Final Version of Bundle Case 1205

1

Caring For the World, Putting Patients, Doctors and Nurses FirstLivia Liu Sebastian MorenoSteven Oakley Catarina Levita SchallenbachAmelia Tsui Julia Zhu Sylvia Zureic

2

Johnson and Johnson Medical Devices will complete restructure smoothly through aligning Critical Tasks, Culture, People and Formal Structure with growth drivers

JnJ MD is the #1 global leader in

surgery and orthopaedics and #1

leader in China and emerging

markets

2015 sales achieved $21B and benchmark levels of profitability

50% of sales generated OUS and 20% of sales in emerging markets

Current pipeline of product filling by 2018 have sales potential > $6B

Expanding new product freshness index from 25% to >30% by 2020

Rapidly changing demographics,

increasingly unmet customer needs,

and new commercial models

challenge JnJ MD’s profitability

Increasingly aging population and majority “minority” require more

customized healthcare products and services

New commercial models need more collaborative and cross-functional work

to accelerate growth and innovation

How can JnJ MD ensure sustainable competitive performance?

Culture

Align the restructuring with

Johnson & Johnson’s Credo

by implementing change

management plan

People

Identify key employee groups

to retain employees and

upgrade information system

Formal Structure

Transform from a Top-down

structure to Matrix

Management and design

open work space

Executive Summary | Background | Framework | Critical Tasks | Recommendations | Mitigations

3

By restructuring and focusing on disease states, Johnson and Johnson will sustain its position as a leader in the industry

Using robust regional model, disease states strategy and identified key geographies, Johnson and Johnson needs a holistic human resource strategy to support future growth


Leadership team

R & DSupporting

FranchiseCommercial Organizatio

n

Supply ChainOthers

Technology

Regional Model Disease State Strategy

Nine Key Geographies

4

Diagnosis / photo

Dissecting the Brain’s Anatomy

Framework

5

Critical Tasks

People Culture

Formal Structure

To restructure smoothly, MD needs to make sure its Critical Tasks, Culture, People, and Formal Structure align with its current growth drivers

With new internal and external challenges, MD needs to first identify critical tasks then adjust other three elements

Congruence Model


6

Finding the Vital Rhythm

Critical Tasks

7

Keeping best talent, encouraging innovation, and sustaining core culture are critical tasks for MD

We will now analyze the congruence of the three components with the critical tasks, and ultimately recommend how they can achieve and accomplish these goals

Retain talent and cultivate leaders

Adopt to new structure at the same time as aligning with

credo

Encourage innovation while

transitioning from a decentralized to a

regional centralized model

Create a pipeline for leadership development


Maximize Business performance

Support Growth Drivers

Align with Culture, Formal Structure,

and People

8

Our recommendations are closely congruence with critical tasks, then support Johnson & Johnson business growth

Adopt to new structure at the same time as

aligning with credo

Encourage innovation while

transitioning from a decentralized to a

regional centralized model

Retain talent and cultivate leaders

Create a pipeline for leadership development

People

• Restructure Sales Team with Tailored Compensation Plan

• Upgrade Information System to Enhance HR Analytics

Formal Structure

• Transform From a Top-down Structure to Matrix Management

• Design Open Workspace Office

Culture

• Align Restructuring With Credo

• Implement Change Management Plan to Strengthen Three Priority Areas

Focusing on improving key employee groups’ performance, adjust physical and management structure as well as align restructuring with credo will address challenges during transition period


9

Growing the Muscle

People

10

By restructuring sales team and upgrading information system, Johnson and Johnson can retain talents and encourage innovation as well as boost business performance

Sales Team Restructure

Expected Increase in Revenue (in billions)

• Identify key employee group to retain talents• Lay a foundation for further implementations

• Automation of certain services in different departments

• Provide information for sales department and other supportive functions

Identify Key TalentsU

pdat

e In

form

atio

n Sy

stem

Three Key Steps

• To deliver unique and tailored services• Incentivize Sales team to achieve better performance

+0.564%

$25.16

Without Implement

After Implement

$25

After identify key employee groups, Johnson and Johnson should focus on sales team restructure as well as upgrade information system since it will encourage innovation and facilitate business growth


11

Analyze talent pool to determine range in employee impact and performance variability

Employee Group Impact Required Knowledge, Skills,

and Abilities

Range in Employee

Impact

Performance Variability

Sales

Introduce customers to

devices across disease states

Detailed product knowledge, relationship management with

customer, collaboration across departments

Research & Development

Create new products, drive

innovation

Research, creative problem solving, teamwork

Human Resources

Talent management

HR strategies, change management

Marketing Product awareness

Understanding of market trends and customer needs,

product knowledge

Operations Quality controlKnowledge of R&D,

manufacturing process, and supply chain

Identify key employee groups to retain employees who provide firm-specific knowledge, skills, and abilities. These invaluable employees will help spearhead the implementation of the proposed changes

