How to Manage a Corporate Crisis

In the fall of 1982, the unthinkable happened. Someone replaced Tylenol Extra-Strength capsules with cyanide-laced capsules, resealed the packages, and put them on the shelves of at least a half-dozen stores in the Chicago area. The poisoned capsules were purchased and seven people died. Suddenly, Johnson & Johnson, the parent company of McNeil Consumer Products Company, maker of Tylenol, was in a catastrophic crisis.

Johnson & Johnson handled the cyanide crisis masterfully and the Washington Post said, "Johnson & Johnson has effectively demonstrated how a major business ought to handle a disaster." Much can be learned from the Tylenol crisis on how to manage a crisis and restore customer confidence after a corporate disaster. Johnson & Johnson acted quickly to indentify a crisis management team, took steps to prevent a future crisis, won sympathy from the public, and offered reparation. Here are the 5 steps Johnson & Johnson took to successfully manage the Tylenol cyanide crisis.

1.     Crisis Management Team – In any crisis situation, a small team of senior executives, including the organization’s legal counsel and public relations executives needs to be immediately formed to steer the actions and communications for the company.

One of the first actions Johnson & Johnson’s CEO, John Burke, took was to form a 7-member strategy team. John had the team focus on two things: 1) How do we protect customers? and 2) How do we save this product?” The strategy team took swift action and Johnson & Johnson’s first step was to alert the public not to consume any Tylenol product until the extent of the tampering could be determined. The company pulled all Tylenol capsules from Chicago stores immediately and then pulled all Tylenol capsules nationally. The decision to withdraw Tylenol capsules from all shelves in the United States showed that Johnson & Johnson was willing to bear the short terms costs in the name of consumer safety. This move played a key role in restoring consumer confidence in Tylenol.

1. Rectification – Restoring customer confidence in the midst of a crisis requires rectification. Rectification is taking calculated corrective action to avert a repeat of the crisis in the future. When Johnson & Johnson created and immediately implemented the triple sealed packaging and developed random inspection procedures, they successfully rectified the crisis.
2. Sympathy Strategy – Rebounding from a serious crisis will happen much faster if an organization gains sympathy from the public. Johnson & Johnson brilliantly won support of consumers by depicting Tylenol as the victim of an external agent that acted maliciously to hurt customers. The company also gained sympathy when they pulled Extra-Strength Tylenol off of all shelves in the United States because they put consumer safety over profits.
3. Reparation - Reparation in the form of compensation to help victims after a crisis can help an organization restore equity. Johnson & Johnson provided victims’ families counseling and financial assistance even though they were not responsible for the product tampering. Not only did Johnson & Johnson’s reparation efforts help to restore equity with victims’ families, it also improved the company’s reputation with the public as the media showed the organization taking positive action to help the victims’ families.
4. Immediateness -   Not only is rectifying the problem critically important, but an immediate rectification will enhance consumers’ evaluations of the organization. The longer it takes for the organization to provide a full rectification, the greater the public’s perception that the victims have been treated unfairly and the greater the threat to the company’s reputation. Johnson & Johnson acted swiftly in forming a strategy team, withdrawing Tylenol capsules from the shelves, keeping the public informed via the media, and working to rectify the situation.

Johnson & Johnson successfully managed the cyanide crisis by acting quickly, putting consumer safety above all else, and strategically restoring customer confidence through rectification, sympathy, and reparation. If ever your organization finds itself in the midst of a crisis, take a lesson from Johnson & Johnson’s text-book perfect response to crisis. But don’t wait for a crisis. Take proactive steps now to prepare your team to react and respond to crisis situations. When you prepare and plan, you’ll find that managing the crisis and restoring customer confidence is far easier.