FrameworkS: turning the challenges of change into opportunities for growth.

Predictions about the next millennium are boundless. But from where we sit at Johnson & Johnson, the 21st Century holds only one certainty: the prospect of an ever more dizzying pace of change. Competition will be tougher. Cost pressures heavier. Innovation even more essential. Technology

Relentless change poses what seems to be a paradox for multinational corporations like ours. On the one hand, to keep our financial strength and market leadership in increasingly global industries, we will have to continue sustaining and expanding large organizations that can seize the very best opportunities wherever they are found. On the other hand, despite our massive size, we will have to be more competent than ever at adapting our companies swiftly to all kinds of change - or risk becoming irrelevant.

How to balance this need for critical mass on a global scale on the one hand - with imperatives to be as nimble and flexible as much smaller organizations on the other - became an increasingly central issue for us as we entered the '90s and looked toward the next century. Conventional thinking says that as you get bigger, you have to slow down. This is understandable logic if you look at Johnson & Johnson as a $23 billion company - which cannot possibly grow at the same speed as billion-dollar companies. Perhaps we could have been pardoned for thinking we had a proven formula for sustaining growth and profits in a changing world. After all, our company has done very well over many tumultuous decades since its founding in 1887.

The Sum of Our Parts

The formula, if indeed we have had one, in large measure reflects our decentralized management structure. While we are a vast, global organization of some 90,000 people working under a corporate name with terrific public recognition, in reality, we are 170 distinct operating companies. The way we look at the growth issue is to say that we are the sum of our parts: we are many companies of different sizes, many of which are growing at excellent rates.

And yet, we did not have to be reminded that only the stars, with nuclear fusion, come near to having an infinite glow. As vital as our decentralized approach is, we saw very serious challenges. We felt that we could become victims of our own success by embracing the false assumption that the traditional ways of doing things would continue to power our growth. We feared that complacency could replace the entrepreneurial vigor that had made us one of the truly great industrial enterprises in this century.

An Agent of Change

We realized we needed to create a powerful agent of change within Johnson & Johnson. This was not a simple proposition. Inherent in our decentralized approach is discomfort with well-intentioned, corporate-wide programs that can end up placing a layer of distracting top-down governance and bureaucracy on line operations. How, then, were we to go about informing our operating management worldwide about the increasingly serious, company-wide challenges we faced? How could we inspire our leaders to embrace a more unified perspective? How could we establish an environment in which we could break down organizational, functional, and geographic barriers and act in concert on challenges best met through a cooperative approach? And, how could we accomplish all of this while preserving and strengthening our decentralized management?

Our answer is a management process called FrameworkS - a dramatic innovation in our approach to managing a global organization. Frameworks started as an initiative of our nine-member executive committee, which had typically focused on major issues involving individual operating businesses and franchises. We felt we were too inward looking. We wanted to achieve a kind of "framework" through which to better understand where we stood in our markets, what people expected of us, how we could be more responsive, and how we could identify new opportunities for growth and development. Hence, the name Frameworks was chosen. In keeping with our commitment to decentralized management, the capital "S" served as a reminder of the multiple "frames" through which we must view our diverse businesses.

Broad-based Participation

It became essential that Frameworks involve our most knowledgeable market, science, and technology experts, our clearest thinkers and sharpest business managers. The executive committee soon brought a wide spectrum of people into the process, principally by tapping into the management boards of our operating companies worldwide and our senior corporate staff. Never before had such a broad-based group of people been invited to be central, active participants in matters of very substantial corporate significance outside the direct responsibilities of their operating companies.

Here's how the process works: a Frameworks team is appointed by the executive committee to address a company-wide issue that has been identified as greatly important to the future of the corporation. The team, representing senior operating company management as well as the executive committee and senior corporate staff, is organized into task forces that engage in very intensive, thorough research on an array of topics related to the issue. This research can involve an analysis of relevant operations, policies, practices, and plans in Johnson & Johnson franchises; visits to other companies; and meetings with experts. Much of this work, which can take upwards of six months, requires a significant additional commitment of time and energy from people who already hold some of the most demanding positions in our company. To give just one example among hundreds of what this work can entail, a Frameworks team in Japan recently came up with more than 1,000 preliminary ideas for strengthening our company in that country.

Everything Is Challenged

The research findings are evaluated and synthesized and are presented and discussed at a multi-day meeting attended by all members of the Frameworks team as well as the executive committee. We are not seeking concrete answers at these sessions, although some do emerge. The aim is to interact in a spirit of openness. Assumptions are cast aside. Everything can be challenged. We are literally starting from scratch, and the exercise can be invigorating, startling, painful - and extraordinarily rewarding. In the end, having shared information we did not have before, as well as the experience, perspectives, and ideas of people who might have had little or no previous contact with one another, we are able to identify the very best opportunities.

