James E. Burke, MBA 1949
Chairman & Chief Executive Officer Emeritus
Johnson & Johnson
Recently named by Fortune as one of the ten greatest CEOs of all time, Jim Burke recommitted Johnson & Johnson to a credo whose values permeated the company as it overcame the Tylenol tragedy to take its place as the country's dominant brand in health-care products. "A company credo that put customers first and shareholders last ultimately benefited both groups," he says.
Jim Burke was among those featured in a Fortune cover story last summer on "The 10 Greatest CEOs of All Time." "I was glad to see that the article focused on Johnson & Johnson's values," he observes. Fortune praised Burke for reaffirming the corporate principles and values that later led to his decision in 1982 to pull Tylenol off the shelves after seven people died in Chicago from taking capsules contaminated with cyanide. According to the article, Burke's "defining moment" actually came six years earlier when he challenged his fellow executives to either recommit to the company credo or "tear it off the wall."
Penned by J&Jscion and legendary chairman General Robert Wood Johnson II in the 1940s, the credo proclaimed that J&J's "first responsibility" was to its customers and then to employees, management, communities, and stockholders-in that order.
By the mid-1970s, however, Burke was troubled by a sense that the credo had lost its influence in the organization. "When I asked people what they thought of it, I got vague answers," he says. But during a series of "challenge" meetings he arranged, executives debated the credo in the context of the company's history and mission. "It became clear that our value system had been vital to our ability to outperform the competition for nearly one hundred years," Burke recalls. "Whenever we cared for the customer in a profound-and spiritual-way, profits were never a problem."
The Tylenol crisis could have been a death blow to the brand and, potentially, the company itself, continues Burke. "Innocent people were killed. Industry analysts and advertising experts told us that Tylenol was finished."
As several HBS case studies point out, Tylenol was the country's best-selling over-the-counter pain reliever at the time of the poisonings, with 35 percent of the market-more than the next three brands combined. Yet within a year of the crisis, thanks to decisions by Burke and his team to recall millions of bottles and replace them in a matter of weeks with pioneering tamper-resistant packaging while keeping the media and public well informed, the product had regained 85 percent of its market share. By the mid-1980s, Tylenol had rebounded completely. The customer confidence and goodwill Johnson & Johnson had built up also enabled it to overcome another poisoning incident in 1986-an event that resulted in the replacement of capsules with caplets.
"When crises occurred that we never could have foreseen, our customers stuck by us in ways we never could have imagined," Burke says. "A company credo that put customers first and shareholders last ultimately benefited both groups."
General Johnson taught Burke other important lessons as well, especially about failure. Shortly after he arrived at J&Jin 1953 as a product director after three years at Procter & Gamble, Burke attempted to market several over-the-counter medicines for children. They all failed-and he was called in for a meeting with the chairman.
"I assumed I was going to be fired," Burke recalls. "But instead, Johnson told me, 'Business is all about making decisions, and you don't make decisions without making mistakes. Don't make that mistake again, but please be sure you make others.'" As Burke moved up the ranks of the company, focusing initially on advertising and merchandising, he also benefited from the mentoring of other senior executives. They encouraged him, for instance, when he made early forays into television advertising in the 1960s and when he suggested that Tylenol, originally available only from physicians and hospitals, be sold as a consumer product.
As chairman and CEO from 1976 to 1989, Burke led Johnson & Johnson to a position as the nation's dominant health-care brand-a $9 billion empire comprised of the main operating company and some 150 wholly owned subsidiaries. In addition, J&Jwas regularly rated as one of the most admired and worker-friendly companies in the country.
When Burke retired after almost forty years with J&J, he quickly found a new mission as chairman of the Partnership for a Drug-Free America (PDFA), a coalition of communications professionals dedicated to persuading children to reject substance abuse. The result was the creation of the largest public service media campaign in the history of advertising-an endeavor that led President Clinton to award him in 2000 the Presidential Medal of Freedom, the country's highest civilian honor.
Burke, whose many other accolades include honorary degrees from Harvard, Princeton, and alma mater Holy Cross; an outstanding volunteer award from the United Negro College Fund; and membership in the National Business Hall of Fame, now supports PDFA's work as chairman emeritus. He also speaks out on another topic close to his heart-restoring trust in American business.
"We've corrupted the system by hiring boards of directors that feel beholden to the CEO," Burke says. Not only should an independent board and lead director govern companies, he advises, but business executives also need to "recreate a trust agenda." "Nothing good happens without trust," he proclaims. "With it you can overcome all sorts of obstacles. You can build companies that everyone can be proud of."