Tuesday, 20 July 2010

Et tu J&J ?

What on earth is happening at Johnson & Johnson ?? It is one of the world’s foremost and respected companies. For 120 years it has commanded trust from consumers, employees, governments, investors – virtually everybody. It is a regular in the Top 5 of the World’s most admired companies – this year it is 4th. Consumers know it largely for its baby products – every mother trusts Johnson’s baby powder, or lotion or bath or whatever. If you are sick, you pop in a Tylenol; if your child is coughing you give her Benadryl. It is also a name totally trusted in hospitals – it produces a variety of medical equipments and supplies. Investors love J&J for the steady performance, and therefore the returns, it produces. It is one of the four companies left in the world which has a AAA rating. If there has to be one company that typifies all that’s good about the corporate world, it would be hard to find a better candidate than Johnson & Johnson.

And yet, I read with an increasing sense of disbelief of the troubles that are plaguing J&J. Today it just released its Q2 results and downgraded its yearly forecast of earnings. Not because of anything fundamentally happening in its markets. Because it has been facing a series of product recalls. It all pertains to one manufacturing plant in Fort Washington in the US. This has been going on now for more than a year – one recall after another, quality problems at the plant, scathing FDA reports and yet J&J allowed this problem to drag on for so long. Now it has shut the plant.

Remember this is the same company that created history in 1982. 9 people died in Chicago after consuming Tylenol – some criminal was tampering with the product on retail shelves and deliberately injecting cyanide into it. It had nothing to do with J&J – this was some crackpot criminal doing it. J&J immediately reacted by recalling 31 million bottles of capsules nationally. It was the first major product recall in the US – J&J said it didn’t care what the financial consequences were and whether it was responsible or not ; it was just not going to put any of its consumers at any risk. Full stop.

And now, look at what’s happening. Foot dragging on quality issues at that factory. Contesting FDA reports. A sorry saga of multiple recalls, drip fed over the last 18 months. Closing the factory only after a FDA inspection slammed it a full one year after the problems started surfacing.

This is a company which has some of the most outstanding quality systems in the world. I know this for a fact. In their famous “Credo”, which the company truly lives by, quality features in the second sentence. Every other manufacturing plant in the company probably has outstanding quality systems. Its just this one plant in Pennsylvania, that has been the cause of all the problems.

Just goes to show that when quality and safety are concerned, you can never, never, ever relax. Not even the greatest and the best are immune to falling. Next time when you take a safety audit as a pain in the backside or the ISO or CMM audit as a joke, pause and consider. This is probably what the plant management in the Pennsylvania plant did. Now look at the consequences.

I am now convinced that there has to be two clinically paranoid people in any company – the head of safety and the head of quality. Clinically certified as paranoid beyond redemption. Complete monsters who will believe nothing and crucify everybody. The most difficult and obstinate people who you can find on the planet. They will be the most valuable employees of the company.

All of you at J&J; please, please ,please, do not let down our trust. It's not just you, the company. You stand for all of the corporate world.


Vishal said...

Very informative post! Just goes to show that one can never relax in matters of safety and quality. It is sad that safety and quality audits are sometimes taken as check-box exercise by the plant executives. Lack of seriousness can really amplify to such higher levels as in this case.

The persons who flout the safety and quality norms at their will should just be shown the door. It is THE basic requirement of business ethics to be in compliance with quality parameters.

One more major area of concern for me could be environmental considerations of running a manufacturing facility. Planet factor is also key to the operations and necessary steps must be taken to ensure that we cause no harm to the environment in which we live.

Ramesh said...

@Vishal - ts not only in manufacturing companies. Even in service companies, we very often take quality laxly. It has to become a way of life. It did, in J&J, and even then .....

J said...

The silver lining in the story seems to be the FDA. I always wonder about the incentives of regulatory bodies doing their job. Was this a case of a lax attitude towards quality or cutting corners in bad times? Either way, it's scary.

Anonymous said...

J&J was trusted by me until she got rashes,red and patchy ones.Paediatrician was not comfy with J&J msinly bcoz it has alkaline pH,which doesnt go well with acidic pH of skin,so i changed to other product from aussie,and she is comfy.
Even their no more tears is really not no more tears,now i have changed to an indian brand for bath,thus eliminating J&J from household.

Its sad but the truth is J&J is not trusted by many.

Anonymous said...

i dont understand this recalling business at all. First u go thru layers and layers and layers of testing and approve those companies whose very product u ditch and dump in dust forcing them to take back watever has been sold or to be sold. y the heck compromise on the checks in first place then!!! from laptops to cars to drugs to even dolls..every damn thing is getting recalled. Its almost as if life has become a movie shoot where you get one more take for any mistake u do!!


