Creating Corporate Character

by Ralph S. Larsen (former CEO of Johnson & Johnson)

What do we mean when we say a person has character? Context aside, we mean the person has good values and the integrity to live up to them. Where do these values come from? Given the powerful influence of family life and school, it is natural to assume a person’s character is formed long before that person becomes an adult and enters the workforce. It is easy to accept the common prejudice that, if anything, the influence of the workplace on character is negative, that work brings out the competitive worst in people.

Yet it is my experience that the modern workplace can be an extraordinarily powerful character-building institution. Indeed, in a fast moving, competitive global culture and marketplace, I feel character is a corporation’s most valuable resource and product. A successful corporation’s, that is.

At Johnson & Johnson (a $24-billion-in-sales consumer products and pharmaceutical concern [since this was written, the company has grown to over 100 billion in revenues]) we expect our executives to demonstrate a number of exceptional qualities. They must be intelligent, innovative, and diligent. They have to master complexity, work well with other divisions, and be able to develop the people who report to them. But no matter how clever or competent they are, they must also have sound values and a powerful sense of integrity. In a world where corporate reputations built over decades can be destroyed overnight, it is absolutely essential that we employ and are represented by people of character.

At Johnson & Johnson we are terribly conscious of the need for leaders with the character to safeguard our reputation as a values-driven company at the same time as they press hard to produce outstanding business results in domestic and international markets. Our present growth rate of $2 to $3 billion per year creates exponentially increasing demands to hire, train, and retain leaders who can effectively deal with opportunities and challenges arising from new products and technologies. The problem becomes both more urgent and complex as we acquire companies whose employees have operated under different corporate cultures.

Of course we make every effort to hire people of exceptional character. But we don’t rely entirely on their existing values. We also train our managers to make decisions according to our core values. We do this not only because we think it is morally right but because we are essentially in the trust business. People of character are trusted people, and that gives us a significant competitive advantage.

For example, Johnson & Johnson consists of 180 companies located all over the world, and these companies conduct business in some countries where bribery and corruption are more common than in the United States. Under these circumstances in particular, competition tests our values and provides continual opportunities to demonstrate integrity. With thousands of managers exercising responsibility, we know there is always a risk that some people will lack the moral fortitude – the character – to resist the temptation to elevate expediency over ethics. However, this simply intensifies our commitment to inculcate the core ethical values that form the bedrock of our corporate character – the Johnson & Johnson Credo.

Mr. Johnson and his credo

Ralph Waldo Emerson said that an institution is the lengthened shadow of one man. Robert Wood Johnson was chairman of our company from 1932 to 1963, and the influence of his character pervades our corporate culture to this day.

In the 1930s, during the Depression, Johnson wrote “Try Reality,” a pamphlet that asked business to adopt “a new industrial philosophy.” He said, “industry only has the right to succeed where it performs a real economic service and is a true social asset…. It is to the enlightened self-interest of modern industry to realize that its service to its customers comes first, its service to its employees and management second, and its service to its stockholders last.”

This was an unorthodox view at the time, and the business community was largely unresponsive. Yet Johnson was undaunted. A few years later he wrote the Johnson & Johnson Credo, a comprehensive statement of the company’s obligations to its primary stakeholders: customers, employees, suppliers, communities, and shareholders.

He was not about to allow this document to be a meaningless wall hanging. He vigorously set about ensuring that the Credo became the bedrock of the company’s management principles. While the Credo was not the first document of its kind in American business, it gained recognition as an innovative way to run a company and became a model for business. From its declaration of the primacy of our responsibility to the people who use our products to its articulation of our organization’s duty to be a good citizen, the Credo has become the moral backbone of our worldwide operations.

It is truly wonderful to have a worthy doctrine that simply and eloquently defines the heritage of our organization. But how do we sustain that heritage as the years go by? How do we keep it vital and relevant in a changing world? These are the most critical questions we contend with, for we are convinced that the success of our organization is rooted in its special character. And we work very hard at sustaining and strengthening that character.

One of the great advantages we have is that so many of the people who work at Johnson & Johnson came here with personal values that are fully compatible with the Credo. Thus the Credo reflects the kind of individuals you find at Johnson & Johnson. People do not necessarily become Credo-ized after they join our company. They join us because some of the fundamental ways we think and act make sense to them.

