On an autumn day in suburban Chicago, Adam Janus took off work to have lunch with his wife Teresa. He bought a couple of steaks and flowers and hurried home. After lunch, he told Teresa he wasn’t feeling well and went to lay down. When Teresa checked on him several minutes later, Adam was unconscious and convulsing. Paramedics rushed him to a nearby hospital emergency room where he was pronounced dead – apparently from a stroke or aneurysm.
Understandably distraught, Teresa asked Adam’s brother, Stanley, and his wife Theresa, to drive her back to the house later that afternoon. Stanley and Theresa comforted their sister-in-law as best they could, but the emotional afternoon left them with headaches, so they both took Tylenol. Theresa went to call Adam’s parents to tell them the bad news, when Stanley fainted on his way out to smoke a cigarette. Theresa called the same paramedics that treated Adam and they returned to the house at 6 p.m. Once they got there, like Adam, Stanley was unconscious and convulsing, and to their horror, his wife Theresa collapsed on the living room floor as well.
The date was September 29, 1982. The three members of the Janus family, and 4 other unsuspecting victims in the Chicago area, had all taken Tylenol capsules laced with cyanide. All eyes were on the Johnson & Johnson Company – the makers of Tylenol – to see what they would do.
Under intense scrutiny and enormous media coverage, Johnson & Johnson was about to make a very public decision on the short-term versus long-term approach to the problem – and their company.
A few years prior to the 1982 incident, CEO James Burke reaffirmed the long-standing Johnson & Johnson credo and its simple premise: consumers first, employees second, communities third, and shareholders fourth. The Credo was on display front and center during the 1982 crisis. But how could he remain true to these values in the wake of the seven people murdered in Chicago? The Tylenol brand accounted for 17% of the company’s revenues in 1981. It represented 37% of the $1.2 billion analgesic market in the United States.
True to the Credo, the company placed consumers first by recalling 31 million bottles of Tylenol capsules from store shelves and offering the safer tablet form free of charge. The move was costly, but right. The recall and re-launch of the product cost Johnson and Johnson $100 million in the short-term.
Although not nearly as dramatic, companies make similar decisions every quarter. Should they focus on short-term profit to satisfy shareholders or invest for long-term growth and stability?
Johnson and Johnson managed for the long run. Despite dropping to a meager 7% share in the analgesic market in the fall of 1982, they took painstaking care to administer the massive recall. Burke faced the media with transparency and honesty, and Johnson & Johnson created the first ever tamper resistant packaging to ensure the public’s safety – even though they knew the capsules were not tainted during their production.
So how did culture play a role in this drama? The 300 word Johnson and Johnson Credo is very specific in stating the desire to build and sustain strong relationships with the four constituents mentioned. The way the company handled the crisis in 1982 proved that these were not hollow words.
We have already outlined the steps James Burke took for the first constituent – the consumer.
In the days of the aftermath, employees were obviously sitting on pins and needles over the future of their jobs. Burke met with employees to tell them Tylenol would be back. He also communicated the plan of how they were going to handle the next few weeks and months. Employees normally working on Tylenol assembly were temporarily reassigned, but wore buttons that said, “We’ll be back!”
To the community, Burke was honest and transparent with the media and the public. He worked collaboratively with the police, the FBI, and the FDA to avoid any perception of a cover up. Initially, the FBI and FDA urged Burke not to recall Tylenol as that would be giving in to the ‘terrorists.’ However, when a copycat incident occurred in California the next week, Burke would not be deterred.
And finally, Burke and his leadership felt that if the first three constituents were satisfied with the handling of the tragedy, the shareholders would come back. Within a year Tylenol climbed back to 30% market share. They had not only reestablished Tylenol as the premier pain reliever, but they had also positioned Johnson and Johnson as a trustworthy, consumer friendly household brand that enjoyed profitable growth for years to come.
Was 1982 a bad year for Johnson & Johnson? Yes, but the way company leaders handled the Tylenol incident relieved a lot of the headaches that could have made it much worse.