Almost from the moment on Feb. 10 when the news broke that a Westchester County woman had died after taking a cyanide-laced Tylenol capsule, Johnson & Johnson found itself racing to stay in control of a rapidly changing situation.
As consumer fears mounted, the company had to move quickly to ensure public safety yet prevent the episode from becoming a staggering blow.
What has become clear, through interviews with James E. Burke, the company chairman, and other Johnson & Johnson officials, is that once the company found itself embroiled in yet another product-related death, following a spate of similar crimes in 1982, the aim was to control consumer reaction, exercise damage control and make the best of a bad situation.
It was not always easy, nor was it accomplished without sharp disputes among executives, with some of them shouting at each other in discussions over what to do next.
Corporate managers always have to strike a balance between the demands of various constituencies: customers, employee groups, suppliers and shareholders. But how Mr. Burke and Johnson & Johnson reacted in the latest Tylenol crisis offers a glimpse into the process in the midst of a highly charged atmosphere.
The crisis began when Diane Elsroth, the Westchester woman, died in Yonkers on Feb. 8; news of her death was disclosed Feb. 10. The Federal Food and Drug Administration and the company immediately started collecting Tylenol capsules in the area. On Feb. 13 the F.D.A. discovered a second bottle of tainted capsules and warned consumers nationwide not to take the capsules. The company began a recall in Westchester and asked retailers around the country to remove the capsules from their shelves.
On Feb. 17 the company began a nationwide recall and announced it would end sales of all nonprescription drugs in capsule form.
Since these events, the 60-year-old Mr. Burke, who has led the company since 1976, has struck a balance between what is good for consumers and what is good for Johnson & Johnson, according to many observers. In recent polls, for instance, the public credited the company with having made the appropriate response to the crisis.
Johnson & Johnson's handling of a similar situation in 1982, when seven people died in the Chicago area after taking tainted Tylenol capsules, enabled the company to regain its leading share in the analgesic market despite a sharp initial decline. In that case, Johnson & Johnson recalled all its Tylenol capsules and introduced a triple-sealed, tamper-resistant package.
Mr. Burke learned of Miss Elsroth's death about 4 P.M. on Feb. 10. He ordered what turned out to be continuous polling of consumers to monitor their fears about, perceptions of and intentions toward all Tylenol products.
Even before the final decisions on the recall and discontinuance of the non-prescription capsule was made last Sunday, Mr. Burke was promoting Tylenol in the form of caplets, elongated, coated tablets that are said to be easier to swallow than normal tablets. Whether at news conferences or in his numerous television appearances, Mr. Burke readily admits, he wasted no opportunity to get across the message that Johnson & Johnson had a safe alternative to capsules.
''I am an aggressive marketing person,'' Mr. Burke said in an interview Thursday in his office in Johnson & Johnson's gleaming white headquarters in New Brunswick, N.J. ''I've never denied that.''
Johnson & Johnson officials also acknowledge that outside events as much as devotion to the company's widely touted credo, which in essense promises to put safety above profits, led to the company's drastic actions. These events included state bans on the sale of Tylenol capsules and spreading consumer apprehension.
Merely pulling nonprescription capsules off the market could ultimately cost as much as $150 million after taxes, company officials say. Johnson & Johnson had earnings last year of $613.7 million on revenues of $6.24 billion. Company Saw Threat To Market Share The action also could jeopardize Tylenol's 35 percent share of the $1.5 billion over-the-counter, pain-reliever market. Johnson & Johnson's revenue from Tylenol, its most profitable single brand, is $525 million, and the capsule had accounted for about a third of that, or roughly $175 million.
Besides its economic significance to the company, Tylenol was a product important to Mr. Burke's career. He had been a champion of Johnson & Johnson's decision in the 1970's to turn Tylenol into a mass-marketed drug, Still, Johnson & Johnson has been widely praised by analysts, government officials and others for its actions in the ordeal.
''This company has figured out if you do poorly by the American public, they won't respect you, and if you do well by them and look out for their interests, they'll give you a second chance,'' said John A. Norris, deputy commissioner of the Food and Drug Administration. Johnson & Johnson has acted in ''enlightened self-interest,'' Mr. Norris said.
In doing so, however, Johnson & Johnson often found itself racing to stay in control of a rapidly changing situation.
