Johnson & Johnson: Over 130 Years of Caring at Risk?

 

Johnson & Johnson (J&J), the American conglomerate specializing in pharmaceuticals, health-related consumer products, and medical devices, has long evoked fond memories of tear-free baby shampoos and soothing lotions. It has served as the poster child for a company that truly cares about its customers. 

However, that image and the deep emotional connection J&J has cultivated with customers worldwide has started to crumble. This is most recently due to its role in the opioid epidemic. In August 2019, an Oklahoma judge ordered the company to pay over half a million dollars to the state for “helping to fuel the state's opioid epidemic by aggressively marketing painkillers,” according to CBS News. That ruling sets a precedent for additional lawsuits and potential verdicts against J&J. 
 

J&J's Reputation is Hit From All Sides
 

Aside from the monetary consequences, J&J faces another problem: a loss of reputation that stems not only from the opioid crisis, but from other hits to the pharmaceutical industry, as well. Those include mounting public and regulatory scrutiny, given the highly publicized increase in drug costs and accusations that pharma companies are focused only on profits.

As other industries have seen an increase in reputation, the pharma industry has struggled. This is due largely to pharma companies’ inability to convince the general public that (a) they are acting in a fair and transparent way and (b) that they contribute to making the world a better place. 

J&J, especially, is a company on trial in more than just a legal sense. Over the past years, the company has been thrust into the public spotlight for all the wrong reasons, including multiple lawsuits and financial settlements linked to its talcum powder, pelvic mesh and blood-thinner products. Based on our own RepTrak  studies, J&J’s reputation has suffered as a consequence.

 

Where J&J was once ranked as the sixth most reputable company in the United States in early 2016, it dropped out of the top 100 by the beginning of 2018. Even more alarming, the company’s reputation reached a new low in the average range as of June 2019. During that time period, its share price has also, for the most part, lagged behind the S&P 500 Health Care Sector Index, and as of Q2 2019, revenue has seen a year-over-year drop — a first since the end of 2015.  

What are the main drivers of J&J’s latest reputation decline in the eyes of the informed general public? The graphic below shows the company’s reputation score as well as its performance evaluation in seven business domains as of June of 2019, and the change in scores over the previous six months. 

        

With a nearly eight-point drop since January 2019,  the public has clearly framed the latest reputational crisis for J&J — the opioid crisis — as a Governance issue. While the company’s perception of being fair and ethical used to be rated as average, it has dropped into the weak range. 

Other business areas have not remained immune to the reputational fallout, either. J&J’s perceived performance has dropped in nearly all of them, including its Products & Services. The fact that J&J has been judged most harshly on Governance and Products & Services is especially concerning; these two business domains are the most critical in driving a company’s reputation in the pharma industry.       

So what are some of the reputational strategies J&J can leverage to turn things around?
 

Implications for J&J
 

It will take a series of responsible decisions and a multi-faceted strategy to reposition J&J as the nurturing company that it once was. They should:

  • openly and transparently cooperate with the authorities as the company deals with each lawsuit.
  • remind stakeholders of the credo and core purpose of the company, and its track-record in supporting the well-being of people for generations.
  • stress the specific actions J&J will take to fulfill its credo of caring for its customers and feature the steps it will take to deliver on that promise in the future.
  • reinforce the company’s efforts to meet high ethical and moral standards.
  • engage influencers to shape the public narrative around the company, and help change the conversation by putting the focus back on its commitment to corporate responsibility.

Of course, there are no guarantees that J&J can bounce back. 

How likely is it for the iconic American company to recapture the trust and support of its key stakeholders? While a good reputation serves as a buffer during times of crisis, some of the goodwill J&J earned has eroded. As we have seen from numerous companies shaken by crisis — VW, Facebook, or Wells Fargo to name a few — winning back a lost reputation is an arduous process, necessitating resources and commitment. 

J&J no doubt has the intent and ability to turn things around, and perhaps its strongest asset is its history of stronger reputation scores, and over 130 years of caring. That means something in the hearts and minds of stakeholders. Time is of the essence, and memories are increasingly short.

 

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Sven research riSven Klingemann, PhD

Research Director
Reputation Institute
sklingemann@reputationinstitute.com

 


 

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