Control Mechanisms for Johnson & Johnson

Johnson & Johnson is one out of many companies, which have developed and implemented a complex system of management control as an essential component of their long-term business strategies. In terms of budgetary control, the company performs regular reviews of its budgetary data to verify its accomplishments; Johnson & Johnson uses budgeting to predict future sales and anticipated expenses (Johnson & Johnson, 2007). Johnson & Johnson uses balance sheets and profit and loss statements as the two relevant instruments of financial control.

The company performs annual review of its financial statements; the written review is available online (Johnson & Johnson, 2007). In terms of market control, Johnson & Johnson keeps to the principle of decentralized management, where limited markets and company’s departments are in some way or other governed by citizens; in other words, the market value of product is viewed through the prism of the value this product creates for the consumer.

Ultimately, decentralized management reflects Johnson & Johnson’s approaches to clan control, which implies that the company’s “strategic planning is guided by the ethical principles embodied in Our Credo, unifying our people worldwide behind a set of common values and providing a constant reminder of the Company’s responsibilities to all of its consumers” (Johnson & Johnson, 2008).

Budgeting and financial control are the two most common forms of bureaucratic managerial control, but in distinction from budgetary control that estimates and predicts income and sales, financial control emphasizes the need for analyzing company’s financial performance at a given time. Financial and budgetary controls form a group of bureaucratic mechanisms that frequently meet resistance and opposition at different levels of company’s performance. The reason for such opposition lies in that budgetary and financial controls uncover mistakes and may threaten status and job security of particular employees.

Market control is the third form of managerial control, which involves pricing and market mechanisms as the instruments regulating company’s performance. Clan performance stands separately from the three previous forms of managerial control; clan mechanism “creates relationships that are built on mutual respect and encourages each individual to take responsibility for his or her actions” (Clive & Otley, 1990). It should also be noted that clan mechanisms take the longest time to be developed and implemented as compared to the three other forms of control in management.

References

• Clive, R. E. & Otley, D. T. (1990). Accounting for management control. Cengage Learning EMEA. Johnson & Johnson. (2007). 2007 Historical Financial Review. Retrieved December 12, 2008 from http://files. shareholder. com/downloads/JNJ/487901287x0x201810/abca6e90-44a0-42af-bf4b-2210f3621857/Historical%20Review%202007. pdf
• Johnson & Johnson. (2008). Strategic planning. Retrieved December 12, 2008 from http://www. investor. jnj. com/strategic. cfm