For instance, Johnson & Johnson officials have repeatedly said that one reason they decided to stop selling capsules was that they could not guarantee that the capsules could not be tampered with.
In interviews on Thursday and Friday, company officials said they also believed they had no choice because they doubted that many states would allow sales of Tylenol capsule until a guarantee of safety could be made. At least 14 states have indefinitely banned Tylenol capsules.
Shifting consumer reaction to the news events also forced the company's hand. After the drug agency discovered a second bottle of cyanide-tainted Extra-Strength Tylenol capsules on Feb. 13, consumer loyalty to Tylenol began to deteriorate. Telephone surveys told the company that its effort to persuade customers that the Tylenol tampering was a local incident was failing.
''There was definitely a trend,'' said David E. Collins, chairman of the McNeil Consumer Products Company, the Johnson & Johnson subsidiary that makes Tylenol.
Still, the deliberations that ultimately led to the decision to stop making capsules were far from harmonious. Meetings in Mr. Burke's 11th-floor office were often punctuated by ''yelling and screaming,'' Mr. Burke said. He added, however, that confrontational meetings are part of Johnson & Johnson's approach to forging consensus.
McNeil officials initially resisted the growing feeling among Johnson & Johnson's executives that the crisis had to be treated as a national event. When Mr. Burke and David R. Clare, the company's president, began to push for the end of Tylenol capsules, McNeil officials argued that such a decision was too drastic.
The timing of the recall was influenced by concerns other than the public's safety, which officials said was no longer threatened because the company had asked that capsules be removed from retailers' shelves. A $4-a-share plunge in Johnson & Johnson's stock price on Feb. 14, and a scheduled appearance by Mr. Burke on the ''Donahue'' television program on Feb. 18, caused the company to make the announcement on Feb. 17, the Presidents' Day holiday. Company officials had been talking of waiting until as late as last Thursday to announce the recall.
But they reasoned that if the announcement came on a holiday when the stock market was closed, investors would have a chance to digest the information and not react in panic. Moreover, Mr. Burke would not ''have to finesse'' questions about a possible recall on the Donahue show, Mr. Clare said. And given the company's obsession with maintaining its public credibility, this was key, he added.
Another reason for the timing of the decision was a fear that competitors would take advantage of Tylenol capsules' uncertain fate. These concerns had intensified after the company told retailers to remove the capsules from their shelves. The company worried that competitors might grab that empty space.
Mr. Burke ''wanted it resolved as soon as they could,'' said Harold Burson, chairman of Burson Marsteller, the public relations firm that was called in by Johnson & Johnson in the crisis. ''One of the objectives was to get back to business.''
In addition, throughout the crisis, Johnson & Johnson appeared obsessed with preserving the high level of public trust in the 100-year-old company and its products. The company credits this trust with Tylenol's remarkable comeback after the 1982 poisonings in the Chicago area. And it is something that Mr. Burke, in particular, takes very seriously.
The son of an insurance manager at New York Life, Mr. Burke still talks about his father's insistence on integrity. When he left Procter & Gamble to join Johnson & Johnson, he said, he found it had ''great values'' that he judged were akin to ''my own personal convictions.'' Credo of Responsibility To Users of Products In 1979, Mr. Burke initiated a companywide effort to recommit managers to its credo, which begins: ''Our first responsibility is to the doctors, nurses and patients, to mothers and all others who use our products and services.'' Mr. Burke said that during the crisis, ''nobody had to ask what the guidelines are.''
This led him to take an uncharacteristically visible role during the crisis. The last time he had done so was in the 1982 crisis. An intensely private man who is reluctant to talk about his personal life, the white-haired, blue-eyed executive abhors being in the spotlight.
''I really don't like this personal publicity; I don't feel comfortable with it,'' said Mr. Burke, who joined Johnson & Johnson in 1953 and who has played a key role in turning it from a concern whose main business had been supplying hospitals and health professionals into a major consumer products company.
Still, Mr. Burke said that as chief executive he felt that he had no choice but to act as the corporate spokesman because ''Johnson & Johnson can't be faceless; it has to be personalized.''
Moreover, his success in dealing with the public in 1982 made him the natural spokesman.
