This case involves an initiative at Johnson & Johnson in the early-1990s that had the objective of reengineering the accounts payable and purchasing systems for all of the corporation's subsidiary companies to harmonize all of the separate company systems into a single shared services system serving the entire corporation. While the shared services concept has a proven track record in many applications, the concept has not proved to be productive in all organizational or industrial environments (Gunn, Carberry, Frigo, & Beherns, 1993; McWilliams, 1996). Similarly, while reengineering has been successful in improving productivity in some corporations, it has proved to be disastrous in other corporations. Johnson & Johnson sought to implement their reengineered shared services accounts payable and purchasing system through a self-managing work team (SMWT) concept. As is the case with both shared services and reengineering, the SWMT concept has been highly successful in some environments and much less successful in other environments.
At Johnson & Johnson, the shared services-reengineering-SMWT initiative turned out to be one gigantic fiasco. To some extent, the shared services, reengineering, and SMWT concepts were the sources of the corporation's difficulties. For the greater part, however, managerial bungling, inept planning, and a bottom-line mentality that could not see the forest for the trees were the core of the corporation's problems with the new shared services purchasing and accounts payable system.
Johnson & Johnson is the leading manufacturer in the United States of health care products. The company's enviable reputation was strengthened two decades ago through its response to the Tylenol tampering case. Both in relation to product quality and financial performance, the company is viewed as a corporate leader.
The shared services is not new. The assumption underlying the concept is that value can be added to...