When you screw up (it happens), admit it, apologize briefly, and then announce your Action Plan moving forward. It's that simple.
Most people make it much worse for themselves when they screw up.
They grovel (so embarrassing).
They offer credits and refunds (undisguised bribery).
Here's what Bloomberg.com has to say about it:
To investors, too much contrition is a sign of weakness.
Publicists are quick to tell clients what to do when the corporate nightmare of a misbehaving executive or a faulty product erupts: apologize, with feeling. The consultant who coached ice cream maker Blue Bell Creameries on a mea culpa after a deadly listeria outbreak in April has chief executive officers read their talking points three times—once aloud, once to himself, and again aloud—to make sure they sound authentic. “The key is to feel the message points, not just recite them,” says Blue Bell adviser Gene Grabowski, a former PR News Crisis Manager of the Year.
Stock market investors have their own feeling about contrition, according to new research: lose it. Two business professors who analyzed more than 100 corporate apologies over three decades through 2012 found that those demonstrating the most emotion also experienced the steepest declines in share price over the following week. “The more empathy the company shows, the more they promise follow-through, the more they get slammed by the market,” says DePaul University ethicist Daryl Koehn of her research with Maria Goranova, who teaches management at the University of Wisconsin at Milwaukee.
The two put together a database spanning Johnson & Johnson’s 1982 recall of poisoned Tylenol tablets to BP CEO Tony Hayward’s infamous “I’d like my life back” crack weeks after the 2010 Gulf oil spill. The professors ranked apologies on a sliding scale of completeness. They figured the perfect apology would acknowledge responsibility, identify the harm, show a wise character, be delivered in person and on time, display empathy for victims, and promise follow-through.
No apology in their database rated as perfect, and only three got the next-best score. One came from Intuit, whose CEO, Brad Smith, wrote customers in 2010 to “deeply apologize for the pain” it caused them after an outage affecting such popular software as Quicken and TurboTax. The company’s stock fell 4 percent over the next week.
When Yahoo! CEO Scott Thompson apologized for discrepancies in his résumé in 2012, his statement took responsibility for the distraction he’d caused, not the errors, and promised to “keep moving forward.” The professors scored his apology a zero. The stock rose for several days afterward, though Thompson eventually resigned.
What the researchers had hoped to prove was that investors valued the most ethically sound apologies. Instead, the strongest finding was the negative reaction to empathy. By contrast, CEOs who identified the problem and took responsibility for it, without any empathy, got a small stock increase.
One reason empathy may disturb investors is that it’s often considered a feminine trait or a sign of weakness, the researchers speculated. All the apologizers they studied were men. A 2007 report on CEO appointments found that corporate stock prices fell more steeply when the new leader was a woman.
Another possible interpretation, according to Koehn: “If you’re showing all that pathos, empathy, and emotional connection with your audience, the stock market might say, ‘They’re actually going to do something.’ And that’s going to cost money.”
Whatever the market risks, in an era when anyone with a mobile phone can publicize wrongdoing around the world, there’s little alternative to apologizing, says Richard Levick, a Washington-based publicist who’s advised Wall Street banks and the Catholic Church. And, as he likes to tell clients, saying you’re sorry is cheap. Levick cites a 2009 University of Nottingham School of Economics study that found an apology to disgruntled customers was more effective than cash. Only 23 percent agreed to withdraw a complaint in exchange for nominal cash compensation, while 45 percent did so after an apology. “Before we’re shareholders, before we’re consumers, we are human beings,” he says.
The Texas ice cream maker Blue Bell isn’t publicly traded, so there’s no way to judge investor reaction to the recall apology earlier this year. More important, adviser Grabowski says, is that consumers stuck with the brand. When it reappeared in stores this summer, customers lined up to buy it. That response may help prove another point, Koehn says: “The market may be out of step with the ethical expectations of the population at large.”
The bottom line: While sincere apologies can bring down stock prices, customers prefer a prompt “I’m sorry” to cash compensation
