A good leader hands out praise when things go right and takes the blame when things go wrong, said William C. Weldon, chairman of the board and chief executive officer of Johnson & Johnson. “The reality of leadership is that you work for everyone else,” he told students at the Tepper School of Business on April 3 during the W.L. Mellon Speaker Series. “No one works for you. You try to help others.”
As the head of a global health care products giant, Weldon taps that philosophy to motivate 120,000 employees working for Johnson & Johnson’s family of 250 companies in 60 countries. The New Brunswick, N.J.-based conglomerate is highly decentralized with managers at far-flung companies given autonomy to make decisions and develop as leaders. “You allow people to make decisions and take risks,” Weldon said. “If you don’t make mistakes, you don’t learn.”
Unfortunately, he said, a challenging economic climate has made many business executives risk-averse, paralyzing their ability to make decisions. But he advised students to act boldly after analyzing the available facts and examining potential downsides.
The public knows Johnson & Johnson, which was founded in 1886, for bringing prodcuts to market like sterile bandages, and for iconic brands like Johnson’s baby powder, Neutrogena skin care and Aveeno shampoo. But consumer products actually constitute the smallest segment of the $65 billion company, accounting for just 23 percent of sales. Medical devices comprise the largest segment at 40 percent while pharmaceuticals constitute about 37 percent. “We touch one billion people a day whether it is with Neutrogena or Aveeno or medical devices,” Weldon said. Johnson & Johnson’s tagline is “Caring for the world, one person at a time.”
Weldon, a 40-year veteran of Johnson & Johnson, said he and others are constantly discussing the company credo, a values statement developed over 60 years ago. Weldon called it the “heart and soul of the company.” The credo states its duty is to serves customers. Its second responsibility is to its employees, who are treated with respect and dignity.
Its third obligation is to give back to local communities. Known for its strong philanthropic tradition, Johnson & Johnson donates four percent of its net income to charitable causes, compared to about one percent for most companies its size. But even more important than the dollar amount, Weldon said, is employee involvement. Eighty percent of the people who work at Johnson & Johnson are involved in some kind of philanthropic activity compared to about 20 percent for comparably sized companies, he said.
The fourth responsibility is to give shareholders a fair return on their investments. Weldon said the last three points often lead to disagreements about company priorities. If you give more to shareholders, does that shortchange philanthropy? If you give a lot to the community, does that take away from employees? Those kinds of debates, he said, are healthy for a corporation.
While some ethical decisions a corporate leader makes are black and white, Weldon said about 80 percent fall in gray areas. “How close to the black do you go?” he said. “If your family reads about you in the newspaper, would you be proud of your decision? If not, you shouldn’t be doing it.” He added that while Johnson & Johnson has operations around the world, it has walked away from countries because of graft and corruption.
A good leader isn’t satisfied with tackling the challenges of the moment. Weldon said Johnson & Johnson pumps $7.5 to $8 billion a year into product research and development and additional money into employee development. “You have to make sure you manage not only for today but that you are also looking to the future,” he said.
“There is a lot of pressure from financial markets not to do that. They are looking for short-term return. You have to stay true to what you believe. Innovation is what drives the health care industry.”