IN THE CORPORATE CULTURE: THE HIGH COST OF EVADING THE TRUTH—THE JACK IN THE BOX CASE

October 22nd, 2012
Jim Thomas

In any organization, suppression of the truth, in all of its myriad variations, is a lethal adversary of Integrity. Without Integrity good works, products, and services find fewer and fewer takers. The competitive edge is diminished and damaged. The penalties, too, are often high.

Note the case of Jack in the Box, as reported in Johnson and Phillips’ book, Absolute Honesty, American Management Association, 2003.

The case arose during a period marked by contaminated and poisoned products appearing in the market place. The Tylenol case was among them. That company’s upright chief executive minced no words and told the unfettered truth, while removing its product from the market. It came back stronger than ever because consumers believed they could trust it.

Jack in the Box adopted a different approach. From 1992 through January 1993 accounts were publicized that contaminated beef served at company stores was linked to the illness of 700 people. The Center for Disease Control in Atlanta concluded the culprit originated in tainted meat. The material was insufficiently cooked at company restaurants.

Washington State Health Department confirmed findings at Disease Control. Whereupon Jack in the Box immediately denied all responsibility. It claimed its sickened customers had dined at other restaurants before becoming ill. Six days of silence followed.

President Robert Nugent of Jack in the Box admitted his company was in fact the source of the contaminated food. However, he combined the admission with an attack on the Health Department’s failure to distribute food handling regulations in a timely manner.

His approach proved ill-advised. Public response was as negative as it was disastrous. Newspaper editors far and wide accused Nugent and his company of shirking its responsibilities. By the end of March 1993 the debacle had cost Jack in the Box in excess of $30million in lost revenue. Liability damages eventually exceed $100 million.

Harry Beckwith, one of the country’s leading authorities on marketing, author of the acclaimed book, Selling the Invisible, has this advice for his clients: “Invest in and preach Integrity. And tell the truth, always. For even when it hurts it will help.”



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