Beyond Compliance and Crisis Beyond Compliance and Crisis Management Management WEC – IEF WorkshopWEC – IEF Workshop

November 4, 2003November 4, 2003

Karl F. SchmidtVP, Worldwide Process Excellence

Our CredoWe believe our first responsibility is to the doctors, nurses and patients,

to mothers and fathers and all others who use our products and services. In meeting their needs everything we do must be of high quality.

We must constantly strive to reduce our costs in order to maintain reasonable prices.

Customers’ orders must be serviced promptly and accurately. Our suppliers and distributors must have an opportunity

to make a fair profit.We are responsible to our employees,

the men and women who work with us throughout the world. Everyone must be considered as an individual.

We must respect their dignity and recognize their merit. They must have a sense of security in their jobs.

Compensation must be fair and adequate, and working conditions clean, orderly and safe.

We must be mindful of ways to help our employees fulfill their family responsibilities.

Employees must feel free to make suggestions and complaints. There must be equal opportunity for employment, development

and advancement for those qualified. We must provide competent management, and their actions must be just and ethical.

We are responsible to the communities in which we live and work and to the world community as well.

We must be good citizens--support good works and charities and bear our fair share of taxes.

We must encourage civic improvements and better health and education. We must maintain in good order

the property we are privileged to use, protecting the environment and natural resources.

Our final responsibility is to our stockholders. Business must make a sound profit. We must experiment with new ideas.

Research must be carried on, innovative programs developed and mistakes paid for.

New equipment must be purchased, new facilities provided and new products launched.

Reserves must be created to provide for adverse times. When we operate according to these principles,

the stockholders should realize a fair return.Johnson & Johnson

• Written by “the General” in 1943Written by “the General” in 1943

• A shared system of values -WorldwideA shared system of values -Worldwide

• The “glue that holds us together” The “glue that holds us together”

• 36 languages - key responsibilities to:36 languages - key responsibilities to:

Our Credo

CustomersCustomers

EmployeesEmployees

Communities/EnvironmentCommunities/Environment

StockholdersStockholders

Why Beyond Compliance?

Protect and enhance J&J reputationProtect and enhance J&J reputation

Reduce and eliminate riskReduce and eliminate risk

Drive Operational ExcellenceDrive Operational Excellence

Definition ofBeyond Compliance

Meets all Johnson & Johnson standards and regulatory Meets all Johnson & Johnson standards and regulatory requirementsrequirements

Optimizes products, processes and facilities by Optimizes products, processes and facilities by designing in quality, safety, engineering and designing in quality, safety, engineering and environmental standardsenvironmental standards

Proactively partners with regulators and anticipates Proactively partners with regulators and anticipates changes in regulations, standards and public changes in regulations, standards and public expectationsexpectations

Achieves Operational ExcellenceAchieves Operational Excellence

Crisis Management “Lessons Learned”

Tylenol Case StudyTylenol Case Study

Incident ManagementIncident Management

Public RelationsPublic Relations

Risk CommunicationRisk Communication

Tylenol Tampering Incident WhenWhen

Sept. ’82 (Chicago) and Jan. ’86 (NY)Sept. ’82 (Chicago) and Jan. ’86 (NY) What happenedWhat happened

7 people die from Tylenol poisoning. 2 tampered 7 people die from Tylenol poisoning. 2 tampered capsules found in store after initial police search. capsules found in store after initial police search. Cyanide source of poisoning, with evidence pointing to Cyanide source of poisoning, with evidence pointing to tampering. Quick decision to recall all capsule product tampering. Quick decision to recall all capsule product by CEO. by CEO.

