Leadership and Organizational Management Exam 4
What did CEO James Burke call the Tylenol scare?
" the single most important POSITIVE thing that has ever happened to the corporation"
How much do Americans spend annually on nonessential items?
$1.2 trillion
How much do Americans spend each year on cosmetic surgery?
$16 billion
What was Doug McMillan's total compensation in 2021?
$22.5 million base salary: $1.2 million bonus: $3.8 million stock options: $17.5 million
What was the average donation for Sanders' 2016 campaign?
$27.16
How much is spent on ads in the US?
$297 billion
How much do Americans use on athletic apparel?
$30 billion
How much has Philly collected from the tax revenue so far?
$385 million
How much do Americans spend on weight loss each year?
$50 billion
How much is the average gym membership in the US?
$55 a month
How much do Americans spend on cosmetics each year?
$55 billion
How much did Sanders raise for his 2016 campaign?
$73 million
How much is spent on advertising worldwide?
$780 billion
How much did Takata pay to resolve the situation?
- $1 billion for investigation - $25 million fine - $125 million for victim compensation - $850 million to auto companies
What would Amazon bring to Philly?
- $5 billion in construction spending - the potential of 50,000 jobs (high-paying tech) - prestige of having a world-class company in Philly - new people = boom to local economy - attract other companies to come = new jobs - taxes that help fund city services
J&J's Response
- 93,000 bottles of Tylenol in the Chicago area were recalled from shelves immediately - Internal manufacturing investigation was launched in cities that manufactured the pills Fort Washington, Pennsylvania, and Round Rock, Texas - CEO James Burke went to Washington to meet with the FDA and FBI and told them to recall his own product because it was the right thing to do - Within a week, all 31 million bottles of Tylenol on the market were recalled - First national recall of any product ever!
J&J's Consumer Research
- 94% of American public was aware of the Tylenol poisonings incident - 61% said they weren't likely to purchase Tylenol in the future
J&J's immediate Response
- CEO goes on National TV - "We're sorry", "We don't know how this happened", We're working with authorities to investigate and we will keep you updated as often as we can"
What were reactions to Jobs being fired?
- Jobs was devastated - employees were relieved
J&J'S Response pt.2
- Massive communication effort launched - 500,000 mailgrams sent to doctors, hospitals, distributors 888 toll-free crisis phone lines established - Spokespeople field 500 press calls per day - CEO James Burke and other executives appeared in the media every day J&J's message: Do Not Take Tylenol!
Not Really Anyone's Fault Examples
- McDonald's loses to CEOs in less than 6 months - closing due to Covid-19
Who is driving the soda tax initiative?
- Philly mayor Jim Kenney - supported by city council - local legislators and educators
Who does Walmart own?
- Sam's Club - Walmart International - Walmart U.S.
Who have now also levied taxes on soda?
- Seattle - San Francisco - Boulder - Cook County, Chicago
Immediate Impact on J&J
- Stock dropped 7 points - Recall cost nearly $200 million - J&J's share of pain reliever market dropped from 35.3% to below 7% - Experts said: "Tylenol as a brand is dead."
Failure of Competence Example
- Takata airbag recall - faulty airbags exploded and sent car parts into the body of both the driver and passenger - Takata was aware of the problem, but didn't correct it - 16 deaths, hundreds injured, 40 million vehicles recalled - largest automotive industry recall in history
Bernie Sanders
- US Senator from Vermont - not a democrat or republican; identifies as an independant - favors liberal causes - ran for pres. in 2016 and lost democratic nomination to Clinton (13 mil. to 17 mil.)
Customer Service Crisis Example
- United Airlines assaults and drags man off of plane because they overbooked - the man was chosen at random, but refused to leave - people on social media were outraged - United Airlines issued a statement explaining what happened but issued no apology - they apologized for the overbooking instead of the assault of the man and stated it was being handled by authorities
What are people internationally thrown off by when speaking to English?
