Kilmer House

Robert Wood Johnson (seated in center) and  Employees

In my last post, I mentioned that Robert Wood Johnson, son of one of the Company’s founders, was able to put many of his ideas about running a business into practice when he became president of Johnson & Johnson in 1932.  Having grown up around Johnson & Johnson, even accompanying his father to business meetings as a child, the younger Robert Wood Johnson had very definite ideas about business and social responsibility.  What made his opportunity to implement those ideas particularly challenging was the fact that it was during the depths of the Great Depression.   Johnson didn’t let that stop him and, when his ideas worked at Johnson & Johnson, he didn’t hesitate to speak out to the press, to other industrialists and to the new Roosevelt administration.

Johnson’s first concern was to make sure the Company was able to weather the financial crisis of the Depression, and my last post talks about some of the things he did.  Although Johnson supported President Herbert Hoover, who was running for re-election during the 1932 presidential campaign, he didn’t hesitate to criticize Hoover’s economic policies, saying:  “ ‘Business can take care of itself, but until the government adopts a sound economic policy there can be no sound business revival.’ ”  [Robert Wood Johnson: The Gentleman Rebel, by Lawrence G. Foster, p. 198]

Franklin Delano Roosevelt won the 1932 election in a landslide.  Before he took office, Johnson wrote him a long letter outlining a four-point proposal for economic recovery.   In that proposal Johnson stated that the nation had to learn to live within its means; that efforts should be made to increase the prices of commodities (which had plummeted); and that wages should be increased so that employees could purchase more, while hours should be decreased so that more people could be employed.  It was that last suggestion that focused the national spotlight on Robert Wood Johnson and Johnson & Johnson.

Robert Wood Johnson circa the New Deal Era

Johnson released copies of his letter to the press, to some elected officials, to corporate leaders and others.  The Associated Press ran a summary of his letter that generated newspaper headlines across the country.  Since the U.S. unemployment rate was then a staggering 25 percent, most of the articles focused on Johnson’s call for higher wages and shorter working hours.  The President’s office said that he would review the proposals, while business leaders across the country, many of whom were struggling to meet their payrolls, kept their heads down and stayed silent.

President Roosevelt’s first 100 days in office saw the start of the New Deal legislation to lift the country out of the Depression.  This included unemployment compensation for workers, federal insurance of bank deposits, regulation of the financial sector, food stamps, Social Security, mortgage refinancing, and federal standards for wages and hours, among other things.  In April of 1933, Robert Wood Johnson wrote another letter to Roosevelt, asking him to gather industry leaders and allow them to come up with a solution to the problems facing America’s businesses.  Johnson felt that the population’s severely reduced purchasing power was at the heart of the problem, and he thought that a 10 percent wage increase would help fix it.  Five weeks later, President Roosevelt announced a plan for bringing together agricultural and industry groups, and Robert Wood Johnson was appointed a member of the executive board of the newly created Drug Industry Institute of America.  One of the group’s first objectives was (not surprisingly) a wage increase, and Johnson announced that Johnson & Johnson would give a five percent increase to all employees.  The Company’s workers were overjoyed, but the same couldn’t be said for some of Johnson’s fellow industrialists – their reactions to his enlightened approach were far less positive.

A Gauze Mill Employee, circa 1920s

The New Deal’s National Industrial Recovery Act included codes setting wages and hours for the textile industry, putting Johnson & Johnson at odds with government standards and with other textile operators (the Johnson & Johnson standards were higher).  The Company had owned the Chicopee Manufacturing Company since the days of World War I, and Johnson & Johnson was the world’s largest producer of surgical dressings, which were of course made out of textiles: gauze and cotton.  But Johnson & Johnson had higher wages and shorter hours than the new government standard, and complying with it would make it necessary to dismiss workers (as it turned out, the Company did not end up needing to dismiss anyone).

