Ethos in Leadership Case Study

This activity is used in conjunction with the Leadership and Ethos page.

Have the learners read the two case studies ( Jack In The Box and The Tylenol Crises ). Give them about 10 to 15 minutes and then break them into small groups composed of 3 to 4 learners.

Inform them that organizations generally make decisions that affect three spheres of need:

· Money — finance, sales, etc.

· People — employees, managers, their families, etc.

· Common Good — society, environment, etc.

Have them discuss the following questions. Once they have finished, bring the small groups back together and have them discuss their answers.

Questions

Did the two organizations make decisions based on any of the three spheres of need?

How did having a plan or Code of Conduct in place help one of the organizations? How important is it to be ready to respond in a time of crises?

Did the two companies act upon their crises like other companies, such as Firestone and its defective tires; Source Perrier, when traces of benzene were found in their bottled water; Occidental Petroleum, who acquired Hooker Chemical, which left hazardous chemical wastes in the Love Canal; Odwalla, who had its own E. coli poisoning crisis in 1996; or Texaco, in which top executives made disparaging remarks about African-Americans?

How often are major decisions made by you and your team decided upon by using the three spheres of needs?

How often should the three spheres of needs be considered when making major decisions?

THE TYLENOL CRISES

When 12 year-old Mary Kellerman of Elk Grove Village, Illinois, awoke at dawn with cold symptoms; her parents gave her one Extra-Strength Tylenol and sent her back to bed. Little did they know, they would wake up to find their daughter dying on the bathroom floor.

Johnson & Johnson won the public’s heart, and the public’s trust, with its obvious commitment to protecting the consumer during the Tylenol poisoning scare. In the fall of 1982, McNeil Consumer Products, a subsidiary of Johnson & Johnson, was confronted with a crisis when seven people mysteriously died in Chicago. Authorities soon determined that all seven people ingested an Extra-Strength Tylenol capsule laced with cyanide. The news of this incident traveled quickly and was the cause of a massive, nationwide panic. These poisonings made it necessary for Johnson & Johnson to launch a public relations program immediately, in order to save the integrity of both their product and their corporation.

The Extra-Strength Tylenol capsules in question were found to contain 65 milligrams of cyanide. The amount of cyanide necessary to kill a human is five to seven micrograms. Dr. Thomas Kim, chief of the Northwest Community Hospital at the time of the poisonings, said, “The victims never had a chance. Death was certain within minutes.”

Johnson & Johnson told of the company’s strict quality control and said that the poisonings could not have been performed in the plants. The tainted Tylenol capsules were from four different manufacturing lots. Evidence suggests that the pills were taken from different stores over a period of weeks or months. The bottles, some of which had five or less cyanide laced capsules and one that had ten, were tampered with and then placed back on the shelves of five different stores in the Chicago area.

“I don’t think they can ever sell another product under that name. There may be an advertising person who thinks he can solve this and if they find him, I want to hire him, because then I want him to turn our water cooler into a wine cooler.” — Advertising genius, Jerry Della Femina as told to the New York Times right after the crises.

Johnson & Johnson needed to find the best way to deal with the crises, without destroying the reputation of their company and their most profitable product, Tylenol. They immediately alerted consumers across the nation, via the media, not to consume any type of Tylenol product. They told consumers not to resume using the product until the extent of the tampering could be determined. They also recalled all Tylenol capsules from the market. The recall included approximately 22 million bottles of Tylenol, with a retail value of more than 100 million dollars. This was unusual for a large corporation facing a crisis. They also immediately put up a reward of $100,000 for the killer.

At first, it is easy to believe that such a move could hardly be acting in the best interest of the company’s stockholders. Johnson & Johnson’s top management put customer safety first, before they worried about their company’s profit and other financial concerns. In other words, they did the right thing.

Della Femina was quite wrong in assuming that Tylenol would never sell again. Not only is Tylenol still one of the top selling over the counter drugs in this country, but it took very little time for the product to return to the market. Johnson and Johnson’s handling of the Tylenol tampering crisis is considered by public relations experts to be one of the best turnarounds in history. Johnson & Johnson was praised for their socially responsible actions. Along with the nationwide alert and the Tylenol recall, Johnson & Johnson established relations with the Chicago Police, the FBI, and the Food and Drug Administration. This way the company could have a part in searching for the person who laced the Tylenol capsules and they could help prevent further tampering.

“Johnson & Johnson has effectively demonstrated how a major business ought to handle a disaster. This is no Three Mile Island accident in which the company’s response did more damage than the original incident. What Johnson & Johnson executives have done is to communicate the message that the company is candid, contrite, and compassionate, committed to solving the murders and protecting the public.” — Jerry Knight, The Washington Post on October 11, 1982. Note that they could have disclaimed any possible link between Tylenol and the seven sudden deaths in the Chicago area. The company never attempted to do anything, other than try to resolve the deaths.

