Codman & Shurtleff

Analysis of Codman & Shurtleff

Codman & Shurtleff is an autonomous subsidiary of Johnson and Johnson (J&J). J&J is a decentralized company which has 3 basic doctrines to achieve success - decentralized management, sense of responsibility and long term management. J&J has 155 autonomous subsidiaries in 46 countries and it employs 75,000 people worldwide. These 155 units are divided into sectors based primarily on products. Codman & Shurtleff employs 800 people in 3 manufacturing locations and competes in 12 major medical product groups.

Codman & Shurtleff 's mission is similar to the building strategy, the company is focus mainly on innovation and differentiation, and its strategy is based on investing in R&D and developing new products. Building Strategy is mainly oriented to qualitative performance rather than to quantitative performance. Because of the changeable environment of the market, budget revision tends to be more frequent and management is actively involved in the formulation process.

Strengths of the System:

1. Bottom-up: because the nature of the business is constantly changing in this business unit of J&J, it is strength that middle management is highly involved in the planning process. According to Govindarajan and Shank, middle managers have more knowledge of the environment and its changes than senior or top management.

2. Strategy plans for long and short term: the planning and control system used in Johnson and Johnson, therefore in Codman & Shurtleff, involve short term planning which consist on one year Budget and second year forecast, and long term planning which consist on a 5 years plan and a 10 years plan. The short term plans are developed with more detail, and it is revised frequently. On the other hand, long term planning is critical in this kind of industry because it is important to visualize the long term benefit that should be obtained by sacrificing short term profits.

3. No punishments for bad forecasting - motivation: it is declared by the president of J& J that the company does not expect that the budget and forecast are accomplish, the real intention of these planning tool is to make the managers think and keep posted of what is happening in their sectors. Although there is not punishment it is clearly stated that "the profit plan and the second year forecast are used to run the business and evaluate managers on planning, forecast and achievements'.

4. Force busy managers to review their strategy: this planning and control system force managers to abstract themselves from the every day activities and revise the company strategy, its results, its potential threats, the projects scope, the market needs, etc. By doing this exercise, the company managers have to sit and think about the company's mission and strategy more than once a year. This also permits management realizes what is going good and what is going wrong early and take some action. In Codman case this allows management to reformulate their strategy if it is necessary.

5. Three revisions: this tend to be seen in many cases as a weakness but, since Codman & Shurtleff market environment is very uncertain and unpredictable this kind of practice actually results beneficial because managers develop planning and budgeting skill in a variable environment.

6. Multi step approval: this make more difficult at certain point to approve a plan with flaws or with weak back up strategy.

Weaknesses of the System:

1. No changes are suggested: the committee that reviews and approves every subsidiary of Johnson and Johnson "never dictates or changes proposals, only challenges ideas", according to the text, the committee, challenges the ideas when the person who is presenting the forecast by him/herself thinks it is not good enough. So it is possible that a person who is not right in him/her forecast and strategy but is a good 'seller' go through the revision, because nobody is going to challenge his/her ideas.

2. Remuneration indicator: the objective indicator used to set remuneration is link with every manager activity, this might create conflict because every division will try to fill achieve their numbers even when this implies affect other division performance. For example, if R&D managers are measure by the number of project ongoing