Exterior of Chicopee Manufacturing Company in Chicopee Falls, Massachusetts

So Robert Wood Johnson went to Washington and met with Secretary of Labor Frances Perkins (the first female Cabinet member in U.S. history) and General Hugh Johnson, the head of the National Recovery Administration (or NRA, for short).  R. W. Johnson felt that the New Deal proposals on wages and hours didn’t go far enough.  He wrote:  “We should have a working day short enough to re-employ those who are unable to find work.  We should have minimum wages high enough for the people to buy what they produce.”  [Try Reality: A Discussion of Hours, Wages and The Industrial Future, by Robert Wood Johnson] Robert Wood Johnson even appealed to Congress and the U.S. Chamber of Commerce, but did not find any public support for his more progressive ideas.

Battle of the General Johnsons
The future General Robert Wood Johnson and the retired General Hugh Johnson would battle over this issue for several years, with Robert Wood Johnson consistently advocating for higher wages and shorter hours – a 35-hour week as opposed to a 40-hour week, and a much higher minimum wage than the government was proposing.* General Hugh Johnson left the National Recovery Administration in 1934 and the NRA itself was dissolved the following year.  When Johnson left the NRA, he gave an interview saying that he was opposed to shorter workweeks because he thought it would increase the costs of goods.  The interview irked Robert Wood Johnson, who wrote him a letter saying:  “ ‘Your administration of NRA is one of the tragedies of the age and perhaps, due to poor execution of the principles behind that great institution, we have lost the opportunity of a century.’ ”  [Robert Wood Johnson: The Gentleman Rebel, by Lawrence G. Foster, p. 211] General Hugh Johnson became a newspaper columnist, from which position he took potshots at his nemesis Robert Wood Johnson – calling him “ ‘…about the biggest pain in the neck that the NRA encountered under the cotton textile code’ ”  – because Johnson continued to advocate for shorter hours and higher wages.  [Robert Wood Johnson: The Gentleman Rebel, p. 227] Needless to say, Robert Wood Johnson’s progressive views were not shared by many people at the time.

Johnson’s frustration at the unpopularity of his ideas about corporate social responsibility and how to help the nation overcome the Depression led him to write a pamphlet called Try Reality in 1935.  This pamphlet contained the seeds of an idea that would become the cornerstone of Johnson & Johnson:  Our Credo.

* Interestingly enough, the standard modern work week is officially 40 hours as a legacy of New Deal legislation.  If Robert Wood Johnson’s ideas had won out, our standard work week might be 35 hours.

Recently, Johnson & Johnson Chairman and CEO William Weldon told investment analysts that, due to the strength of the Company’s leadership, our broad base of business and our fiscal discipline, he remained optimistic about our ability to adjust to the current evolving economic conditions.  He also mentioned that, thanks to the people at Johnson & Johnson, the Company has managed through difficult economic cycles many times throughout its history.  So while the past may have little or no bearing on current or future events, I thought it would be interesting to take a look at the difficult economic cycles in 1893, 1907 and 1929, and how the Company steered through those times…by looking at the bigger picture and managing for the long term.

Old Johnson & Johnson Plaster Mill with Delaware & Raritan Canal in Foreground, 1893

The Panic of 1893
During the Panic of 1893, Johnson & Johnson had been in business for only seven years.  In those seven years, Johnson & Johnson had expanded steadily, adding more products, more employees, and pioneering the first-ever First Aid kits and improvements in sterilization methods for its surgical dressings and sutures.  Robert Wood Johnson the first was president of the Company, and a new product was introduced that year that would have a huge impact on our business…JOHNSON’S® Baby Powder.  The Company, like the country, was doing well, and the Johnson brothers’ first-ever mass produced sterile surgical dressings were causing surgical mortality rates to drop in U.S. hospitals…because the availability of the Company’s aseptic dressings and sutures made it possible for more and more surgeons to adopt antiseptic surgery.