The operative word here is fundamental. All of us at Johnson & Johnson start from a common set of beliefs, but we are anything but automatons. “Everyone must be considered as an individual,” the Credo boldly declares, and respect for people courses through its every provision. We know the Credo is not self-enforcing. It must be interpreted and applied by individuals. Without people of character, the Credo would become a hollow pledge.

The Credo has served us well even as we have grown larger and more diverse because it is a democratic, and therefore resilient, document. It provides a transcending set of principles that appeal to the ethical aspirations of people from many different cultural, ethnic, religious, and educational backgrounds. That is its magic.

We have discovered that the basic character of our organization – with its emphasis on responsibility to our customers, employees, and shareholders – strikes a chord with people whether they are from Cincinnati, Sao Paulo, Madrid, Bombay, Tokyo, or Sydney.

Although the CEO has always borne the ultimate responsibility for the Credo’s vibrancy and perpetuation, it is a responsibility shared by every member of the Johnson & Johnson family of companies worldwide. That is the only way the Credo can remain a living document.

The credo in practice

How does this play out in the everyday world? Here are three tests to our individual and group character, events that have the potential to result in great accomplishment – or disheartening setback.

A test of ethics. Like people everywhere, we at Johnson & Johnson face moral choices every day. When there is a clear choice between doing right or wrong, the decision is obvious. But we are often faced with moral dilemmas that present no easy answer, no clear ethical choice. The Credo cannot possibly be a formula that gives us the answer for every issue that comes up. However, it does give us an ethical framework for decision-making. It helps good people be the best they can be. In this sense, it is a character builder. It leaves no doubt that we expect our employees to pursue the highest standards of integrity and ethics.

For example, say we enter a new business in a country where some customs run counter to our practices. While we will certainly always be honest, respectful, and law-abiding, the answers to all questions may still not be obvious. We have to work our way through them. If we simply push ahead and insist on doing things our usual way, we may offend and possibly alienate well-intentioned people who simply do not see things the way we do. Individual decisions requiring patience, sensitivity, and good judgment must be made. Perhaps we would choose to talk the issue out in a way in which both sides gain understanding. This might take time, and we might give up some competitive advantage or lose an immediate business opportunity. Yet, if we were to compromise our integrity in this situation, what sort of message would that send the next time a moral or ethical decision had to be made? Because our corporate character is paramount, we will not betray the traditions or sully the reputation of our company for short-term gain.

Over the long term, principled action is not only the moral thing, it is the correct business decision.

Sometimes the moral challenges we face as individuals are less dramatic, seemingly trivial – yet equally telling. Take the scenario in which people from different departments are working as a team on creating a new, very promising product. A senior executive hears of the effort and is of the impression it’s largely the work of one person, whom he commends. It may not be immoral for this team member to say thanks and walk off with a glow of satisfaction and heightened career expectations; but within a community where people have a strong sense of responsibility to each other, people expect more. They will see this as an opportunity to share earned credit with their colleagues. I would suggest that a duty to share credit is rooted in the ethical principles of respect and fairness and is a matter of character that speaks volumes about an individual. Though this is a simple example, its importance cannot be overstated. It has been my experience that people who can be counted on to make the ethically correct decisions on the big things – when the crisis hits and the pressure is on – are most often those who have made it a habit to work at making the correct ethical decision in the countless small choices each individual faces in life.

Are we perfect at Johnson & Johnson? Of course not. Do we misstep at times? Absolutely. What matters most is that we continue to strive to live up the moral standards we set for ourselves, to own up to our mistakes, and to learn from them. From our view, that’s character at its best.

A test of leadership. The 21st century promises an ever more dizzying pace of change. That means tougher competition. Heavier cost pressures. Greater needs for innovation. Continued technological challenges. And on and on.

What qualities will leaders need to be successful in this tumultuous world? They will have to be extremely responsive and adaptive to change. They will have to be able to embrace ambiguity and uncertainty, to look at change as a source of new opportunities to compete and grow. They will have to have the will, the energy, the determination, the fire, and the courage to take ever more vigorous, creative action. They will have to be entrepreneurially spirited, encouraging and rewarding individual effort and risk-taking, but they will also need to be team-oriented, to be able to break down dysfunctional, organizational, and geographic barriers to sharing the best ideas and taking action. And they will need to be able to do all these things in a way that reflects sound ethical and moral values.

