Never waste a good crisis. I’ve heard this sentiment a lot over the past 18 months. But Paul Ruh, CFO of Johnson & Johnson’s Consumer Health business isn’t just talking about it, he’s putting it into practice.
As part of my conversation series with finance leaders who attended the virtual CFO of the Future Summit with Accenture and Harvard faculty, I talked with Paul about how he and his team used the crisis as a springboard to improve their agility. This is definitely something that every finance organization needs more of today.
What is the breadth of your role, and what are you and your team responsible for on a daily basis?
J&J is the world’s largest healthcare company with Pharmaceutical, Medical Devices and Consumer Health businesses. As the CFO of the Consumer Health business, I am responsible for delivering on the financials in a compliant manner, driving the talent in the finance organization and making sure that we work in line with Our J&J Credo, which is front and center in everything we do.
J&J has been on the front lines during the pandemic, especially in the pharmaceutical business. How did the crisis impact the Consumer Health business? What are some of the key lessons learned?
COVID-19 put the J&J model to the test, and I think we passed with flying colors. Our Consumer Health business is all about scientifically-based, professionally-endorsed products, which is exactly what consumers wanted during this period. This played very much in our favor.
Agile resource allocation was one of the biggest challenges and lessons learned. We had to react quickly in a very flexible way. We pushed down decision making, co-located our multifunctional teams and ensured that we were thinking end-to-end. To manage volatility, we focused on better forecasting to drive improved resource allocation.
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Did you see the same impacts across the different categories of your consumer business?
Our three Consumer Health categories are Skin Health, Self Care (Over the Counter) and Essential Health. In the first quarter of last year, sales in our Self Care business, like Tylenol, went through the roof. We had to ensure that we had product availability to meet skyrocketing demand. On the other hand, demand in our Skin Health business dropped as no one was wearing make-up or using sunscreen because we were all stuck at home. These disparities meant that we had to shift resources quickly to where we saw growth.
The beauty of our portfolio is that we participate in multiple businesses and could target shifting growth opportunities. We also had to make sure that we had a resilient workforce. We were pleased with how quickly our organization reacted to the changes. In a matter of one or two quarters, we were used to working at home, and we didn't miss a beat.
You had to pivot fast to shift resources to hyper growth areas. How did you do this on a global scale?
Things were moving so fast, and none of the standard predictive models accounted for the changes we were seeing. We had to be in close touch with the decision makers on the ground, because COVID-19 hit every geography differently. We stayed close to the business in markets in addition to having the right infrastructure, the right systems and the right data.
Thinking about this concept of the local touch, what do you think Finance’s role is—and will be—in helping the business units keep up with changing customer and consumer dynamics?
Finance should act more as an end-to-end integrator. We are obligated to be present from the beginning to the end of the value chain. Everything is interconnected, so Finance has to partner from R&D to Sales to Supply Chain, making sure that we have the data and decision-making elements we need to take the right calls.
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I would think that your finance organization got a lot closer to the supply chain organization as a result of the pandemic.
That’s absolutely what we did. Historically it has been misunderstood that improving Gross Profit is the responsibility mostly of the supply chain team, which is not true. Every decision that you make from a supply perspective has a commercial implication and vice-versa.
This is why one of the rallying cries over the last couple of years for us—especially during the crisis—has been around improving our Gross Profits. The decisions that Finance and our commercial and supply chain teams had to make together have been critical. Everything has a consequence, especially as we see commodity and distribution costs increasing because of scarcity of products in many areas.
What advice would you give other CFOs who want to create more agile finance organizations?
Focus on the fundamentals and take a back-to-basics approach to understanding the portfolio. A big part of this is understanding the profitability of the different parts of the portfolio. This is key to make the right resource allocations and shift things around to the areas of growth.
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What’s your most important takeaway from the crisis?
The ability to continue to perform while transforming. We had to deliver despite adverse situations while becoming more agile. The crisis equipped us to be able to make the right calls at the appropriate times, intervene when necessary, and let the teams work wherever they are empowered to work.
Thanks to Paul for taking the time to talk with me. Agility is one of those words that we hear tossed around a lot in Finance, especially today. It’s important to understand what an agile finance organization looks like in practice and how pragmatic leaders can improve performance even during a crisis period.
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