The 1880s had been a time of incredible economic expansion and optimism in the U.S.  But over time, that expansion became driven by speculation, leading to a railroad bubble.  Railroads were the hot industry of the day, and they greatly over-extended themselves, causing widespread bankruptcies, bank runs and a credit crunch.  A series of railroad and bank failures rippled across the United States.  It’s estimated that over 15,000 companies and 500 banks failed, leading to high unemployment at the worst of the crisis.  The unemployment plus loss of savings due to failing banks left a huge chunk of the middle class unable to pay mortgages, forcing many families to walk away from their recently built homes.  (Stop me if that sounds even slightly familiar.)

Robert Wood Johnson, one of the Company’s three founding brothers

Fortunately for Johnson & Johnson, the medical products business was steady.  From the beginning of the Company, Robert Wood Johnson the first had put in place a group of strong managers who kept Johnson & Johnson focused on its larger goals during the Panic of 1893-1896.  Due to the prudence of its management and its focus on new areas of business (like Baby Powder) and constantly improving its products, the Company was able to weather the crisis.  At the end of 1894, employment at Johnson & Johnson had risen (to 400 employees), and the Company had grown to occupy 14 buildings.  Factory output was up sharply, with Johnson & Johnson producing 4,000 pounds of cotton and 15,000 pounds of plasters per day, and 3,500,000 yards of gauze a year.

Johnson & Johnson Employees, circa 1890s

The U.S. economy recovered in 1896, leading to ten years of growth.  But in 1907, the country, and Johnson & Johnson, faced another economic downturn.

The Panic of 1907
In 1907, there was another economic crisis, this time called The Panic of 1907. (Before 1929, these crises were called “panics,” until President Herbert Hoover decided it would be less alarming to call the 1929 crisis a depression instead.)  The Panic of 1907 was triggered by a failed stock-cornering scheme that led to the downfall of one of New York’s largest trusts.  The New York Stock Exchange fell almost 50% from its high in 1906, leading to bank failures, business bankruptcies, and runs on banks as frightened depositors withdrew their money. The crisis would have been worse had financier J. P. Morgan and others not intervened to prop up the banking system.  Johnson & Johnson was 21 years old at the time, still with Robert Wood Johnson the first as president.  The Company had continued to grow steadily and in 1906 had formalized its benefits for employees into the Employee Welfare Department, which included pensions, insurance coverage, medical and social benefits, educational classes and more.  Like other companies, Johnson & Johnson was affected by 1907’s financial panic, and instituted some temporary belt-tightening measures like shorter hours and lower paychecks.  With its eye still on long-term goals, and because it hadn’t taken the kinds of unnecessary risks that led to trouble for other companies, Johnson & Johnson was able to continue a plant expansion and, in 1908, opened a large addition to its Cotton Mill.

1907 Addition to Cotton Mill.  For those familiar with New Brunswick, NJ, the dirt road in front of the building is George Street.

After the economic recovery, Johnson & Johnson continued to grow and expand, adding new products and more manufacturing capacity.  The extraordinary demands for dressings during World War I led to the purchase of the Chicopee Manufacturing Company in 1916.  In 1919, the Company opened its first international affiliate in Canada.  Five years later, due to a well-researched worldwide fact-finding trip by the future General Robert Wood Johnson and his brother (as the sons of Robert Wood Johnson the first, they represented the younger generation of management), the Company opened its first overseas affiliate in the U.K. in 1924, thus starting our decentralized global expansion.

Seward Johnson (L) and the younger Robert Wood Johnson (R) in Egypt during their 1923 fact-finding trip

The Great Depression
On February 1, 1927, 33-year-old Robert Wood Johnson (son of Company founder Robert Wood Johnson the first) was elected to the Company’s Board of Control, the forerunner of today’s Executive Committee. The mood in the United States was optimistic (it was the height of the Roaring Twenties), more and more people were investing in the stock market and, on the surface, everything seemed good.  But Johnson became concerned during the summer of 1928 because U.S. industrial production and consumer spending were starting to lag, and he urged management to curtail all major spending.

On Thursday, October 29, 1929 – Black Thursday – the stock market collapsed…and the nation was officially in the grips of the Great Depression, which worsened over the next few years into a worldwide crisis.  Massive bank failures caused runs on banks, and many small and large businesses failed. U.S. unemployment reached a high of 25 percent – one in every four working Americans was without a job – and soup kitchens and bread lines became a common sight.