- accents - speaking too fast - idioms
What usually makes up a CEO's compensation?
- base salary - bonus (based on performance) - stock options
What are some tips for international business people?
- be aware of where you are - work hard to understand the culture (customs & etc.) - avoid idioms - be patient with the other side (don't try to reach agreements quickly) - be honest
Why did Queens say no to Amazon?
- believes money would be better spent rebuilding the broken subway system and improving under-funded school system - most people in Queens wouldn't be qualified for these jobs - rise in real estate values and higher rent; harder to find affordable housing
Steve Jobs Life
- born in SF - put op for adoption - attended Reed College ad dropped out - went to India for enlightenment and studied Zen Buddhism - took LSD and said it was one of the most important things he had done in his life
Sam Walton
- created Walmart in 1962 - Strategy: lowest prices anytime, anywhere
What do critics of advertising say?
- creates dissatisfaction with life - leads to unhappiness - encourages excess consumption - encourages selfishness and materialness
What are the three categories of crisis?
- customer service issues - failures of competence - events that are no one's fault
John Mackey
- disagrees with Friedman and Rogers - believes value should be created for all constituencies - there is a humanitarian dimension to capitalism
How J&J Recovered: Retailers
- discounts - advertising allowances - full refunds
Al Dunlap's Abuse
- fired 11,000 employees (1/3 of total) - fires people on the spot - yelling and screaming - slashed R&D budget and closed manufacturing plants - eliminated all charitable activities - moved headquarters from Philly to Boca Raton so he could play golf year-round
John Stumpf
- former CEO of Wells Fargo - Involved in Wells Fargo Scandal - Not allowed to work at a bank again - Must pay $17.5 million in fines
What did Jobs do later?
- founded Pixar and NeXt - Apple bought them in 1996 - Jobs was brought back as CEO of Apple
What did experts say about how J&J handled crisis?
- honest - consumers and patients were top priorities - quick corrective action - open communication channels - faith in product - protected company's image - brought back brand aggressively
How J&J Recovered: Consumers and Physicians
- hotline - coupons - letters - 1 million presentations to MDs
What are Amazon's new HQ requirements?
- in North American metro area with more than 1 million people - local and regional talent, especially in software development - stable and business friendly environment - proximity to well-connected airport and walkability "someplace hip millennials want to live"
What do defenders of advertising say?
- informs people on goods and services - sells images of glamour, sex or adventure that consumers crave - aspect of free competition in a competitive market - subsidizes the media
What kind of leader was Steve Jobs?
- intense leadership style - alienated underlings and executives - management style characterized as "abusive" and "belligerent" - tremendous motivator; pushed people to strive for excellence and deliver - his behavior was celebrated when Apple thrived
How to give and get good information whilst traveling abroad?
- know where information flows - don't get straight to the point - don't mistake a courteous answer for the truth - don't break the silence, it's a form of speech - learn the different types of body language for different areas
Al Dunlap Overall
- made money for himself and shareholders - didn't build anything instead he destroyed and liquidated - he's not allowed to run a public company ever again
What else does a CEO do?
- make sure the company is developing new products - hires (and fires) a senior leadership team that manages day-to-day operations - responsible for short and long term profitability and growth of the company
What must CEO's do?
- manage their time - make decisions
Caterpillar and Peoria
- moved their headquarters from Peoria to Chicago - impacted workers; lost their jobs
Who is Al Dunlap?