Ramesh said...

@J - Yes, the FDA is usually pretty good. In a job like theirs, they never get positive press. When they do well, nobody bothers.

@ambulisamma - Oh; Ho - that's a pity. Normally J&J products are very good.

@gils - Despite everything, errors do happen in the production process and poor quality, or even dangerous, products go out into the market. If its likely to pose a risk to the consumer, there's no choice except to recall. This used to happen before as well, but recalls were rre as the consumer really had no power and the companies didn't care. Now that's not the case.

Anonymous said...

yes..me not against recall. i am more worried abt the process these guys follow. agreed they wud be masters in wat they are doing and watever they practice comes out as guidelines for others. But wen they falter..its scary actually!! tip of iceberg...if these guys who are trusted globally themselves falter..imagine the low profilers!! by failing our trust..these giants not just screw themselves but the trust over their entire industry

Sandhya Sriram said...

in tamil there is a saying - yaanaikum adi sarukkum.

a company cannot suddenly become great or bad. there was someone who was paranoid about certain things that they got there. and i feel they will come out of this

But million dollar statement it is " the safety and the quality head of the company has to be paranoid about their job - Period"

Ramesh said...

@gils - Very right. By and large , bigger companies have better systems than smaller companies - although not always The problem is that sometimes the temptation to cut corners is too great. Almost everybody succumbs to this temptation at some time or the other (after all we do it in our personal lives all the time - think of two wheeler riding without helmets). Very often companies get away with it and nothing happens; but sometimes the disaster does happen and that's what we get to read about in the papers.

@Sandhya - The saying is very right. Yes, J&J will come out of it and for some time at least they will be paranoid in manufacturing, which is good.

LG said...

Thanks Ramesh! Very informative post. Definitely no excuse for safety & quality issues - there lies the difference between mind & heart while making money. Hope J&J will look into it seriously and SHOULD come out of it. Once again thanks for the nicely written post.

zeno said...

Nothing lasts forever and nothing was built to last. No matter who or what, he/she/it should definitely go through the ups as well as downs.May sound philosophical, but an hard reality and a time tested truth.

Is the downgrade of 10 cents per share that big an impact? [I really do not know hence asking]

Is it getting too much attention and exposure, just because it is JnJ?

w.r.t medicines, I have personally visited two or three medicinal factories, One was even WHO-GMP certified.[considering there are only very few in the locality i visited and the way they bragged about, seemed it is not so easy to come by]still folks it definitely made me to think twice to take medicines manufactured by them. I am stopping right here from going further cause i dont wanna put my foot where my mouth is!

Forget the medicine you take when you fall sick. what about the food ingredients. say tamarind,how many of you folks have ever visited a place where they make tamarinds they way they are[a very essential ingredient in day to day life of indian cooking] that you buy in shops or any big supermarket?[even if it is marked export quality] just the place it gets converted from raw material and packaged! I do not want to spoil your lunch and i do not want to cover the entire life cycle which might possibly ban tamarind entirely from your household!

zeno said...

Oh, I would say that is a perfect job description for the head of safety and head of quality.Please add the term, little bit of sensibility too. yeah sensibility and paranoid are oxymorons ;)

Deepa said...

All we can hope is this is one black mark which J&J can wipe off its face. Trust takes years to build. It can't happen that you'd never fail, but what matters is what you do after that. I am with you on the last lines. Maybe not as fervently on the 'corporate Pov', but a little tilted towards the lovely smell of the baby powder and the soap and the blind faith that thats the safest thing on your skin.

Ramesh said...

@LG - Thanks. Hope its getting better for you ....

@zeno - Oh yes, the share price movement was nothing and it is high publicity because its J&J and the brands involved are household names. Don't even start off on the spices business in India - I was involved in it sometime ago and it takes a great amount of courage to continue eating Indian food. The saving grace is that we cook everything to death; so all horrors are somewhat mitigated. Amazing, your knowledge is. Hats off zeno ; you are truly very well informed.

@Deepa - Spoken more like a future mom than a corporate cat :)

Reflections said...

Thanks Ramesh....this is one informative post....honestly was glued to every line;-).
But somehow a gut feeling says they will overcome this setback....they r too big a brand to go down. I mean there is general blind trust regarding their product which is incomparable really. Sincerely hoping they do...I mean if we cant a J&J product then who else can we trust;-(

Ramesh said...

@Reflections - You put it perfectly. If we can't trust J&J, then who can we trust. Very true.

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