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Tuesday
Mar312015

SC Johnson case -- a test of values

An article in the current edition of Harvard Business Review captures the dynamics of managing a privately owned business with strong, long-held values and the tough decisions these companies are faced with on many levels.
 
In it, the CEO of SC Johnson presents a case study of sorts based on the company's Saran Wrap product. Framed in terms of "revenue vs. goodwill," the piece talked about the pressures he faced when deciding whether to replace the existing, successful product with a reformulated one that eliminated a questionable chemical but had inferior performance.
The goodwill of people is the only enduring thing in any business. The rest is shadow"

Ultimately, the company went with the reformulated product. As a privately held venture it did not face a shareholder backlash, but it was not an easy decision by any means. Inside the company there were vocal proponents of sticking with the existing formula beforehand, and afterwards the brand's financial performance did suffer as its relative market share dropped.

 
CEO Fisk Johnson maintains it was the right decision, based on the longstanding values of the company that put trustworthiness above all else. "Back in 1927 my great-grandfather said something that has been a guiding principle for me throughout my career: 'The goodwill of people is the only enduring thing in any business. The rest is shadow.'”
 
Across the corporate world we see a growing number of companies making commitments to higher values -- though we also see market pressures pushing managers arguably in an opposite direction. This is a tension we will see arise more often, and in more high-stakes decisions than before.
 
Key questions from examples like the Saran Wrap case include:
  1. When core values conflict with financial performance, what is the deciding factor?
  2. And what are the time horizons that will be used to make the decision -- will the calculation look at the long-term or the immediate impact?
-- Segundo Saenz & Bojan Angelov