J&J Recalls Johnson & Johnson - a Quality Catastrophe

After 50?plus product recalls in 15 months, the $60 billion company is fighting to clear its once-trusted name

In the modern business world, management is often faced with a difficult challenge to find the right balance between short-term profitability and long-term sustainability. Given the intense pressure they face to increase profits and reduce costs, it is often the case that managers will sacrifice sustainability for profitability. This often results in a decrease in quality which can have long-term implications. In the case of Johnson & Johnson, it does not seem like a few managers have made errors on the side of short-term profitability. Rather this position has seemed to permeate much of the organizational culture. Not only does this deviate from the values that the company was founded on, but it also is having a significant detrimental effect on consumer perceptions of the brands value. This report will employ the balanced scorecard approach to generate recommendations of how the company can regain some of the lost consumer confidence due to its quality issues.

Figure 1 - Strategy Map

Financial Perspective

Johnson & Johnson has seemed to lose sight of the sustainable practices that lead to the company's original success. Although every organization is composed of human beings and humans are certainly prone...

The CEO in 1982, James Burke, made a bold and ethical decision to recall over thirty one million bottles of Tylenol from the shelves within six days of realizing that there was a possible contamination. This is one of the classical cases of how companies can do the right thing and build intangible goodwill as a result. However, today's J&J apparently had data about some defective well before they stopped marketing these products; which represents a sharp contrast from 1982.
Consumer perceptions of value are of critical importance of to the J&J organization. Retail prices for their products can be double, or more in some cases, that of what the generic alternatives can command. Furthermore, the company also stands to lose a substantial share of loyal customers. Thus the quality issues could cost the company a substantial portion of their market share. Though it is impossible to speculate exactly how much damage will be financially inflicted upon the company, it is reasonable to believe that it is an order of magnitude larger than whatever cost savings they achieved by bypassing quality standards. Thus there is a strong financial incentive for J&J to restore its image in the most expedient manner as possible.

Customer Perspective

When a consumer purchases any one of Johnson & Johnson's products they…