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Who’s #1?

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In the March/April issue of Journal of Employee Communication Management (a print publication; subscribers have access to online articles), my good friend Steve Crescenzo questions the notion of companies prioritizing audiences.

Steve often ponders things that never occur to anyone else. This tendency comes from a combination of creativity, stress, and alcohol. As for his musing about ranking audiences, Steve wrote:

I just think it’s dangerous to start ranking and prioritizing your different audiences or stakeholders. It’s sort of like a parent favoring one child over another. If customers are always first, who’s second? Do employees come before shareholders? Where do your distributors fit in? Outside contractors? Wha about the board of directors, or your lobbyists and legislators? If you’re putting one group first, that must mean you’re putting another group last.

And there’s another reason the whole “customers first” philosophy irks me. As an employee communications guy, I tend to think that if you are going to start ranking your audiences (and I’m not saying you should), then the employees should come first.

Steve cites Southwest Airlines, which has always held that employees come first. I remember hearing a tale about retired Southwest CEO Herb Kelleher reacting to a company vision pitch from a PR agency by insisting the agency just didn’t get the essence of Southwest’s vision. In a nutshell, he said, the vision is: “Smiles on faces, butts in seats, money in the bank.” In other words, customers will want to fly Southwest if the company is populated by happy employees. Thus, you start with your employees. I don’t know if the story is true, but it makes me happy to think that it is.

But I don’t think Steve is looking at the prioritization from the right perspective. It is important to rank audiences, and it is important to put customers first. And I say this as a guy who spends a lot of time on employee communications myself. But employee communications isn’t the point. The point is about dealing with crises.

In a crisis, senior management is inclined to panic. Panic begets knee-jerking. Knee-jerk reactions in a crisis can be deadly to a business: “Oh, crap, this is serious! We gotta protect our shareholders or our share price will tank. What do we do?” The answer, most often, is to make a decision with investors in mind that ultimately sinks the company.

That’s precisely what Johnson & Johnso didn’t do when faced with the Tylenol tampering incident back in 1982. For those who are unaware (I figure that’s about six people in the US), someone had laced Extra Strength Tylenol capsules with cyanide and then returned the bottles to store shelves. Seven people died as a result of ingesting the capsules. To this day, Johnson & Johnson’s handling of the crisis is a textbook study of effective crisis management. That success was the direct result of the prioritization of audiences.

Johnson & Johnson earned its reputation by pulling all Tylenol from store shelves. The cost to the company was enormous. The recall of 31 million bottles of Tylenol cost the company $100 million. The company also stopped manufacturing Tylenol until they could come up with a method for protecting the contents of the bottles, another huge hit to the company’s bottom line. The company was under no obligation to yank the product-after all, only a few bottles in one region were affected and odds were 99.999% of the people who bought Tylenol wouldn’t die of cyanide poisoning. A kneejerk reaction would have been to keep product on store shelves, protecting sales and profits, while making statements about working with law enforcement to find the culprit. But the company had a printed priority list of stakeholders with customers firmly at the top and investors equally firmly at the bottom. The philosophy was simple: Do the right thing by customers and profits and share value will take care of themselves. During crisis exercises, management put the list into practice. Thus, when the Tylenol scare erupted, management didn’t hesitate to put customers first and pull the product and suspend production until the company could innovate its tamper-resistant bottle.

Following its decision to put customers first, rather than let circumstances and panic dictate the decision, the company’s share price fell seven points. Before the action, Johnson & Johnson owned 35% of the non-prescription pain reliever market. Without the product on store shelves, that percentage dropped to 8%. Investors could not have been happy. But because the company’s decision bolstered its reputation among consumers, it didn’t take long to regain its market share after the tamper-proof bottles were introduced. It exceeded its previous market share shortly after that.

J&J’s credo is explicit: “We believe our first responsibility is to doctors, nurses and patients, to mothers and fathers and all others who use our products and services.” Next are employees, followed by communities, and finally by stockholders.

That’s right: Employees come second in the company’s ranking. It’s a sound approach-one that led the company through a crisis that could have doomed any organization with different priorities-or worse, no priorities at all. It doesn’t mean employees don’t matter. It does guide decision making that can mean life or death for an organization.

You can read more about the J&J Tylenol scare here and here.

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Shel Holtz is principal of Holtz Communication + Technology which focuses on helping organizations apply online communication capabilities to their strategic organizational communications.

As a professional communicator, Shel also writes the blog a shel of my former self.

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