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.
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 to making mistakes, the blunders at Johnson & Johnson seem to be more systemic in nature. 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 expect the product to be an industry leader in terms of quality. J&J has had a long reputation of quality which is exactly why the company became one of the leading U.S. brand names. Customers expect that the company will utilize the most advanced practices in the industry to ensure they are getting the best quality and most advanced product on the market. They also expect that J&J acts both social and environmentally responsible in regards to its business practices.
Process Perspective
To fulfill the customers' expectations, there is no doubt that the quality and safety will have to improve substantially. The organization would almost certainly benefit from some version of a total quality initiative as well as better corporate governance. Due to rapid expansions in the organization, mainly through acquisition, the corporate structure has become more decentralized and less accountable. Although at the same time the company also became more profitable, the evidence suggests that this structure is not sustainable for long-term growth. Although the loss in profitability may decline in a marginal manner, continuance of these quality issues could case the brand to reach a threshold point in which a slippery slope emerges. Thus there needs to be accountability injected into processes through quality control measures and an aggressive corporate governance initiative.
Organizational Perspective
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