''He does exceptionally well on television,'' noted Lawrence G. Foster, the company's vice president for public relations. ''Why does a baseball manager go with his 20-game winner in the World Series?''
Known for guarding its secrets jealousy in calmer times, even to the point of keeping securities analysts at bay, Johnson & Johnson has gone out of its way to shape media coverage of the crisis. It has held three news conferences at its corporate headquarters and one in Washington, and Mr. Burke has made more than a dozen television appearances, agreeing to interviews on everything from national talk shows to local broadcasts.
The first news conference - held on Feb. 11, the day after the news of Miss Elsroth's death, was Mr. Burson's idea. The purpose was to project a positive image of the company. ''We had nothing new to say,'' the public relations executive said. ''But with the company having trouble returning the deluge of calls, I was alarmed we were jeopardizing our credibility.''
Five other people - Mr. Clare; Mr. Collins; Mr. Foster; George S. Frazza, the company's general counsel, and Joseph R. Chiesa, McNeil's president -have helped Mr. Burke manage the crisis.
Mr. Burke stresses that the six have operated as a team and that his style is to manage by consensus, not by edict. The decision to pull out of the capsule market might have come earlier than last Sunday, but Mr. Burke wanted everyone, including McNeil officials, to support such a major move.
Since Friday night, networks have been carrying commercials announcing the recall of Tylenol capsules and promoting the caplets. Mr. Collins, McNeil's chairman, acknowledges that it is going to be tougher to get capsule users to switch to caplets than it was to persuade capsule users in 1982 to buy capsules in the tamper-resistant packages that the company introduced.
For his part, Mr. Burke, who has been putting in 16-hour days, said he now plans to ''back out'' of handling Tylenol and let McNeil officials take charge of rebuilding Tylenol's image once again.
The initial signs are promising, they said. Of the nearly 205,000 Tylenol users who had telephoned Johnson & Johnson by midday Friday about exchanging their capsules, more than 95 percent requested caplets rather than cash. And Mr. Collins noted that on Wednesday and Thursday, McNeil had its two largest sales days in history.
But this seemingly promising news is not likely to set Mr. Burke's heart at ease. ''When everything is going right, I'm inclined to worry about what can go wrong,'' he said.
Almost from the moment on Feb. 10 when the news broke that a Westchester County woman had died after taking a cyanide-laced Tylenol capsule, Johnson & Johnson found itself racing to stay in control of a rapidly changing situation.
As consumer fears mounted, the company had to move quickly to ensure public safety yet prevent the episode from becoming a staggering blow.
What has become clear, through interviews with James E. Burke, the company chairman, and other Johnson & Johnson officials, is that once the company found itself embroiled in yet another product-related death, following a spate of similar crimes in 1982, the aim was to control consumer reaction, exercise damage control and make the best of a bad situation.
It was not always easy, nor was it accomplished without sharp disputes among executives, with some of them shouting at each other in discussions over what to do next.
Corporate managers always have to strike a balance between the demands of various constituencies: customers, employee groups, suppliers and shareholders. But how Mr. Burke and Johnson & Johnson reacted in the latest Tylenol crisis offers a glimpse into the process in the midst of a highly charged atmosphere.
The crisis began when Diane Elsroth, the Westchester woman, died in Yonkers on Feb. 8; news of her death was disclosed Feb. 10. The Federal Food and Drug Administration and the company immediately started collecting Tylenol capsules in the area. On Feb. 13 the F.D.A. discovered a second bottle of tainted capsules and warned consumers nationwide not to take the capsules.
The company began a recall in Westchester and asked retailers around the country to remove the capsules from their shelves.
On Feb. 17 the company began a nationwide recall and announced it would end sales of all nonprescription drugs in capsule form.
Since these events, the 60-year-old Mr. Burke, who has led the company since 1976, has struck a balance between what is good for consumers and what is good for Johnson & Johnson, according to many observers. In recent polls, for instance, the public credited the company with having made the appropriate response to the crisis.
Johnson & Johnson's handling of a similar situation in 1982, when seven people died in the Chicago area after taking tainted Tylenol capsules, enabled the company to regain its leading share in the analgesic market despite a sharp initial decline. In that case, Johnson & Johnson recalled all its Tylenol capsules and introduced a triple-sealed, tamper-resistant package.
