5 Ways Alex Gorsky Can Heal Ailing J&J

by Susan J. Aluise | February 23, 2012 10:10 am

5 Ways Alex Gorsky Can Heal Ailing J&J

“Rangers lead the way.” – U.S. Army Rangers motto

As embattled health-care giant Johnson & Johnson (NYSE:JNJ[1]) prepares to rebuild its reputation and revenue-growth prospects after a plethora of recent high-profile product-safety failures, it needs a leader who knows how to “move further, faster and fight harder” than the norm. Luckily for JNJ, newly minted CEO Alex Gorsky learned to excel at that mission as a captain in the elite U.S. Army Rangers.

The 51-year-old Gorsky, who has been in charge of J&J’s worldwide medical devices and diagnostics unit since 2009, prevailed over pharma and consumer-products chief Sherilyn McCoy[2] in the internal-succession race. Gorsky, who began his J&J career as a sales rep, spent 15 years at the company (including a stint as head of pharma operations in Europe) before joining Novartis AG (NYSE:ADR[3]) in 2004. After rising to head the company’s North America division, he came home to Johnson & Johnson in 2009.

When Gorsky formally takes the helm from current CEO Bill Weldon on April 26, he will do so at one of the most critical and defining moments in the 125-year old health-care giant’s history.  While Weldon’s decade-long leadership of the company delivered shareholder returns of 142%[4] (compared to a 29% return on the Dow), the past couple of years have nearly wiped out the good will associated with Weldon’s legacy.

Massive quality-control problems in products ranging from common over-the-counter medications such as Tylenol, Benadryl and Motrin to high failure rates in hip prostheses and recalls of insulin syringes have bedeviled J&J over the past two years. As recently as this month, the company recalled its grape-flavored children’s Tylenol over packaging concerns.

These issues led to congressional hearings, the closure of a manufacturing plant and a court-enforced consent decree requiring government oversight of certain plants for five years. The company has also wrangled with patent litigation and come under fire over its marketing practices. A New York Times piece on the “Worst CEOs of 2011”[5] proclaimed Weldon “the most complacent chief executive in America” and “almost the Tony Hayward of America” — a reference to the much-maligned former BP (NYSE:BP[6]) CEO whose tenure ended over the Deepwater Horizon fiasco.

It’s no wonder that J&J, which had owned the No. 1 or 2 spot throughout the 13-year history of Harris Interactive’s annual corporate-reputation survey, fell to seventh place in the 2012 survey[7], released earlier this month.

Now, Gorsky will get his shot at not only restoring J&J’s sterling reputation but recovering  hundreds of millions of dollars in lost sales and positioning the company to be an effective and profitable global competitor in the future.

Expect the former triathlete, who still keeps up his 4:45 a.m. physical-training regimen, to hit the ground running. An engaging and candid communicator, Gorsky exudes energy even when he’s standing still. And the West Point graduate still values the U.S. Ranger discipline and mindset that he credits for helping him succeed in the business world.

In remarks to the MBA Veterans Conference last year[8], Gorsky gave some advice to attending military personnel who soon would be leaving the service to enter the civilian workforce. “What we need more than anything is leadership,” he said. “We need people who can come in, challenge the system, not be afraid to work hard…make a few mistakes, be innovative — and at the same time, not be afraid to step up and lead our way through. Because that’s the only way we’ll get through the morass we’re currently in.”

Gorsky will need to bring to bear all of the attributes he advised his audience to cultivate to lead JNJ out of the morass it’s currently in. Here’s a game plan:

1. Be a Realistic Optimist

In Ranger School, Gorsky learned that “no matter what kind of obstacle you put in front of me, I’m going to figure it out.” In the CEO job, that translates into projecting an optimistic attitude that accepts the fact that things are tough or bad yet seeks out realistic solutions to overcome those challenges. Gorsky is confident that there is an opportunity hidden behind JNJ’s current challenges — and he’s capable of motivating his team to take advantage of them.

2. Boil Down Complex Situations to Key Issues and Options

All CEOs are vulnerable to “drowning in data” — and data are not the same thing as information. Expect Gorsky to push his team toward critical thinking: taking that raw data, connecting the dots, then determining the best ways to act on that information. Gorsky is well-equipped to identify the few top priorities JNJ must act on now and focus his department heads to execute them efficiently.

3. Don’t Wait for a Perfect Solution

“You don’t have to be 100% right,” he says. “If you get 60%, go.” Gorsky is a firm believer that if you wait for 100% certainty before you move, you’ll miss out on the speed advantage. “Don’t let perfect be the enemy of good,” he says. “Then run fast.”

4. Value a Diverse Team

“If everybody at the table looks and sounds alike,” Gorsky asks, “why do they need each other?”  He’s got a point. With 55% of JNJ’s sales coming from outside the U.S., the company’s future will rest on the insights of the team members in place locally — particularly in fast-growing emerging markets such as China, India and Brazil. Expect Gorsky to cultivate a management team that represents JNJ’s customer demographics. He also will bring together leaders with very different core competencies to more effectively drive innovation.

5. Lead With a Purpose

Gorsky advised the future executives to “either do something you love or learn to love what you do,” pointing out that people are much better at their jobs if they’re passionate about them. He tells a story of a time early in his career when he was the product manager for a new schizophrenia drug that had fewer side effects than traditional treatments. “I’d be in the middle of the ad campaign, the brochures, the P&L — and get a phone call from a mother or father saying, ‘Thank you for giving me my son back,’ ” he recalls. “That gave me a real purpose — a real reason to get out of bed in the morning.” Expect Gorsky to be firmly grounded in his purpose.

The bottom line: How Gorsky will lead J&J out of its morass and into the future is linked to the measure of the man and the path he took to get here. “A Ranger is a more elite Soldier who arrives at the cutting edge of battle by land, sea, or air,” the Ranger Creed says. “I accept the fact that as a Ranger, my country expects me to move further, faster and fight harder than any other Soldier.”

If Gorsky succeeds in bringing those qualities to his leadership of & Johnson, shareholders could very well see the $65 billion market cap colossus become a more disciplined, focused global competitor with a revived reputation and a rock-solid balance sheet.

As of this writing, Susan J. Aluise did not hold a position in any of the stocks named here.

Endnotes:
  1. JNJ: http://studio-5.financialcontent.com/investplace/quote?Symbol=JNJ
  2. prevailed over pharma and consumer-products chief Sherilyn McCoy: http://www.nj.com/business/index.ssf/2012/02/johnson_johnson_names_alex_gor.html
  3. ADR: http://studio-5.financialcontent.com/investplace/quote?Symbol=ADR
  4. Weldon’s decade-long leadership of the company delivered shareholder returns of 142%: http://investorplace.com/dow-leaderboard/http://investorplace.com/dow-leaderboard/
  5. A New York Times piece on the “Worst CEOs of 2011”: http://dealbook.nytimes.com/2011/12/27/the-worst-c-e-o-s-of-2011/
  6. BP: http://studio-5.financialcontent.com/investplace/quote?Symbol=BP
  7. fell to seventh place in the 2012 survey: http://www.harrisinteractive.com/vault/2012_Harris_Poll_RQ_Summary_Report.pdf
  8. remarks to the MBA Veterans Conference last year: http://www.youtube.com/watch?v=KjMxbGzmtaIhttp://www.youtube.com/watch?v=KjMxbGzmtaI

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