In September 1982, Johnson & Johnson, the maker of Tylenol, faced a crisis: Seven people in Chicago died after taking cyanide-laced Tylenol capsules. Prior to that moment, Tylenol controlled 35% of the painkiller market. Immediately following these deaths, Tylenol’s share plummeted to 7%. Furthermore, Johnson & Johnson didn’t know whether the person responsible for the murders was associated with the company.
Johnson & Johnson CEO James Burke considered his options. Searching for guidance, he looked to the company’s credo, which reads in part, “We believe our first responsibility is to the patients, doctors and nurses, to mothers and fathers and all others who use our products and services. In meeting their needs everything we do must be of high quality.” Burke quickly had all 31 million bottles of Tylenol recalled, which cost Johnson & Johnson $100 million and put the Tylenol brand in jeopardy.
When asked about his expensive and remarkable decision, Burke referenced trust. “Trust has been an operative word in my life,” he explained. “[It] embodies almost everything you can strive for that will help you to succeed. You tell me any human relationship that works without trust, whether it is a marriage or a friendship or a social interaction; in the long run, the same thing is true about business.”
It would have been easy for Burke to send a canned condolence letter to the families who were affected and offer a hollow promise to investigate the matter. But the CEO understood that Johnson & Johnson’s relationship with its consumers depended on trust, and to regain it, Burke needed to demonstrate that the company valued accountability. In the ensuing months, Johnson & Johnson created tamper-proof packaging, which has since become ubiquitous in the drug manufacturing industry. By the end of 1983, Tylenol had reclaimed its 35% share of the painkiller market, and today, Burke is considered one of the most effective CEOs in history.
Roughly four decades later, Johnson & Johnson faces another crisis of trust, embroiled in over 100,000 lawsuits from consumers who allege that the company has been a key player in the proliferation of opioid abuse in the United States and adopted a laissez-faire approach to product safety. For its part, Johnson & Johnson denies any culpability, but assures consumers that it “has deep sympathy for everyone affected.”
Perfunctory contrition from companies was all too common last decade. Like Johnson & Johnson, PurduePharma has aggressively denied responsibility for its role in the opioid crisis. Tech companies also took a blameless stance in their crises. Facebook, for example, has refused to admit liability in the wake of the Cambridge Analytica scandal. Elizabeth Holmes, the former CEO of the defunct blood test company Theranos, has denied wrongdoing as she awaits trial on nine counts of fraud. Amazon has refuted numerous allegations of worker mistreatment at its warehouses. Transportation companies also shirked accountability. Boeing only recently dismissed its CEO after months of avoiding responsibility for the company’s role in the fatal crashes of two of its 737 MAX aircraft. Volkswagen initially lied about manipulating emissions tests, and only admitted fault after being exposed. And then there’s Uber.
To say that the leaders of these companies displayed a lack of emotional intelligence is true, but drawing such a broad conclusion isn’t particularly instructive for future leaders. Similarly, it’s not especially productive to theorize why these leaders chose to lie or deny responsibility. It may be most useful and informative to consider these leaders’ actions within the current context of consumer trust.
Burke had good reason to champion the importance of trust between businesses and consumers through his leadership at Johnson & Johnson. According to Edelman, 90% of global consumers believe “it’s important to trust the brands they buy.” Moreover, 68% insist that once a brand has gained their trust, “they will buy first, stay loyal to, advocate for, and defend the brand.” It’s not surprising, then, that highly trusted companies outperform their competitors by an average of 5% financially.
Engendering trust isn’t just ethically important; it makes economic sense too. When business leaders demur responsibility, delay taking corrective action or obscure harm done, they send the message that success means being immune to failure. They create an unsustainable work environment where honest failure is forbidden, accountability is discouraged and a growth mindset is just a buzzword.
If future leaders are going to redefine business, they must prioritize ethical decision-making, appreciate financial risk, but respect consumer safety more. They must value trust and understand that it can’t be commodified. (Just ask Wells Fargo and Chipotle.) Moving forward, leaders must have the humility to know when they’ve failed, and the courage to admit responsibility when they do. Those are the risks worth taking.
Nathaniel Goldberg is a PSU MBA candidate. Prior to entering the program, he served as a high school humanities teacher for six years. Nathaniel holds a BA in history and English from Emory University, and a master’s degree in education from Vanderbilt. Upon his graduation from The Portland MBA, Nathaniel hopes to become a consultant.
Categories: Current Issues