Mr. Burke learned of Miss Elsroth's death about 4 P.M. on Feb. 10. He ordered what turned out to be continuous polling of consumers to monitor their fears about, perceptions of and intentions toward all Tylenol products.
Even before the final decisions on the recall and discontinuance of the non-prescription capsule was made last Sunday, Mr. Burke was promoting Tylenol in the form of caplets, elongated, coated tablets that are said to be easier to swallow than normal tablets.
Whether at news conferences or in his numerous television appearances, Mr. Burke readily admits, he wasted no opportunity to get across the message that Johnson & Johnson had a safe alternative to capsules.
''I am an aggressive marketing person,'' Mr. Burke said in an interview Thursday in his office in Johnson & Johnson's gleaming white headquarters in New Brunswick, N.J. ''I've never denied that.''
Johnson & Johnson officials also acknowledge that outside events as much as devotion to the company's widely touted credo, which in essense promises to put safety above profits, led to the company's drastic actions. These events included state bans on the sale of Tylenol capsules and spreading consumer apprehension.
Merely pulling nonprescription capsules off the market could ultimately cost as much as $150 million after taxes, company officials say. Johnson & Johnson had earnings last year of $613.7 million on revenues of $6.24 billion. Company Saw Threat To Market Share The action also could jeopardize Tylenol's 35 percent share of the $1.5 billion over-the-counter, pain-reliever market. Johnson & Johnson's revenue from Tylenol, its most profitable single brand, is $525 million, and the capsule had accounted for about a third of that, or roughly $175 million.
Besides its economic significance to the company, Tylenol was a product important to Mr. Burke's career. He had been a champion of Johnson & Johnson's decision in the 1970's to turn Tylenol into a mass-marketed drug, Still, Johnson & Johnson has been widely praised by analysts, government officials and others for its actions in the ordeal.
''This company has figured out if you do poorly by the American public, they won't respect you, and if you do well by them and look out for their interests, they'll give you a second chance,'' said John A. Norris, deputy commissioner of the Food and Drug Administration. Johnson & Johnson has acted in ''enlightened self-interest,'' Mr. Norris said.
In doing so, however, Johnson & Johnson often found itself racing to stay in control of a rapidly changing situation.
For instance, Johnson & Johnson officials have repeatedly said that one reason they decided to stop selling capsules was that they could not guarantee that the capsules could not be tampered with.
In interviews on Thursday and Friday, company officials said they also believed they had no choice because they doubted that many states would allow sales of Tylenol capsule until a guarantee of safety could be made. At least 14 states have indefinitely banned Tylenol capsules.
Shifting consumer reaction to the news events also forced the company's hand. After the drug agency discovered a second bottle of cyanide-tainted Extra-Strength Tylenol capsules on Feb. 13, consumer loyalty to Tylenol began to deteriorate. Telephone surveys told the company that its effort to persuade customers that the Tylenol tampering was a local incident was failing.
''There was definitely a trend,'' said David E. Collins, chairman of the McNeil Consumer Products Company, the Johnson & Johnson subsidiary that makes Tylenol.
Still, the deliberations that ultimately led to the decision to stop making capsules were far from harmonious. Meetings in Mr. Burke's 11th-floor office were often punctuated by ''yelling and screaming,'' Mr. Burke said. He added, however, that confrontational meetings are part of Johnson & Johnson's approach to forging consensus.
McNeil officials initially resisted the growing feeling among Johnson & Johnson's executives that the crisis had to be treated as a national event. When Mr. Burke and David R. Clare, the company's president, began to push for the end of Tylenol capsules, McNeil officials argued that such a decision was too drastic.
The timing of the recall was influenced by concerns other than the public's safety, which officials said was no longer threatened because the company had asked that capsules be removed from retailers' shelves. A $4-a-share plunge in Johnson & Johnson's stock price on Feb. 14, and a scheduled appearance by Mr. Burke on the ''Donahue'' television program on Feb. 18, caused the company to make the announcement on Feb. 17, the Presidents' Day holiday. Company officials had been talking of waiting until as late as last Thursday to announce the recall.
But they reasoned that if the announcement came on a holiday when the stock market was closed, investors would have a chance to digest the information and not react in panic. Moreover, Mr. Burke would not ''have to finesse'' questions about a possible recall on the Donahue show, Mr. Clare said. And given the company's obsession with maintaining its public credibility, this was key, he added.