It’s one thing to identify the characteristics needed for leaders in the next century. It’s quite another for a company to take the steps necessary to ensure that such leaders flourish, to provide an environment in which leaders can come forward with the ideas, the skills, and the initiative to take charge of change. At Johnson & Johnson, as one way to encourage leaders, we have created a program called FrameworkS.

The FrameworkS process flowed from our belief in the centrality of the individual and from our sense of our responsibility to treat each person with respect and dignity. It is built on the assumption that the people of our company have a great amount to contribute, have extraordinary pride in Johnson & Johnson, and want to be involved in keeping our company great.

FrameworkS is simple in concept, but it requires a very big commitment of time, energy, skill, and enthusiasm. Teams (representing members of our executive committee, operating company management at all levels, and corporate staff) address issues of great importance to Johnson & Johnson’s future. Through a global process of intense research and no-holds-barred discussion and debate, FrameworkS enables the best ideas, talent, and experience at Johnson & Johnson to be directed toward mastering the challenges of change. Never before has such a broad-based group of people been invited to be central, active participants in matters of substantial corporate significance outside their own direct responsibilities.

Bringing this diverse talent and enthusiasm into the process of changing our corporation has had a remarkable impact. We are finding that Johnson & Johnson is more responsive and adaptive than ever before. We’ve started new businesses and entered new markets. We’ve set up global programs that are harvesting great returns for us in critical areas such as leadership development and innovation.

Perhaps more than any other single step we have taken, FrameworkS is helping to ensure that the special character of our firm is not only preserved but strengthened and kept vital and relevant.

We leave no room for doubt that we expect all our managers to live up to the highest standards of integrity. The senior management team of every Johnson & Johnson company attends a five-day leadership seminar in which nearly one full day is dedicated to an extensive discussion of how our Credo values apply to very specific and challenging hypothetical questions. This portion of the program is extremely powerful because the discussion is led by one of the nine most senior officers from Johnson & Johnson’s international headquarters.

A test of innovativeness. Our Credo states that our first responsibility is to meet the needs of “the doctors, nurses and patients … mothers and fathers and all others who use our products and services.” That means we must constantly be improving products and services. But as we see it, innovation in business is not simply the invention of a new product, service, process, business system, or management method. These things are the end result of innovation. For us, to be truly innovative goes to the heart of individual character.

Let’s imagine somebody who develops, makes, or markets health-care products sitting in an office pondering how to come up with something really new. The usual approach is to look at the existing marketplace, scientific data, or manufacturing processes with the hope of identifying a need or operating efficiency that has yet to be tapped. This is fine. But we look for something more. And the search starts by looking within. We ask ourselves, what assumptions, biases, or habits might we have that could limit the scope of our ability to see with complete openness and clarity? What limits in skill, knowledge, risk-taking, and self-initiative do we bring to the creative process that could diminish the potential for results? Whom should we reach out to with our ideas – and how do we work most effectively with such people?

Each time we answer these questions, we take ourselves into a broader dimension of thinking, creating, and acting. As we seek to see through others’ eyes and to serve others’ needs, we engage in a terrifically valuable character-building exercise.

What does such a way of looking at innovation mean to a company like Johnson & Johnson? The answer once again can be found in our respect for the individual and our belief in the capacity of every individual employee to make a contribution to our organization. It means that we view creativity and personal leadership as something every single person is capable of. It means that within every person can be found the knowledge, skill, motivation, and zeal to make something special happen.

By unleashing the incredible capacity of each individual to make a difference and by applauding good values, integrity, and fairness, we make the workplace an extraordinarily vibrant and enriching place of character-building. This is the spirit in which the shared beliefs and values of Johnson & Johnson have evolved.
Ralph S. Larsen  (November 18, 1938 – March 9, 2016) was the chief executive officer (CEO) of Johnson & Johnson from 1989 to 2002, one of the world’s largest and most admired corporations. At a time when the commitment of many companies to their ethics codes and mission statements was being questioned, Johnson & Johnson made headlines by adhering to the company Credo and acting promptly to recall all its Tylenol products after tampering was discovered. The company lost millions of dollars but secured once again the trust and admiration of the country.