Over the years, Americans have looked to elected leadership to show resolve backed up with action plans for economic and national security crises. For example, the horrific terrorist attacks on the World Trade Center and the Pentagon created emotional and economic chaos that affected people everywhere. The economic decisions made within the last five years have affected not only Americans, but others around the world. In the process of seeing justice done, it is important that the President and other leaders act in ways consistent with the Constitution. We want situations resolved the American way.
Just as American citizens expect government leaders to speak clearly and act decisively in the heat of battle, so do a company’s stakeholders look to their leaders to respond appropriately. In times of chaos, it is imperative that business leaders respond consistently with their corporate values (their constitution) rather than be overwhelmed by emotions or a desire to “look decisive” to their shareholders.
The reflex reaction of some CEOs has been to follow the pattern that began in the 1980s—to lay off thousands of their employees in the attempt to improve the bottom line quickly. Layoffs only magnify the feelings of chaos and despair many are feeling. My intent here is not to bash downsizing or those who initiate it. Some desperate situations do indeed call for such desperate measures. My purpose is to point out that those companies who remain strong through a crisis, indeed through several crises over many years, are those who handle such situations consistent with their corporate constitution of mission and values. In times of chaos, leaders have an opportunity to actually strengthen the bonds that hold their company together.
One notable case in point, Johnson & Johnson Company’s Tylenol pain reliever, was found to have poisoned seven people in Chicago in 1982. In the hours following the coroner’s finding, you can imagine the chaos in that company. What to do? Where to start?
In similar situations, other companies have conducted exhaustive research to prove how widespread the problem was before choosing a course of action, have challenged the judgments that blamed their products, or even denied altogether that their product was responsible for the problem.
In the absence of factual information, members of the J&J organization reverted to their values—their credo—to decide what to do. The J&J Credo outlined the following hierarchy of purposes:
1. Our first responsibility is to our customers…
2. We are responsible to our employees…
3. We are responsible to the communities in which we live and work…
4. Our final responsibility is to our stockholders…
Because everybody at J&J deeply understood this hierarchy of priorities, the product was off the shelf across the nation in a matter of hours. Eventually it was proven that the problem was isolated to one store in Chicago. Only after it was clear that there were no problems elsewhere, did Tylenol slowly make its way back onto the shelves—with a modified package. J&J invented the tamper-proof seal to ensure such an episode couldn’t happen again.
What most people don’t know is that J&J CEO James Burke had worked for two years prior to this crisis to involve employees everywhere in a process to examine the credo, reshape it to be meaningful to them, and commit themselves to live by it. Mr. Burke made this observation after the Tylenol episode was over:
“I do not think we could have done what we did with Tylenol if we hadn’t all gone through the process of challenging ourselves and committing ourselves to the Credo. We had dozens of people making hundreds of decisions and all on the fly. And they had to make them as wisely as they knew how. The reason they made them as well as they did is, they knew what the beliefs were of the institution they worked for. So they made them based on that set of beliefs and we made very, very few mistakes.”
What was the ultimate consequence of using the J&J Credo as the constitution in times of uncertainty? Marketing experts will tell you that a high profile product recall is usually the kiss of death. Short term, the recall cost the company over $100 million, not counting the lost sales revenues, but after it returned, Tylenol’s market share actually grew higher than it was before the tampering incident.
There are a few leadership lessons that emerge from the J&J experience:
- Engage yourself and your fellow associates in a process of defining, understanding and committing yourselves to your corporate constitution.
- Respond to any challenge or opportunity consistent with your constitution. Overrule and correct any action that is “unconstitutional.”
- Review the situation and how it was handled as a way of reminding everyone that living by your values is critical to your company’s longevity.
Whether the situation calls for a layoff, other drastic cost-reducing measures, or an innovative idea to help you bounce back from the chaos, if you will follow the direction set by your mission and values, your company will emerge stronger than before.