IIPM

PRESENTATION
ON
BUSINESS ETHICS

(The Tylenol Crisis)

By:- Abhishek Singh

 Classic Crisis Case:
J&J’s 1982 Tylenol Tampering

In this presentation I will cover:

description of the case

impact of the case on the
industry
what was learned
Case Overview
When the Johnson & Johnson Company faced the Tylenol poisonings in
1982 they applied the Four C’s quite effectively. They relied on the value
and strength of their culture credo which also identified the stakeholders

Four responsibilities:
• To the customers
• To the employees
• To the communities they serve
• To the stockholders
 Tylenol Case Analysis

Background

• In the mid 1950’s Tylenol became a needed and popular substitute for
aspirin for such conditions as flu and chicken pox, since aspirin was
related to Reyes Syndrome (liver degeneration, brain edema, 20-30%
fatality)
• Large market: 100 million users, 19% of corp profits, 13% of year to
sales growth, 37% market share of painkillers, outselling other top
analgesics combined
• J&J was one of the “Best 100” companies to work for
• Tylenol became a product trusted by physicians and families alike
• Numerous other Tylenol products were developed for an active
market
• J&J strong “family” corporate culture
Tylenol Case

The Crisis Begins…

• September 1982 Extra Strength Tylenol

bottles of at least 6 pharmacies and food
stores were opened, & capsules were
filled with cyanide (10,000 x fatal dose)
• Media reporter asked PR Asst. Dir Andrews about poisoned
Tylenol– then it hit the news!
• 7 people died in the Chicago area
• CEO James Burke refers to the Credo, alerts to the danger, &
assigns team to discover the source
• Formed 7-member strategy team
• Stop the killings
• Reasons for the killings
• Provide protection & assistance to people
 Poison
Madn
--Tim
e Mag ess in the M
…and snowballs! azine idwest

• Police drove through streets with loudspeaker warnings

• Chicago hospital received >700 calls in one day
• Immediate stories in major magazines and newspapers
• Over 100,000 separate news stories ran in US papers
• Hundreds of hours of national and local TV coverage
• >90% of Americans had heard of the Chicago deaths
• Widest coverage since Kennedy assassination & Viet Nam
• Copycat tampering– 270 reported incidents (36 true)

S c are
Tylenol, killer or cure? yl en ol
T
-- Washington Post The sweek
w
--Ne
• J&J stock fell 7 points
• Market share dropped from 37% of pain-reliever market to 7%; from
$400 million in annual revenue to $70
 Initial Response– Phase 1 Crisis response
• Immediate alert to consumers not to use any type
Tylenol product or resume use until extent
determined
• Live TV satellite feed of press conferences; media
exposure via 60 Minutes, Donahue, etc.
• 800# Hotline for customers (30,000 calls in Oct-Nov)
• Toll-free phone for news organizations; pre-taped
messages and updated statements for distribution
• Strict production, different lot $, & crisis only in
Chicago indicated post-production tampering
• Withdrew bottles from Chicago area; ordered recall
of >31 million bottles nationally at a cost of >$100 million (against
FDA & FBI)
• It temporarily ceased all production of capsules
• High public profile and repeated reassurance by Burke
• Working relationship with law enforcement agencies
• Notification of health professionals nationwide & FDA
Initial Response—Phase 2, PR Rebound

Five-Point Plan
1. Replaced them with tamper-resistant caplets (triple safety seal within 6
months)
2. Incentives: free replacement of caplets for capsules, special coupons
($2.50 off) easily obtained
3. New pricing program: discounts up to 25%
4. New advertising program: national 1 minute commercial, News & talk
shows,
5. New presentations by 2250 sales personnel made to medical
stakeholders
• positive press articles regarding J&J, products, & safety
• indications of regaining market share
• held up as positive example of ethics & responsibility
• 450,000 e-mail messages
 Strategies

Most public recovery strategies incorporate

the following five components:

• Forgiveness: win forgiveness from stakeholders and create

acceptance for the crisis
• Sympathy: portray organization as unfair victim of attack by
outside persons; willing to accept losses
• Remediation: offer compensation for victims and families
(counseling & financial assistance)
• Rectification: take action to reduce recurrence (triple sealed &
increased random inspection)
• Effective leadership: clear, visible, consistent role-modeled
message from beginning by CEO
 Employee Response

• Strong family-oriented culture, “we care about our employees”

• Open and current communication with employees; 4 video
programs on the unfolding process
• Emphasizing plant workers were innocent
• CEO speech in a week to employees, “We’re coming back”
(wearing buttons)
• Idle employees given tasks to keep involved & reduce rumoring and
boredom
• Indications of market recovery bolster spirits
• Congruence and consistency in demonstrating the Credo
 Consequences– Lessons learned
• J&J showed that they were not willing
to risk public safety even at excessive cost
• J&J could be trusted all the way to the top–
they lived their Credo & having a functional
credo worked
• J&J set a new standard for protection thereby requiring competitors to
expensively follow suit
• J&J was viewed as a co-victim of the crime
• Stakeholder involvement and relationships is essential
• One must anticipate and prepared for crises; expect the unexpected
• Cynicism: Be aware that 75% of people don’t believe companies take
responsibility for crises or tell the truth
• “No matter what you do in the beginning, in the end you will have to tell
the truth”
• React fast, openly and decisively
• 1983 Tylenol Bill by Congress made malicious tampering of consumer
products a federal offense
• 1989 federal legislation to make consumer products tamper resistant
(learning cont’d)

• Report your own bad news– don’t wait for

reporters to root it out
• Speak with one voice
• Gather facts and disseminate from one info center
• Be accessible to the media so they won’t go to other sources
• Target communications to those most affected by the crisis,
and can affect the media
• If you can’t discuss something, explain why
• Provide evidence for your statements
• Record events via video and documents so you can later
present your side of the story