On a September morning in 1982, Johnson & Johnson CEO James Burke was flying high, both literally and figuratively. At a time when many other businesses were battered by the economy, the $5.4 billion J&J was growing at a steady clip. Earnings were up 16.7% in 1981, and 1982 was on a steady growth track. But all that was about to change.
As Burke was reviewing ambitious plans for global expansion while on a routine business flight, he had no way of knowing that his team at the company’s New Jersey headquarters was facing news that was anything but routine. The Cook County Medical Examiner’s Office had determined that three people had been killed as the result of ingesting cyanide in Tylenol capsules, Johnson & Johnson’s leading product.
The reactions by J&J’s executives while Burke was out of reach has become the gold standard of corporate crisis response. They did not stall. Instead, they flew into action. By the time Burke landed, they had already ordered the removal of every bottle of Tylenol capsules from store shelves across the nation. Their actions would result in a $100 million loss, and a plummet in stock price from $37 to $7 per share.
“Their decisions,” wrote Jerry Useem in a recent issue of Atlantic Monthly, “weren’t really decisions.” Instead, the executives were acting more or less instinctively in response to the company’s credo – to put the needs and well-being of people we serve first. When faced with the biggest crisis in the company’s 96-year history, it was J&J’s credo, not its concern for earnings, that moved its executives into action in the absence of their CEO.
The reason Burke’s team moved so quickly while their CEO was in mid-air was because he had prepared them to do so. As Useem writes, “Just three years before the Tylenol scandal broke, Burke threatened to destroy the company’s credo. Although it had been a fixture of the company since 1943, it was regarded as a historical a tool for modern decision making. ‘If we’re not going to live by it, let’s tear it off the wall,’ Burke told his team, using the weight of his office to force a debate. And that is what he got: a room full of managers debating the role of moral duties in daily business, and then choosing to resuscitate the credo as a living document.”
A similar scenario is being played out today. Apple is resisting the FBI’s request and a U.S. Magistrate’s Order to unlock the Apple 5c owned by Syed Rizwan Farook, one of the two killers in the San Bernardino mass shooting last December. Apple’s executives are keenly aware that lives have been lost, and that their decisions may result in a backlash including a boycott of Apple products. “Opposing this order is not something we take lightly,” wrote Apple CEO Tim Cook in a February 16 Open Letter to Our Customers.
Apple’s swift reaction stems in part from a deeply embedded core value of Apple – “We believe that we need to own and control the primary technologies behind the products we make.” Apple executives have made their core values part of the DNA of the company. Values they turn to when faced with a media firestorm, threats from angry consumers, and a hit to the balance sheet.
On the other side of this techno-political battle are the core values and priorities of the FBI. Specifically, its first priority, to “protect the United States from terrorist attacks.” The FBI’s actions are strongly supported by many, including Senator Diane Feinstein who stated, “I believe that as a government we have every responsibility and duty to see that Apple provides that information. And here we have the first court order of a phone owned by the county in which a terrorist act has taken place. And I believe very strongly that this — that Apple should voluntarily agree to it.”
But the former head of the U.S. National Security Agency and former Director of the CIA, General Michael Hayden, expressed his unwavering support for encryption. Speaking at a cybersecurity conference in Miami Beach, Hayden remarked, “I disagree with [FBI director] Jim Comey. I actually think end-to-end encryption is good for America.” This, despite Hayden’s role in the controversial surveillance of telephone communications between people in the U.S. and alleged foreign terrorist groups, and continued belief that the NSA has the “moral responsibility to use all of the authorities” it was given.
Whether Apple or the FBI stand on higher moral ground is not the purpose of this post. The purpose is to ask yourself where your team would turn in the face of a crisis. If the proverbial storm hit the fan tomorrow, do you have a credo, a set of values, a list of priorities that have been embedded into the DNA of your organization? Would your team instinctively know what to do – even if you were completely unreachable – even if it meant a potential hit to the balance sheet?
It’s not possible to have policies and procedures for every scenario that your organization might face. What is possible – what is imperative – is that your organization have a fundamental set of guiding principles. Those principles are not to be broken into in case of emergency, but to be used as a filter by which daily business decisions are made. That’s the only way to hardwire them into the DNA of the organization. Only then can you be certain that your organization can be prepared for any scenario whether or not the CEO is in the building. Have you prepared your team to pass the test?
Question: Does you team know how to respond to a crisis if you are unreachable?
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