Robert Wood Johnson

On February 4, 1930, in the middle of this mess, Robert Wood Johnson was promoted to vice president and general manager of Johnson & Johnson, with his uncle James still as company president.  Faced by growing threats to the business, Johnson adjusted:  he shortened work shifts, eliminated Saturday work (it was common back then for working hours to extend to Saturdays – the elimination of Saturday work was one of the changes caused by the Great Depression) and he asked production employees to take three-day weekends twice a month, among other belt-tightening measures.  Those actions were mild compared to what was happening at other companies, and they reflected well on the Company’s policy of focusing on the long-term, bigger picture, the crucial nature of the business it was in, and on the reserves it had built up.  Due to the Company’s smaller size, the unique situation at the time and the measures it was able to take, no jobs were lost at Johnson & Johnson during the Depression.  In 1932, Robert Wood Johnson succeeded his 76-year-old uncle James as president of Johnson & Johnson.  In 1933, six weeks before Franklin Delano Roosevelt was inaugurated, the new president of Johnson & Johnson sent Roosevelt a letter outlining his ideas for a plan for the nation’s economic recovery.  In the letter, Robert Wood Johnson suggested a federal law to increase wages and reduce working hours for American workers.  This proposal was contrary to what most industrialists of the time were saying and, needless to say, it received widespread attention in the newspapers of the day.

During the years of the Depression, both sales and growth had slowed at Johnson & Johnson.  But Robert Wood Johnson and his management continued to look for opportunities…including opportunities to continue the careful and judicious global expansion when the business was large enough in a given region, leading to operating companies in Mexico, South Africa, Australia and Europe during this time period.  Seeing another opportunity in decentralization, in 1934 the Company opened a large manufacturing plant in Chicago, the first major domestic facility outside of New Brunswick.

Now that Robert Wood Johnson had reached the top position in the Company, he would put into practice many of his ideas about running a business, which helped get Johnson & Johnson through the Great Depression, and would greatly expand the business in the future and lead to the writing of Our Credo.  To find out what some of his ideas were, stay tuned for my next post.

Have you ever wondered why JOHNSON’S® Baby Powder containers have been square or rectangular in shape since the product was first sold in 1893? Was it because the Company got a good deal on square tins from the local square tin manufacturer? No, that wasn’t it. Was it because the distinctive shape helped consumers identify the product? Perhaps…but that wasn’t the reason, either.

Like everything else about the product (including the scent), the reasons behind the square JOHNSON’S® Baby Powder tins were well thought-out both from the product side (holding the powder) and the consumer side (to be helpful to those using it).

JOHNSON’S® Baby Powder Tin, 1890s

As anyone who’s ever taken care of a baby knows, you need two hands (or sometimes more!) to bathe a baby or change a diaper. You can”t walk away to get something, you have to be focused on the baby and you need to keep everything you need close by.So, the Company chose square and later rectangular tins (and, after 1963, plastic containers) of JOHNSON’S® Baby Powder because they didn’t roll away when being used, so that parents could more easily use the product when taking care of their babies.

Vintage JOHNSON’S® Baby Powder Ad from 1921 Showing Rectangular Tin

Also, the Company had discovered that square or rectangular tins held more product.How do we know that? Because a druggist who visited Johnson & Johnson in 1917 and toured the Company”s labs and manufacturing facilities learned that and wrote about it:

“Incidentally I learned that Johnson & Johnson did not just happen to pack their Baby Powder in square tins. They adopted this form of container because it is most convenient, because it holds more than other forms of containers and because it will stay where placed and not roll around. They aimed to place a powder of quality in a can of utility, and they succeeded admirably.” [THE RED CROSS MESSENGER, Vol. IX, May, 1917, p. 184]

And we can still find a trace of that 1893 tradition today. Even though today”s containers have a much more rounded shape, they still retain subtle sides that stop them from rolling.