September 9th, 2008
More than 25 years ago, Tylenol changed the “crisis management” business forever by taking decisive action to compromise profitability based on something that was not its fault.
In the fall of 1982, seven people in Chicago died after taking Extra Strength Tylenol capsules laced with potassium cyanide. A 12-year old girl was reportedly the first to die. Panic ensued. Police cars roved the streets in and around the Chicago area blasting warnings from PA systems. When it was determined that the poisoned bottles had come from different factories, the possibility that Johnson & Johnson (Tylenol’s ultimate parent) was somehow to blame was decisively ruled out. Officials came to believe that one or multiple criminals had instead removed bottles from stores, tampered with the contents and then surreptitiously returned the bottles to store shelves.
And yet, responsibility never entered into the decision-making process underway at J&J: only public safety did. The company stopped all Tylenol production and promotion. It issued a national recall not after the episode was over, but while it was still very much underway. The bottles returned to J&J as a result of the recall had a retail value of more than $100 million. I shouldn’t say that J&J stopped all Tylenol promotion: it paid for and issued new national advertising instructing individuals to avoid taking any products that contained Tylenol, and offering to reimburse anyone who sent in an existing bottle of Tylenol capsules.
Once both the crisis and J&J’s action plan were in full force, Tylenol’s market share dropped like a rock from 35% to 8%. To be expected. What was not expected was that share rebounded in less than one year: a return widely credited to J&J’s immediate and decisive action to sacrifice its own well being for the health of – really – the entire country. Since then, J&J’s response is widely considered to be the gold standard in crisis management. Act now. Ask later.
I cannot overemphasize how I feel today about J&J’s behavior that long-ago autumn when I was still a kid. It made an impression that has lasted my entire career: one that influences how I measure companies and my own conduct as a business executive to this very day.
So when I see a company disregard such a lesson for no other reason than financial gain, I am not just nonplussed – I’m disgusted.
SFCA Inc. purchased the assets of Simplicity Inc., a baby bassinet manufacturer, earlier this year after Simplicity went out of business. SFCA is an affiliate of the private equity firm, Blackstreet Capital. Two weeks ago, fifteen retailers – including Target, Wal-Mart, Toys R Us, Amazon and Kmart – halted the sale of certain Simplicity bassinets that the U.S. Consumer Product Safety Commission said could be hazardous to babies after two baby girls died (from strangulation in their bassinets). The Wall Street Journal reported that Toys R Us were selling eight of the 66 models affected by the warning; the chain pulled the products anyway. And all the retailers affected agreed to permit consumers to return the bassinets for a refund or store credit, regardless of how long ago the product had been purchased. These retailers heeded the lessons learned from the shining example set by Johnson & Johnson. Act now.
SFCA, on the other hand, is doing nothing, holding fast to its claim that it bears no legal responsibility for the hazardous bassinets. The USCPC couldn’t even issue a product recall, because SFCA would not cooperate. Rick Locker, a lawyer representing SFCA has declared the company unwilling to recall “a product that it did not make and sell.” The blog Daddy Types reports that – while SFCA may have hired Locker to assist with this matter – Locker is also paid as counsel for the Juvenile Product Manufacturers Association: the lobbying organization that helps protect the makers of children’s products.
Ironically, the JPMA’s website is currently heralding September as “Baby Safety Month.” In July, the association tooted its own horn for “reaffirm[ing] its commitment of safety.” The communications contact on the July press release isn’t someone at a real PR or crisis management firm: it’s a woman at Association Headquarters, Inc., an organization whose lone means of support is selling services to organizations such as… JPMA. You can’t make this stuff up.
Henceforth, SFCA has taken a “Who, me?” approach to its products killing children. The company claims that it might go out of business if it took all the offending bassinets back. I find this particularly ironic and outdated in our Web 2.o world. If SFCA came out on the Web and announced a recall (even though they were not legally responsible), the company’s future would be far more secure. The company would be a hero. Parents would rave and remember the company when they went shopping the next time. They would tell one another, at a time in history when spreading the word is easier than ever. Their marketing folks would get college and business school cases written.
Isn’t this exactly what Tylenol did and exactly what happened as a result (in a decidedly Web 0.0 world)? But then again, it’s not hard to imagine those meetings in 1982 where well-meaning lawyers warned that a recall could take down the company and J&J’s top management said, So be it. We’re not going to stand by and let people die. Short-sighted greed and bad lawyering are in full control at SFCA. The drawbridge is up. SFCA is not legally required to take back the affected bassinets, there are no mandatory standards for safety in the category and the USCPSC cannot bring legal charges against SFCA.
No matter. There is a higher standard for working and living on this planet that J&J set and by which all corporations should live. As an aside, I’ll say once again that it’s just good business: (a) the positive halo effect for J&J post-crisis was and still is phenomenal, and (b) not doing the right thing will get you in the end. You can expect boycotts and bad press at minimum: perhaps a crazed parent manufacturing a terrible happening to take you down if you’re really unlucky. Permanently disastrous online search results. But aside from it being good business, it’s about acting human, like someone whose own child or grandchild was killed by your product.
There is no exception – and if there is, I haven’t heard about it and SFCA most definitely does not qualify. This is capitalism run right into the ground, taking humanity and business ethics down with it.
SFCA Simplicity bassinets Blackstreet Capital JPMA
Johnson & Johnson 1982 Tylenol Rick Locker
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