Executive Summary | Framework | Critical Tasks | Recommendations | Mitigations

Low M

edium H

igh

Sylvia Zureich

Short term rec:Utilize existing MBA rotational program; encourage rotations in unique functions to expand knowledgeLong term rec: Expand rotational system to other programs

Sylvia Zureich

RE: "Take advantage of diverse knowledge"

12

• Introduce change to key talents first

• Update compensation system

• Improve communications between different functions

• Utilize diverse knowledges

• Reevaluate talents with updated criteria

• Encourage cross-reginal work

Adopt to new Structure and Align

with Credo

Encourage innovation

Retain talent and cultivate great leaders

Identify key talent to address the critical tasks through a new sales structure

Restructure Sales Team

• Only one sales interface with the hospital

• New technical consultants to lead with practitioners

• R&D team focused on innovation through disease states


13

Sales team structure proposal

Business Development Role• Develop hospital relationships,

procurement/purchasing• Sell products, negotiate bundles

Technical Consultant Role• Support Sales team ”level 1” tech

instructions• Relays feedback and engages in

productive dialogue with R&D Dept. to help encourage innovation

R&D Department• Incorporate feedback from Tech

Consultants into MDs• Focus on innovative product

development into disease states

Supply Chain Hospital Director

Technical Consultants

R&D Department

Doctors/ Practitioners

Sales team as business developers, focused on hospital relationship. Technical team as product application, relationship with Surgeons. R&D scientist team focused on research and development of

new MD solutionsExecutive Summary | Background | Framework | Critical Tasks | Recommendations | Mitigations

Business Development

Hospital Johnson and Johnson

14

By restructuring sales team, we can increase employee engagement as well as productivity which will lead to an increase of 2.9% of ROI

111.26

+31.84%

Cost

Bonus

163.25

Turnover

Revenue

ROI Analysis (in millions)

Current ROI

31.84%2.9%

Increased Amount

Expected ROI

28.94%

ROI Comparison

V

• Revenue is expected to increase $163.25 millions

• Return on Investment will be 31.84%

• ROI will increase 2.9% compare with the current 28.94% ROI

ROI Analysis

Based on our assumption of 25% of employees are highly engaged, 60% are neutral 15% are lowly engaged, after rebalancing the compensation system, employee engagement will increase which will lead to a higher company growth rate. Higher company growth rate will eventually lead to an increase

of revenue and higher ROIExecutive Summary | Background | Framework | Critical Tasks | Recommendations | Mitigations

15

Upgrading Information System to provide data for HR and other supporting functions

Sales team given higher degrees of autonomy, so Information Management System should be tweaked to address changes. HRMS and CRM to be integrated, to promote cross-departmental collaboration and optimize operations.

• Re-organize platform to meet the matrix management

system and the new sales structure

• Consolidate HRMS with CRM system to promote cross-

departmental information sharing

• Increase input requirements of external facing employees to

help HR identify key skills and performance

Upgrade HRMS to fit with new disease state structure

Benefit

• Short Term

- Performance Management

- Governance Risk Compliance

- HR Analytics

• Long Term

- Data Automation

- Marketing Automation

- Sales Automation

Cost

• Indirect Costs

- Lost productivity of

implementation

- Training & Support

• Hard Costs

- Software/Hardware


16

Formal Structure

Adjusting the Bone

17

Transform from a top-down structure to matrix management would accelerate innovation & growth

Johnson and Johnson should adopt a matrix structure for its key product projects to unleash employee potential, support innovation, and maximize business impact

Top-down Matrix

Leadership

Functional Managers

Functional Managers

Functional Managers

Assigned WorkersAssigned Workers Assigned Workers

Project Managers

Leadership Leadership

Project Managers

Functional Managers

Functional Managers

Functional Managers

Engineering Marketing

Advantages• Facilitate cross-function collaboration

• Delegate responsibility and hold

everyone accountable

• Accelerate communication process

• Reward teams that provide solutions to

disease states and hospital relationship


18

Johnson and Johnson should convert to an open workspace plan in order to align the physical work environment with the critical tasks

Design open workspace office to foster open communication and collaboration

% Who Report it being Worse

(Scores 1 or 2)

% Who Report it being Better

(Scores 4 or 5)

Better Inclusion?

Better Collaboration?

Better Innovation?

Better Decision-Making?

Better Engagement?

9%

9%

11%

6%

10%

39%

70%

54%

59%

Core Characteristics

Traditional vs Open Space

59%

Focus Group Information from one Fortune 500 pharmaceutical company in the states. Data from 3 different campus across southwest, east and west regions (n=69)Participants all came from a traditional workplace and were presently working in an open space. They were asked torate and discuss differences between the two.