- named CEO of Scott Paper in 1994 - had full support of higher ups to do what he deemed necessary for results -
Drawbacks of Amazon Coming to Philly
- new jobs might go to people from other areas; Philly might not have enough high-tech workers - more traffic and congestion - higher housing costs - loss of tax revenue; Phill will give Amazon tax incentives to build HQ
Indirect Tax
- not directly paid by by an individual consumer - government levies the tax onto the merchant - merchants pass it onto the consumer by including it in the price
J&J's Tylenol Extra Strength: Pre-controversy
- one of the first aspirin substitutes - 1982: Tylenol had 35.3% of the $1.2 billion pain reliever market; more than combined sales of Bayer, Bufferin, and Anacin - 1979: Tylenol broke the 18 year dominance of Crest toothpaste to be the largest selling health and beauty aid in America - Tylenol represented 8% of J&J sales, but 17% of profits
J&J: May 1983
- regained all of it's market share (35%)
How J&J Recovered
- regular updates to stockholders - J&J visited 160 congressional offices
What was the Lisa?
- released under Jobs' guidance - first computer with a graphical user interface - technical marvel, but flop sales-wise
What does a CEO do?
- sets strategy and direction - determines how the company spends its money - keeps and eye on the market and the competition
Al Dunlap's results
- shareholder value increased 225% - company was sold to Kimberly-Clark - Dunlap received $100 million for 18 months of work -
How did the Macintosh do?
- sold better than the Lisa - didn't sell well enough to make a sizable dent in IBM's control of the PC market
What do CEO's have a lot of?
- stakeholders ex. shareholders, board of directors, customers, employees and etc.
How should you behave in crisis?
- stay calm - be visible - put people before the business - tell the truth - know when to get back to business
Benefits of Local Business
- stick around and generate income for years and generations - have a smaller carbon footprint - dollars spent there tend to circulate in the local economy longer
What does a community want from business?
- taxes - jobs and healthcare benefits for employees - products and services - support for the environment (pollution, recycling, etc.) - support of local charities - a good partner in urban planning
What did a 2021 study for Rutgers find?
- the soda tax created 800-1,350 jobs before the pandemic - the increased funding for childcare services freed up low- income parents to enter the workforce
What are some characteristics of great leaders?
- they have a vision for the company - they ensure the organization is aligned - they ensure people see beyond their department or unit - they're good teammate - they groom their replacement
How J&J Recovered: Employees and Retirees
- videos - letters - "Ask your pharmacist to restock..."
How J&J Recovered: Public
- videos for TV - tamper-resistant packaging - execs interviewed by various media
Richard Branson
- was dyslexic - almost didn't graduate high school - told by principal that he was either gonna be a CEO or be in jail - opened chain of record stores - expanded the Virgin Records label into airline company (Virgin Atlantic Airlines) - now owns over 400 companies
J&J's Recovery Plan
-Phase 1: Figure out what happened - Phase 2: Assess and contain damage - Phase 3: Get Tylenol back on the market Protect consumers and patients at all times
How much did Philly start taxing sugary drinks 5 years ago?
1.5 cents an ounce following a contentious debate with the local business community
How many suppliers does Walmart do business with?
100,000
How many workers have local business workers been forced to lay off?
12,000
How much have water sales gone up in Philly?
13%
How many items are in the average American home?
300,000
How much are the sale of sugary drinks up in suburban areas?
36%
How much have the sales of sugary drinks fallen in Philly?
38%
What do CEO's earn compared to their average worker?
399x
How many gym members never use their membership?
60%
How many distribution plant workers did Pepsi have to lay off?
80-100
How many millennials are influenced to make a purchase by advertisements?
81%
How many advertisements influence consumers to make a purchase?
90%
Who is Doug McMillan?
CEO of Walmart
What was Al Dunlap's nickname?
Chainsaw Al
Matching Gift Programs
Employees donate to non-profit organizations and their company matches their donation
True or False: Most people around the world speak English
False; outside major cities, most project or field offices, employees don't speak english other than in basics; they can read or write english at a basic level
J&J's Tylenol Extra Strength Scandal
October 1982: 7 Chicago consumers died after ingesting Tylenol Extra Strength that had been laced with Cyanide - no one was ever charged because there was no evidence of it being external or internal - 2,000 leads were investigated
Who was the first major US city to pass a tax on soda?
