The Harvard Business School teaches future executives the gold standard in brand crisis management. The model dictates that a firm should communicate clearly with the public about a crisis, cooperate with government officials, swiftly begin its own investigation of a problem and, if necessary, quickly institute a product recall.
The template is based on Johnson and Johnson Services Inc.’s (J&J) conduct in 1982, when several people died after taking tainted Tylenol pills. The company’s reaction to the crisis is widely regarded as exemplary.
Anything but swift: Some of the products that were recalled on Friday by McNeil, a division of Johnson and Johnson. Daniel Acker / Bloomberg
But last week, Johnson and Johnson appeared to abandon its own template, stunning a few business school professors. Its conduct also drew harsh criticism from federal officials.
On Friday, McNeil Consumer Healthcare, a division of Johnson and Johnson, announced the recall of several hundred lots of popular over-the-counter medicines, including Benadryl, Motrin, Rolaids, Simply Sleep, St Joseph Aspirin and Tylenol.
According to a federal inspection report, the response was anything but swift.
The recall came 20 months after McNeil first began receiving consumer complaints about mouldy-smelling bottles of Tylenol arthritis relief caplets, according to a warning letter sent by the US Food and Drug Administration (FDA) to the company on Friday.
Since then, a few people have also reported temporary digestive problems such as nausea, vomiting and stomach pain, the agency said.
The McNeil unit of Johnson and Johnson had recalled some lots of the arthritis drug at the end of last year. But the company did not conduct a timely, comprehensive investigation, did not quickly identify the source of the problem, and did not notify authorities in a timely faJohnson and Johnsonshion, prolonging consumer exposure to the products, the warning letter said.
Industry analysts said the company’s seemingly slow response appeared out of character for one of the most trusted corporate brands in the US, the maker of beloved household products such as Johnson’s Baby Shampoo and Band-Aids.
And the recall, they said, had the potential to encourage consumers, who may have perceived name-brand medicines as being a higher quality worth their premium prices, to switch to less expensive drugstore brands.
“The FDA comments on Friday were devastating because they make the company seem to be complacent and sloppy,” said Timothy Calkins, a clinical professor of marketing at the Kellogg School of Management at Northwestern University in Evanston, Illinois.
Deborah M. Autor, the director of the office of compliance at the FDA’s Center for Drug Evaluation and Research, said on a conference call with journalists on Friday that the company should have acted faster. “When something smells bad literally or figuratively,” Autor said, “companies must aggressively investigate and take all necessary actions to solve the problem.”
In response to a query from a reporter on Sunday, a spokeswoman for McNeil said that the company was working with the FDA to resolve the agency’s concerns.
“We’re conscious of the fact that people expect more of us,” the spokeswoman, Bonnie Jacobs, wrote in an email message. “McNeil Consumer Healthcare has applied broad criteria to identify and remove all product lots that it believes may have the potential to be affected, even if they have not been the subject of consumer complaints.”
In a statement on Friday, McNeil said the breakdown of a chemical used to treat wood pallets that transport and store product packaging was the source of the mouldy smell in some products.
The company has set up a website, McNeilProductRecall.com, which provides the list of recalled lots.
Separately on Friday, the US Justice Department also filed charges against Johnson and Johnson in federal court in Massachusetts, accusing the firm of paying kickbacks to a nursing home pharmacy to promote several of its prescription drugs, including the antipsychotic drugRisperdal, to elderly patients. The company said on Friday that its conduct had been legal and appropriate. The company was reviewing the government’s complaint and intends to respond in court, a spokeswoman said.
Calkins said the company faces even more public scrutiny with both problems coming out on the same day.
“Now you have two stories that people are connecting,” Calkins said. “It is a bit of a compound fracture.”
He and other analysts speculated that company managers might have underestimated the extent of the chemical contamination problem or might have underestimated the public relations issue that could ensue.
This is not the first time a multinational corporation appears to have under-reacted to a limited product problem that turned into a big public relations headache, said Stephen A. Greyser, a professor emeritus of marketing at the Harvard Business School. Coca-Cola Co., he said, was slow to respond to reports in 1999 that several hundred people in western Europe had become sick after drinking Coke.
Greyser said he was puzzled by Johnson and Johnson’s corporate conduct in this instance. The FDA’s charges of bad behaviour have not yet been proved, he said, but they were serious enough that the company should be more forthright about what its own investigations showed.
“This is an instance where behaviour is more important than communications,” said Greyser, who wrote Harvard’s original case study on Tylenol in 1982. “Communications and good public relations can be very helpful, but it can’t overcome bad behaviour.”
In a climate in which Americans have come to expect perfection in consumer goods, companies are better off overreacting than under-reacting when product problems arise, said Michael Braun, an assistant professor of marketing at the MIT Sloan School of Management.
©2010/THE NEW YORK TIMES