• Align with the overall restructuring

• Cultivate transparent and timely communication in the working environment

• Build physical foundation to foster cross-functional collaboration

• Provide broader platform to generate new ideas

• Save big money on real estate such as reducing number of desks and altering the desk-to-employee ratio

Align with Critical Tasks and Lower Cost


19

Strengthening the Spine

Culture

20

Aligning restructuring with Johnson & Johnson’s Culture

Leverage Johnson & Johnson’s Credo as the guiding principle to ensure the restructuring aligns with culture

• Following the credo, necessary for business success

• Innovation culture generates optimal value for the organization

Assumptions

• Support autonomy in job roles• Procedural justice: involving

employees in restructuring• Incentivize innovation

Norms

• Serve customers first• Treat employees with respect• Empower employees

Values

• Collaboration and innovation • Employee retention• Championing new structure• Greater quality products and

customer satisfaction

Artifacts


21

- Serve customers first

- Treat employees with respect - Empower employees

Values: “CREDO”

- Incentivize innovation

- Employee autonomy- Procedural justice

Norms

- Incentivize innovation

- Employee autonomy- Procedural justice

Norms1st Part of Credo

2nd Part of Credo

- Collaboration and innovation - Championing new structure- Employee retention

ArtifactsRewards

Perception & Confidence

Culture: How these elements align

All of norms can be found in our recommendations which bring credo into new disease states strategy


22

Incentivize InnovationMaintain Employee AutonomyEmpower Employees

Create Change Agents Group – Empower Employees

Culture Survey – before, during, & after changes

Map impacts of changes & build action plans

Training to align restructuring to organizational values & Credo

Compensation – Reward

Intrinsically & Extrinsically

Collaboration & Innovation

Employee Retention

Championing New Structure

Recommendations

Critical Tasks

Change Management

- Culture

Norms

Culture: Foundation for our Recommendations

Implement Matrix

Management


Upgrade Information

System

Create Open Workspace


23

Preventing Infection

Implementation and Mitigation

24

After evaluating implementation difficulty and time/cost, we suggest Johnson and Johnson execute recommendations below

Johnson and Johnson should mitigate relevant risks by creating quick win and strategic communication


Cost Time LengthImplementation

Difficulty

Change Management Plan


Upgrade Info System

Implement Matrix Structure

Increase Open Office Space

Potential Risks Process or Not

Low M

edium H

igh

Recommendations

25

Risks and mitigation plan

Johnson and Johnson should mitigate relevant risks by creating quick win and strategic communication


• Prioritize current resources and communicate effectively • Select low-risks teams as pilot to create quick win • Calculate ROI and provide alternative solutions based on sensitivity

analysis

Mitigate Potential Risks

Risk Level Mitigation Level

Majority of employees resist change

• Be aware of the difference between those employees who are more willing to change and those that resist change

• Customized communication strategies with different groups of employees

Find suitable candidates to the technical consultants and business development positions

• Make sure recruiters and leaders understand the new roles and have the ability to recruit them

• Use the new career paths to find internal candidates in specific areas

Handover of sales team

• Guarantee that all clients (hospital and practitioners) are aware of the change to minimize their resistance

• Assure that all sales information are inputted on the system before the changes happens

• Make sure after implementation that technical consultants and business development team utilize the system properly

Low M

edium H

igh

26

Johnson and Johnson MD should implement the strategic plan in next two years


(months)Change Management Plan

• Culture Survey• Create Change Agents Group• Map Impacts and provide culture training• Communicate Clients of change

Restructure Sales Team• Define Roles and Responsibilities• Development plan and training program• Assess employees and choose the team• Align compensation • Communicate and train • Implement the new structure

Upgrading Information System• Define data and metrics to be analyzed• Structure the system• Train and implement

Implement Matrix Structure and Open Workspace

• Survey to identify Pilot Groups• Implement and Collect Feedbacks• Analysis and Implement broadly

Milestone

27

28

Appendix

29

Low UNIQUE high

Low VALUE high

Low

Per

form

ance

Var

iabi

lity

hig

hSales

R&D

Operations

Human Resources

Marketing

Appendix 1– People: Impact & Variability

30

Appendix 2 - Restructuring Sales Department

Sales team as business developers, focused on hospital relationship. Technical team as product application, building relationships with surgeons. R&D scientist team focused on research and development of new MD solutions.

- Streamline Sales Team- responsible to sell all MD products to one or more hospitals- only one sales interface with the hospital- focus on hospital relationship and business development

- New structure positions- Business Development (Sales)- Technical Consultants (Technical Product Application)- R&D Scientists

Define new roles and responsibilities.Define career paths.

Analyze talent pool to determine employee impact and performance variability.

Assign employees to new positions.Build training and development plan.

Implement and communicate changes to all interfaces.