Philadelphia
Who was forced to close because of the soda tax?
ShopRite on Haverford Avenue - they were located on the city limit and customers could easily travel outside of the city to buy their sugary drinks
How much has the average American home increased in size over the past 50 years?
Triple
True or False: The soda tax was a contentious issue in the run-up to Mayor Kenney's bid for reelection in 2019
True
Idiom
a common, often used expression that doesn't make sense if you take it literally - American idioms usually rely on metaphors and analogies - Ex: raining cats and dogs
What is Richard Branson known as?
a great listener (wants employees to come up with ideas)
What is the Philly Soda Tax?
a strategy by Philly to generate tex revenue from sugary drinks to fund community schools, pre-k programs, recreation centers, libraries and parks
corporate philanthropy
all business donations to nonprofit groups, including money, products, and employee time
What else did Philly add to be taxed?
artificially sweetened "diet" sodas
Milton Friedman
believed businesses had no moral obligations or social responsibility, only maximizing profit
TJ Rogers
believed the sole purpose of a business was to maximize profits for investors
What is one way that business can affect a community?
charity
Bossa Nova
company that sells robots to Walmart; had to lay off 50% of employees after Walmart changed it's minds about using them for inventory
What has Sanders been called by his oppositions?
democratic socialist and/or a communist
Walmart is the largest private ________ in the U.S.
employer; employs more than twice as many people as Amazon (second largest employer)
What did Richard Branson do in 2004?
founded spacelight corporation Virgin Galactic (focused on space tourism)
What is the local business community saying about the Philly mayor?
he didn't listen to their side of the story
Why didn't Sanders perform well in college?
he found the classroom "boring and irrelevant"; his most significant learning was from community activism
What did Steve Jobs want in the early 1980's and how did Apple respond?
he wanted to be a CEO and the BoD didn't think he was ready
Excise Tax
indirect tax charged on the sale of a particular good or service Ex: - fuel - tobacco - alcohol
What do executives agree on the largest issue with doing business internationally?
language
Walmart
largest retail corporation of discount department and warehouse stores in the world
Who is influenced the most by advertisements?
millennials
Who does Sanders believes need help?
people who can't help themselves; he supports: - free college - universal healthcare - $15 an hour minimum wage
What is the #1 factor that determines what CEO's are paid?
performance
What did Walmart announce last year?
plans to extend use of robots in store to lower labor costs
Why was Jobs fired from Apple?
power struggle with CEO John Sculley
Social Proof
principle of persuasion which maintains that people are especially likely to perform certain actions if they can relate to the people that performed the actions before them
What does advertising influence?
purchasing decisions
The Local Multiplier Effect
refers to the enhanced financial well being a community gains when it supports locally-owned businesses
What has been the fastest growing segment of the commercial real estate industry over the past four decades?
rental offsite storage
Which one do Americans spend more on: shoes, jewelry, and watches OR higher education?
shoes, jewelry, and watches
What is one way to be a good listener?
show empathy - try to understand the other person's point of view even if you don't agree
Who did Sanders accept contributions from?
small individual donation; he didn't accept money from Super PACs or wealthy donors
What did Philly exclude from the tax?
sugary fruit juices
What does Walmart pay a lot of?
taxes; helps to improve the communities where Walmart operates
How did the local business community respond to the Philly tax?
they said the tax would hurt the local economy and many people in the city (especially poor people)
Why is Amazon opening up less stores?
they spent $1 billion remodeling existing stores and developing it's online grocery delivery and pickup service
What happened with prospective donors in a fundraising campaign?
they were shown a list of neighborhood donors; the longer the list the more people were willing to donate
What did Walmart change in it's decision to use robots?
they'll no longer use them for monitoring inventory but will use them for cleaning floors and unloading trucks
Volunteer Grant Programs
when employees donate their time to a nonprofit organization, their company donates money to the non-profit
