allocation of resources in business units.
There are numerous environmental changes and pressures that J&J have to encounter. The market in which J&J operates is full of rivals that impose continuous threat to overpower J&J with the increasing rate of acquisitions and expansion in product lines. Clutter of numerous products and large economies of scale are the results of this competition. The consumer tends to become more knowledgeable by time as he is provided with an array of opportunities; hence to effectively market the product to them is a challenge in this changing environmental scenario. Amidst these challenges, there is no specific organizational change that J&J need to make. They can cater to these challenges by working harder for more market share, cutting off unnecessary expenses and development of shareholder value through effective mergers.
The other major challenge is that the field in which J&J operates has numerous governmental regulations, local cultural cues and requirement of adaptation. This demands J&J to show more flexibility in their multinational operations and leverage authority to the local management as they have a better understanding of the scenario than they have. The decision right should be such that should not only restrict to a particular function, but should be relevant to the entire department. The top management structure would remain similar but with more allocation of right for decision making.
With the raising competitive and technological forces, the case workers are provided with the primary responsibility of decision making and with this change in organizational architecture from functional format to this would help J&J to effectively cater to the emerging changes (Brickley, Smith and Zimmerman, 371-374).
2. Based on your answers below, How do you think the proposal would impact the firmsa willingness to hire low-wage employees?
Executive compensation is a much debated issue across the world as the executive salaries surge rocketing up the sky and being leaps and bounds ahead of that of subordinates. This has imposed serious questions on the ethics of compensation in corporate culture. There have been numerous proposals being offered by different regulatory bodies, however there is a trade off between the compensation and performance.
To accept such a proposal that the executiveas pay shall not exceed 10 times of the lowest paid employee can have impactful results. Usually it is seen that the big companies of the World have top executives who have zero correlation between performance and compensation. It is evident from the statistics of World top companies that even though the executive compensation tends to rise significantly, their financial position has deteriorated.
I personally believe that such proposal should not be accepted. The primary reason is that the executive and top management possess expertise, experience and skills unmatched even if they arenat yielding the best results. There is no parallel to the level of in depth knowledge they have for the business and a firm grip on it. They are the real strategic assets of the firm, and such a plan would not motivate them to perform at their maximum potential and they would seek alternative job positions. However, a carefully designed compensation plan in which the compensation i.e. awards, bonuses and salary should be correlated directly with performance would be an effective proposal. Stringent conditions and consequences would be termed if the performance and objectives are not achieved.