Actions takenActions taken CEO chaired crisis mgmt team, daily communicationsCEO chaired crisis mgmt team, daily communications Credo based decision makingCredo based decision making Full cooperation w/ authorities, open with mediaFull cooperation w/ authorities, open with media Innovative package design , industry standardInnovative package design , industry standard

DamageDamage Business impact – $100MM write-off, sales rebounded Business impact – $100MM write-off, sales rebounded

70% in 4 months, 90% in 1 yr, stock price bounced back70% in 4 months, 90% in 1 yr, stock price bounced back

The Story behind “THE” Case Study

Starts with excellent reputation built on deep Starts with excellent reputation built on deep personal emotional trust and Valuespersonal emotional trust and Values buys benefit of doubt in difficult timesbuys benefit of doubt in difficult times

Conduct scenario planningConduct scenario planning Get top mgmt involved and visible fast!Get top mgmt involved and visible fast! Manage the information flowManage the information flow Train and strengthen local expertiseTrain and strengthen local expertise Use “outside – in” thinking - sensitivityUse “outside – in” thinking - sensitivity

Incident Management ObjectivesIncident Management Objectives

Bring situation under control Emergency response

Comply with regulatory requirements

Recovery strategy

Typical Plan Components Emergency Response Emergency Response

First hour reaction to an emergencyFirst hour reaction to an emergency Focus on damage assessment & controlFocus on damage assessment & control

Incident ManagementIncident Management From second hour through day 2-4From second hour through day 2-4 Internal / External Communications Protocol: Internal / External Communications Protocol:

w/ employees, customers, suppliers, media, etc. w/ employees, customers, suppliers, media, etc. Recovery Strategy Recovery Strategy (~70% of development effort)(~70% of development effort)

From day 2 to months beyondFrom day 2 to months beyond Actions to bring Manufacturing, Administration / Actions to bring Manufacturing, Administration /

Support back as quickly as possibleSupport back as quickly as possible

Incident Information Incident Information Management ObjectivesManagement Objectives

Information control– have the facts prior to release

to the public.

Maintain public trust.

Maintain license to operate.

Public RelationsPublic RelationsIssuesIssues

Protect and enhance the company’s reputation among all audiences

Communications IssuesCommunications Issues

The Audiences

Customers/Suppliers Employees, Neighbors Elected Officials (at all levels) NGOs, activists News Media …. and many more!

Communications IssuesCommunications Issues

News Media Sources Police, fire, ambulance crews, medical and scientific

experts, local authorities, government, neighbors, current and former employees, specialist writers, trade publications, psychologists and “disaster” consultants, public records, annual reports, competitors, analysts, unions, neighbors, pressure groups, etc. etc. etc.

And There’s More!

Risk Communications Principles

The Communications EnvironmentThe Communications Environment

The BAD newsThe public believes they are faced with greater risks today than in the past.

Product recalls Plant closings versus corporate

profits Governance issues Environmental damage

The Communications EnvironmentThe Communications Environment

The GOOD newsThe public is not looking for zero risk.

People are human, mistakes happen.

To maintain shareholder value,sometimes difficult decisions

must be made.

Even with a good EHS program, incidents can happen.

What the Public WantsWhat the Public Wants to Knowto Know

What happened?

How dangerous is the situation?

What are you doing about it?

How long will it take?

Will there be any danger afterwards?

Why We Don’t CommunicateWhy We Don’t Communicate

Don’t have all the facts Want to avoid panic Lack of a spokesperson Legal implications Protect the corporate image Can’t solve the problem Fear of revealing proprietary information

Is Silence Golden?Is Silence Golden?Company says, “No Comment”

Media says, “Company not forthcoming”

Public says, “No smoke without fire” “They’re hiding something” “They’re guilty”

General Communications GuidelinesGeneral Communications Guidelines

Point to your achievements in terms of your reputation

product safety and efficacy environmental & safety record proactive efforts within the

community (outreach)

General Communications GuidelinesGeneral Communications Guidelines

Use government or commonly accepted stds for comparison

Demonstrate that you share the public's feelings.

– Share their concerns– Avoid technical jargon

General Communications GuidelinesGeneral Communications Guidelines

Deal with the emotional issue before discussing fact.

Be a “person” before you’re a “spokesperson”

Employees are your best ambassadors

ControlControl

ClarityClarity

ConcernConcern

CompetenceCompetence

ConfidenceConfidence

Crisis Management Summary

Aim for the 5 “C’s”…