Initiate training and development

31

Appendix 3-Data Source: Rebalancing Compensation System

32

Appendix 4-Data Source: ROI Calculation

33

Source: https://www.shrm.org/about/foundation/research/documents/retaining%20talent-%20final.pdf

Source: http://www.kenan-flagler.unc.edu/~/media/Files/documents/executive-development/powering-your-bottom-line.pdf

Source: http://www.gurufocus.com/term/wacc/JNJ/Weighted-Average-Cost-Of-Capital-WACC/Johnson--Johnson

Source: https://www.shrm.org/ResourcesAndTools/business-solutions/Documents/shrm_ansi_cph_standard.pdf

Appendix 5-Data Source

https://www.shrm.org/about/foundation/research/documents/retaining%20talent-%20final.pdf

https://www.shrm.org/about/foundation/research/documents/retaining%20talent-%20final.pdf

http://www.kenan-flagler.unc.edu/~/media/Files/documents/executive-development/powering-your-bottom-line.pdf

http://www.gurufocus.com/term/wacc/JNJ/Weighted-Average-Cost-Of-Capital-WACC/Johnson--Johnson

https://www.shrm.org/ResourcesAndTools/business-solutions/Documents/shrm_ansi_cph_standard.pdf

34

• Define new roles and responsibilities

• Implement matrix structure to improve communication through disease state

• Assess the new roles and reevaluate job impact and compensation

• Change bonus program to reward matrix/disease state and business development (hospital) solutions

• Assess employees to new job requirements

• Analyze talent pool to keep them in the organization

• Build new career paths

Talent ManagementCompensationOrganization Design

Appendix 6-HR challenges to bolster J&J MD new strategy


• Build development plan, based on the assessment

• Train different skill sets for different disease states

• Hire new technical team• Internal and external hires• Build onboarding program

aligned with new structure

• Utilize upgraded information system to determine who to target and how

• Analyze information and relate to performance, training, and compensation

HR Data AnalyticsRecruitmentTraining and Development

35

• Define new roles and responsibilities• Implement matrix structure to improve communication through disease state

Organization Design

HR challenges to bolster J&J MD new strategy


1. Identify key sales leaders to create the job descriptions2. Job description of new BD position - at least 5 yrs experience in MD, disease states knowledge, knowledge on business strategy, ability to work independently, etc.

36

• Assess the new roles and reevaluate job impact and compensation• Change bonus program to reward matrix/disease state and business development (hospital) solutions

Compensation



1. Take into consideration additional requirements for new BD position and technical consultants, to create revised comp/ben plan to ensure retention.

2. Increase salary base, include bonus, adjust commission3. Bonus suggestions: - Bonus related to ROI of projects created between technical experts and R&D teams - Bonus related to the amount of projects in a year that Business Development (sales) creates to hospitals. 4. Performance management: - The employees would create a set of goals to achieve in one year (examples above) - The upgraded info system will later give goals information back to HR. HR will be able to predict bonus amount and budget it.

37

• Assess employees to new job requirements• Analyze talent pool to keep them in the organization• Build new career paths

Talent Management



1. Use current assessment tool to identify key employees that fit new structure2. Input data points from previous talent management system (HRMS) into new upgrade information

system 3. From this assessment, the leaders will have a deep comparison between people and will be able to

decide which ones will continue in the new roles4. With the new info system, HR will also be able to analyze performance of commercial team

38

• Hire new technical team• Internal and external hires• Build onboarding program aligned with new structure

Recruitment



1. Identify internally who are the employees in R&D or sales that fit in technical consultant role. Follow current internal recruitment practice.

2. Recruit outside technical candidates aligned with JnJ culture and with MD technical expertise. Follow current external recruitment practice.

3. Develop onboarding program, focused on product and disease state training, and on systems training. The training length will be 1 year. New tech team will have both technical training and market training.

4. A final transition will be the sales team introducing to the tech consulting the practitioners (surgeons, nurses) they will deal with from now on.

39

• Merge HRMS and CRM to create shared platform for necessary departments, promoting cross-departmental collaboration

• Utilize upgraded information system to determine who to target and how• Analyze information and relate to performance, training, and compensation

HR Data Analytics



1. Identify internally who are the employees in R&D or sales that fit in technical consultant role. Follow current internal recruitment practice.

2. Recruit outside technical candidates aligned with JnJ culture and with MD technical expertise. Follow current external recruitment practice.

3. Develop onboarding program, focused on product and disease state training, and on systems training. The training length will be 1 year. New tech team will have both technical training and market training.

4. A final transition will be the sales team introducing to the tech consulting the practitioners (surgeons, nurses) they will deal with from now on.

40

• Build development plan, based on the assessment• Train different skill sets for different disease states

Training and Development



1. Build training programs for each disease state2. Start training employees on the products that they haven't sold before3. Train to use new system4. Use data from Information system upgrade to create new training programs