Another reason for the timing of the decision was a fear that competitors would take advantage of Tylenol capsules' uncertain fate. These concerns had intensified after the company told retailers to remove the capsules from their shelves. The company worried that competitors might grab that empty space.
Mr. Burke ''wanted it resolved as soon as they could,'' said Harold Burson, chairman of Burson Marsteller, the public relations firm that was called in by Johnson & Johnson in the crisis. ''One of the objectives was to get back to business.''
In addition, throughout the crisis, Johnson & Johnson appeared obsessed with preserving the high level of public trust in the 100-year-old company and its products. The company credits this trust with Tylenol's remarkable comeback after the 1982 poisonings in the Chicago area. And it is something that Mr. Burke, in particular, takes very seriously.
The son of an insurance manager at New York Life, Mr. Burke still talks about his father's insistence on integrity. When he left Procter & Gamble to join Johnson & Johnson, he said, he found it had ''great values'' that he judged were akin to ''my own personal convictions.'' Credo of Responsibility To Users of Products In 1979, Mr. Burke initiated a companywide effort to recommit managers to its credo, which begins: ''Our first responsibility is to the doctors, nurses and patients, to mothers and all others who use our products and services.'' Mr. Burke said that during the crisis, ''nobody had to ask what the guidelines are.''
This led him to take an uncharacteristically visible role during the crisis. The last time he had done so was in the 1982 crisis. An intensely private man who is reluctant to talk about his personal life, the white-haired, blue-eyed executive abhors being in the spotlight.
''I really don't like this personal publicity; I don't feel comfortable with it,'' said Mr. Burke, who joined Johnson & Johnson in 1953 and who has played a key role in turning it from a concern whose main business had been supplying hospitals and health professionals into a major consumer products company.
Still, Mr. Burke said that as chief executive he felt that he had no choice but to act as the corporate spokesman because ''Johnson & Johnson can't be faceless; it has to be personalized.''
Moreover, his success in dealing with the public in 1982 made him the natural spokesman.
''He does exceptionally well on television,'' noted Lawrence G. Foster, the company's vice president for public relations. ''Why does a baseball manager go with his 20-game winner in the World Series?''
Known for guarding its secrets jealousy in calmer times, even to the point of keeping securities analysts at bay, Johnson & Johnson has gone out of its way to shape media coverage of the crisis. It has held three news conferences at its corporate headquarters and one in Washington, and Mr. Burke has made more than a dozen television appearances, agreeing to interviews on everything from national talk shows to local broadcasts.
The first news conference - held on Feb. 11, the day after the news of Miss Elsroth's death, was Mr. Burson's idea. The purpose was to project a positive image of the company. ''We had nothing new to say,'' the public relations executive said. ''But with the company having trouble returning the deluge of calls, I was alarmed we were jeopardizing our credibility.''
Five other people - Mr. Clare; Mr. Collins; Mr. Foster; George S. Frazza, the company's general counsel, and Joseph R. Chiesa, McNeil's president -have helped Mr. Burke manage the crisis.
Mr. Burke stresses that the six have operated as a team and that his style is to manage by consensus, not by edict. The decision to pull out of the capsule market might have come earlier than last Sunday, but Mr. Burke wanted everyone, including McNeil officials, to support such a major move.
Since Friday night, networks have been carrying commercials announcing the recall of Tylenol capsules and promoting the caplets. Mr. Collins, McNeil's chairman, acknowledges that it is going to be tougher to get capsule users to switch to caplets than it was to persuade capsule users in 1982 to buy capsules in the tamper-resistant packages that the company introduced.
For his part, Mr. Burke, who has been putting in 16-hour days, said he now plans to ''back out'' of handling Tylenol and let McNeil officials take charge of rebuilding Tylenol's image once again.
The initial signs are promising, they said. Of the nearly 205,000 Tylenol users who had telephoned Johnson & Johnson by midday Friday about exchanging their capsules, more than 95 percent requested caplets rather than cash. And Mr. Collins noted that on Wednesday and Thursday, McNeil had its two largest sales days in history.
But this seemingly promising news is not likely to set Mr. Burke's heart at ease. ''When everything is going right, I'm inclined to worry about what can go wrong,'' he said.