Johnson & Johnson, Essay Example

As soon as Johnson & Johnson’s (J&J) Chairman James Burke heard about deaths from cyanide-laden Tylenol tablets, he appointed David Collins to manage the crisis. David Collins was a member of the company’s executive committee, Chairman of McNeil Consumer Products (J&J’s subsidiary which manufactured Tylenol), and also a strong proponent of decentralized decision making within the company. Collins immediately flew to McNeil’s headquarters to manage the crisis from there and prevent the incident from harming parent company’s reputation. Unlike past in which the company had a rocky relationship with media, this time J&J welcomed media because they could both provide valuable information from around the country as well as serve valuable communication channels to reach the public.

The company didn’t hesitate to communicate even potentially negative news to the media such as the use of cyanide by the quality assurance department next to the manufacturing department. The company recalled all 930,000 bottles of extra-strength Tylenol from the market and suspended advertising for Tylenol. Even though Collins was a believer in decentralized decision-making, it soon became clear he could not handle everything by himself due to the magnitude of the crisis. J&J’s management also realized the crisis had to be managed at corporate level instead of at the subsidiary level. James Burke became the company’s spokesperson and the company initiated communicated channels with all stakeholders include media, FDA, and medical community. During press conference, Burke answered all answers honestly and convinced everyone that the company was not hiding anything it knew. Burke didn’t only communicate with the relevant stakeholders but even took their suggestions into account such as changing the reward prize for useful tip from $1 million to $100,000 or product recall.

While the investigation was going on, the company was also faced with the uncertain future of Tylenol brand. The company considered various courses of action including rebranding the product, changing the product type, changing the product packaging but eventually the company decided to restore Tylenol’s reputation. One of the solutions the company came up with to avoid a repeat of the crisis was tamper-resistant packaging. The company also engaged in extensive market research to understand the public opinion and incorporated findings into its marketing and sales strategy.

The company faced a similar crisis though smaller in magnitude again in 1986 when another customer died due to cyanide-laden Tylenol. The company successfully applied the lessons learnt from 1982’s crisis such as open communication with all relevant stakeholders and immediate withdrawal of products suspected to have been tampered. The incident also demonstrated that tamper-resistant packaging was not enough and the company decided to withdraw from direct-to-customer capsules market and replace capsule products with tablets or caplets. Even though it meant a significant loss of revenues from the capsules market as well as loss of market share to rivals, the company concluded it had no other way of guaranteeing product safety.

It is difficult to imagine how J&J could have done a better job. The company applied almost every effective approach such as being open and honest with all relevant stakeholders, developing working relationship with them, recalling products immediately, and avoiding blame even though it was apparent that the company had been the victim of local terrorism. There is one approach the company could have taken that might have prevented the 1986 incident and that is to take direct control over distribution. The company worked with a number of distributors who stored products in their warehouse for some days before distributing it. By taking direct control over distribution which means the company would have invested in distribution centers around the country and delivered to the retail outlets itself, it would have reduced the probability of product tampering.

J&J management did the right thing by actively managing the crisis. Had the company taken a backseat approach, it would have lost a great deal of its goodwill and would have found it difficult to win back consumer trust. In addition, it would also have lost control over the publicity much of whom would have been negative and would have likely painted the company as selfish. It would also have given the competitors ample material to paint J&J’s products as unsafe and would have hurt other J&J’s subsidiaries as well. The company would not only have lost a blockbuster drug by taking a backseat approach but indirect costs to other subsidiaries might have been even higher. 1986 incident might even have further fueled the speculations that J&J’s production processes are unsafe.

The bottom line should not be the primary concern in such cases because not all costs are identifiable and some costs such as lower goodwill may have higher negative consequences in the long term than the direct costs involved. Company’s reputation and leadership are valuable assets that have material impact on the company’s long-term future and effective leaders know this. This is why companies should hold to the highest standards of corporate social responsibility because consumers care for companies that demonstrate their human side.