After the meeting, management teams proceed with creating and rolling action plans to capitalize on those opportunities. Bringing a broad base of talent and enthusiasm into the process of changing our corporation has had a remarkable impact on our company. The 10 Frameworks held thus far have spawned numerous initiatives, many of which continue to be implemented. We have started new businesses, entered new markets, and set up broad-based programs that are already harvesting great returns for us in critical areas such as technology, leadership development, innovation, and recruitment.

Frameworks has also produced less tangible but equally important results. The executive committee is better able to see Johnson & Johnson as others inside and outside the company see it. Operating management is gaining a keener understanding of the executive committee's role - and is empowered to pursue market opportunities more aggressively, without waiting for other options to "come down from the top of the organization." There is a receptiveness to deal with change that did not exist five years ago.

Is Frameworks a single, simple approach to equipping an organization to deal with change? Absolutely not. But within the decentralized management structure of Johnson & Johnson, it has become a proven means of releasing energy throughout the corporation and focusing the eyes of the organization and its leadership on the two most important issues central to our future - innovation and growth.

COMRADE-IN-ARMS

The Hidden Dangers of E-Communication

Bill Gates wasn't the first CEO to learn the hard way that seemingly harmless employee e-mail lurking within the corporate network can make big trouble for a corporation under siege. With so much of a company's communication stored in bits and bytes, firms are at risk for a host of new problems CE caught up with Mike Elgan, editor of Windows magazine, to find out how CEOs can protect themselves and their companies.

What kinds of risks are we talking about here?

The biggest risk is e-mail being used by employees completely without the knowledge of upper management for any of the standard list of violations, such as sexual harassment, racial discrimination, insider trading. The company and the CEO can be held liable for creating an environment that encouraged that behavior even if the CEO didn't know it was going on.

What can management do about it?

They need to create an e-mail policy that protects them, a specific set of guidelines that specify, first of all, what's allowed in e-mail and then spell out a laundry list of things that are not allowed - that all company e-mail must be used for business purposes only, that anytime anyone in the company uses e-mail to communicate with anyone outside the company, that employee is essentially representing the company. And you have to come back every six months and have a big high-level communication reminding people of the e-mail guidelines.

There are many software programs that do this sort of thing. Essentially, they have filters that go through outgoing e-mails and search for words that indicate sexual harassment, racial discrimination, insider trading, and anything else of that nature. They can also be customized; you can add your own words or take out some of those built in. There is also software that will insert a sentence at the end of every message, "Any opinions expressed by this user do not represent those of the corporation."

Suppose a company has none of this in place. What's the first step?

CEOs have to get together with senior management and the IT staff and say, "If all of our e-mail and electronic records were subpoenaed today - right now - what would they find?"

If it's a very large company, they should hire an expert or consultant to come in, and you can get everything up and running very quickly.

What's happening now is called "electronic forensic discovery," and there are firms that specialize in it. Essentially, they'll go in and make copies of absolutely everything and then search for specific things. If an employee is suing a company for sexual harassment, they'll go through and search every e-mail message ever sent or received by the company for related words.

That's essentially what happened to Microsoft. The government's aim was to discredit Microsoft as a credible witness. So they went through and searched everything - and Microsoft sends and receives three million messages a day. With a company that uses lots of e-mail, you can find anything. It's all in there. And in court, every e-mail is treated as an official company memo instead of gossip and water cooler type comments. If you come up with 300 messages that have strong racial content, then it's fairly easy to show a pattern of racial discrimination by the company.

So CEOs need to ask, are we ready for this? And there are several dimensions to that. First of all, do we have the resources to stop everything and hand over all these documents? Do we understand the rules? Once you're subpoenaed, anything that's deleted is considered a contempt of court.

E-mail should be regularly deleted?

One of the best things you can do is have a policy where you delete e-mail that is of a certain age. Anything that's a year old, you blast it. That protects you from anything. The records can never help you; they can only hurt you. And you can flag certain important documents, saying, "never delete this."

What is the CEO's role in this?

In a nut shell there are really three things that CEOs need to make sure exist: 1) a well-crafted consistently communicated e-mail policy that all employees understand. In some cases, you may want them to sign something saying they understand; 2) software that facilitates what the company needs to do, e.g., filtering and putting disclaimers on outgoing e-mail; and 3) a separate e-mail policy protecting employees from MIS staff and management. Management shouldn't be able to arbitrarily read employee e-mail. You need to guard against abuse by management.

POWER TOOLS

* MMEsweeper Content Technologies (www.contenttechnologies.com)

Network content security software that filters junk e-mail, guards against incoming e-mail software viruses, blocks Web site addresses (URLs), and adds legal disclaimers. Cost: $2,628 and up

* WorldSecure Server Worldtalk Corp. (www.worldtalk.com)

E-mail firewall server that allows administrators to enforce an array of security and content policies. Cost: $1,995 and up

* SafeMAIL Electronic Evidence Discovery (www.eed.com)

E-mail policy development kit. Cost: $175

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