As final step in Johnson & Johnson’s public relations plan, the company offered to exchange all Tylenol capsules that had already been purchased for Tylenol tablets. It was estimated that millions of bottles of Tylenol capsules were in consumer’s homes at the time. Although this proposition cost Johnson & Johnson several million dollars, and there may not have been a single drop of cyanide in any of the capsules they replaced, the company made this choice on their own initiative in order to preserve their reputation.

To make a comeback, New Tylenol capsules were introduced in November with a triple-seal tamper resistant packaging: the package has glued flaps on the outer box, which must be forcibly opened. Inside a tight plastic seal surrounds the cap and an inner foil seal wraps over the mouth of the bottle.

To advocate the use of Tylenol to customers who may have strayed from the brand, Johnson & Johnson provided $2.50 coupons that were good towards the purchase of any Tylenol product. Also, over 2250 sales people from Johnson & Johnson domestic affiliates were asked by Johnson & Johnson to make presentations to people in the medical community. These presentations were made by the millions to promote support for the reintroduction Tylenol.

How Did Johnson & Johnson Make These Decisions? They simply turned to their corporate business philosophy, which they call “Our Credo,” when determining how to handle the Tylenol situation. The credo was written in the 1940’s by Robert Wood Johnson, the company’s leader for 50 years. Little did Johnson know, he was writing an outstanding public relations plan. Johnson saw business as having responsibilities to society that went beyond the usual sales and profit incentives. He felt that his credo was not only moral, but profitable as well. The credo stressed, it was important for Johnson & Johnson to be responsible in working for the public interest. The public and medical community was alerted of the crisis, the Food and Drug Administration was notified, and production of Tylenol was stopped. The media did much of the company’s work. Queries from the press about the Tylenol crisis were beyond 2,500.

JACK IN THE BOX

In January 1993, tragedy struck when the deadly E.coli virus was traced to Jack in the Box’s Pacific Northwest restaurants. The 300 or so food poisoning cases reported in the previous week were linked to undercooked beef at the hamburger chain’s shops. Jack in the Box not only survived this horrific crisis; they have since experienced an unprecedented revival. What makes this story unique, however, is not the company’s crisis-management tactics, but how it transformed this crisis into an opportunity to remake its entire corporate culture and reawaken a near-comatose brand. Jack in the Box is now considered an industry leader in safety and health procedures, not because of great spin control, but as a result of changes throughout the company.

Jack in the Box initially did not handle the public relations crisis very well. It took two days after the health department had traced the bad meat to a supplier before the company addressed the public and had removed all meat from its restaurants. Jack in the Box officials did not take immediate decisive action to shut down all the stores for a few days and teach employees how to properly grill hamburgers.

After the incident, the company developed the most comprehensive and multi-dimensional food safety system in the fast-food industry. Called HACCP (hazard analysis critical control points), the program consisted of “farm to fork” procedures that included microbial meat testing by Jack in the Box suppliers and in-restaurant grilling procedures to ensure fully cooked hamburgers. The U.S. Department of Agriculture (USDA) has since called the program the industry model. The success of the food safety program would contribute greatly to the company’s eventual recovery when ten quarters later; it would post its first profits since the outbreak.

On the second anniversary in January 1995, Jack in the Box still struggled with a negative corporate reputation resulting from the outbreak. The company often faced a hostile press that tended to reprise the blame and focus on the past event because they had little knowledge of the company’s progress since. To better manage news stories about the company, corporate communications sought to improve these relationships. Through a public service campaign, they let consumers know that food poisoning incidents were prevalent — with more than five million cases a year resulting in 4,000 deaths, most occurring in the home. Although USDA meat inspection regulations had been in place since 1906, these regulations have remained virtually unchanged. Without microbial and scientific procedures, the nation’s meat supply is vulnerable to dangerous pathogens. In essence, the outbreak could be traced to inadequate government controls. Today, E.coli outbreaks continue to occur across the country not just in restaurants, but in homes.

Now, reporters look at Jack in the Box as the authority on food safety. For example, when 20/20 was researching its story on food safety, the reporter was told by Jack in the Box competitors to consult Dr. Theno, Jack in the Box’s vice president of quality assurance. Food bacteria are far more common than most people realize. “We begin with our suppliers,” Theno says. “If a supplier’s products test positive for bacteria more than once, the supplier is dropped. Every day, restaurant management tests cooking systems, including cooking sample products. There are weekly inspections. As a final step, each and every cooked patty is individually checked visually by an internally certified employee before it can be removed from a grill.”

Another key to the turnaround was the humanizing of the chain by resurrecting the Jack icon and literally blowing up the company’s culture — the first Jack ads by Los Angeles-based Chiat/Day showed Jack dynamiting company headquarters. It was a necessary transformation that has paid enormous dividends. “Laws do not make food safe,” adds Theno. “Companies make it happen with extra focus and effort.”

Although it took almost two years before sales recovered to pre-poisoning levels, Jack in the Box is now experiencing the most profitable run ever. Jack in the Box has a new culture and a new self-image.

Next Steps

Read Leadership and Ethos

Return to the Leadership Training and Development Outline