In today’s unforgiving business climate, what exactly should CEOs say when they make a mistake or suffer a setback of their own making? There are really only two options.
Plan A is to hunker down and hope that no one notices, disclose nothing, admit less, be stingy with facts and, when pinned down, delay and blame forces beyond your control. The business, under Plan A, is a fortress. The only protection is to keep the moats filled and the gates lowered. Besides, apologizing shows weakness and indecision. Leaders can’t allow their followers to get rattled at this perilous time. Isn’t an apology akin to an admission of liability that will be turned against you when the lawsuits start flying? The lawyers, God bless them, will always give you cover when you go with Plan A.
Plan B is to recognize that business is now conducted in a hyperconnected world where transparency rules, secrets are impossible, information cannot be controlled and accountability is assigned regardless of how a CEO ducks and weaves. The business, under Plan B, is akin to a college campus where the unfettered flow of information lets everyone see deeply into who they are, what they stand for and how much integrity they have. This accountability allows you to turn the conditions of transparency to your advantage. Plan B means acknowledging the facts, accepting responsibility and offering not just an apology, but an effective one. (See sidebar “The Five Rs of Effective Apology.”)
The Five Rs of Effective Apology
Effective apologies are as unique as the offenses that inspire them, but they all have, in varying degrees, five dimensions. You will easily remember them if you think of the five Rs of effective apology: Recognition, Responsibility, Remorse, Restitution and Repetition.
RECOGNITION-acknowledging the offense-establishes that an offense requiring apology has been committed. To the offender this step may seem as obvious as the offense itself and therefore it may be tempting to just get through the apology or “get on with it.” But more often than not, skipping the recognition step results in a statement that just compounds the offense because it leaves the victim uncertain whether the apologizer understands why the victim is so upset.
RESPONSIBILITY-taking ownership of your role in the consequence of your behavior—is essential to an effective apology. What distinguishes effective from half-hearted apologies is the integrity that offenders demonstrate when they look deep into their hearts and reckon uncompromisingly with what they find there. In fearlessly pushing away all excuses, the apologizer retains undiluted responsibility. Underlying it all is the intention that the offender values the relationship and desires to rebuild it on terms agreeable to the victim.
REMORSE-signals the offender’s contrition. Remorse is the feeling that we get when we realize that something we did hurt someone, that it was wrong and that we wish we could undo what we did. Because there is no way to know whether someone else is experiencing remorse, we rely on a variety of verbal and nonverbal cues. By far the most important verbal cue, without which a statement falls short of being an actual apology, is the phrase “I’m sorry” or “I apologize.” Using the words “I’m sorry” or “I apologize” is pretty much nonnegotiable. It is, in fact, the entire reason for the apology, and without such an expression you may as well not bother with the apology at all.
RESTITUTION-is the practical attempt to restore the relationship to what it was before you broke it. Effective apology is more than just words. You can’t talk your way out of a situation you acted your way into. For serious breaches, the offender must demonstrate a concrete expression of contrition. In other words, it must have some element of action. Without restitution, it becomes more difficult for offended parties to accept an apology, however well crafted.
REPETITION-is a promise to the victim that the offender will not repeat the offense. A particularly effective phrase is a variant of “I promise it will never happen again.” It is often effective to end the apology with such a commitment; communication theory suggests that people remember best what they hear last.
For most of business history, Plan A has been the default position that CEOs took when something went wrong. We have only to look around to see how well that has worked out. The standing of CEOs on the dimensions of competence and integrity has never been lower. It’s time to give Plan B a try. Luckily, there is evidence that apologizing, accepting responsibility and acting in a transparent manner has significant advantages for CEOs. Apology is not a get-out-of-jail-free card, but it’s less costly than the alternatives. Leaders who apologize just have better outcomes than those who don’t.
Misstating Academic Credentials: A Tale of Two CEOs
Within months of each other in 2006, two CEOs came under fire for misstating their academic credentials. One CEO was forced to step down while the other is still at the helm. David Edmonson, CEO of RadioShack Corporation, admitted that the company’s web site gave him a credential he never actually earned. At yellow pages publisher R.H. Donnelley Corporation, Chairman and CEO David Swanson admitted that he never actually earned a degree from the university he attended, despite what the company said in news releases and what it posted on the web site. The CEO who chose Plan A (RadioShack’s Edmonson) was forced to resign, while Swanson who chose Plan B is still R.H. Donnelly’s CEO.
Edmonson now acknowledges a candid and immediate apology might have saved his job. Currently CEO of Fort Worth-based EasySale, Inc., Edmonson admits he made a mistake by not immediately correcting the biography that RadioShack distributed to the news media and posted on its web site. Then when a story appeared on the front page of the Fort Worth Star-Telegram in February 2006, he should have apologized immediately. Instead, Edmonson made three classic errors. He delayed. He got defensive by deflecting responsibility (“I wasn’t responsible for the web site.”). And he tried to explain. These behaviors led to a death spiral from which no CEO can recover.
Over at R.H. Donnelly Swanson went to his board before the issue became public. Swanson accepted total responsibility and apologized. The company nervously issued a news release to correct the record, but it never became a problem. At the time, news reports about the incident praised Swanson for his candor. With hindsight, Edmonson recommends that CEOs incline toward more transparency. “When you own up to your own shortcomings, the fear of whatever you are guarding is released,” he says. “Apology frees you from the burden of whatever you have in your past.” Swanson didn’t respond to a request for comment for this article.
Pantheon of Apology
Many CEOs appear to have gotten the message. Consider the numerous CEO apologies that have made the front page just in the past few months:
- Apple’s Steve Jobs for presenting confusing information about the status of his health. Earlier, he apologized to its most ardent customers for slashing the price of iPhones two months after they stood in line for the high-priced item.
- Amazon’s Jeff Bezos for not having a sufficient supply of Kindle readers for the holiday season.
- Whole Foods CEO John Mackey for writing anonymous posts on financial message boards.
- Steve Hughes, former CEO of tea-maker Celestial Seasonings, for poisoning prairie dogs on company property.
- General Motor’s Rick Waggoner for failing to invest in small cars and other misjudgments.
- Facebook’s CEO Mark Zuckerberg for heavy-handed tactics that many Facebook customers felt would threaten their privacy.
Evidence suggests that apology may be positively correlated with compensation. The Pearl Outlet, an online retailer, noticed that some customers, invariably men, presented pearls as part of an apology, usually to wives and girlfriends. The company wanted to know more about this relationship between pearl giving and apology. If there really was a correlation, its next marketing campaign would be a no-brainer: “Say you’re sorry with pearls!”
The company commissioned a formal study of over 8,000 customers. The survey confirmed that customers who were willing to say “I’m sorry” earned more money-nearly twice as much-than those who rarely or never apologize. Stated another way, customers who earned more than $100,000 a year were twice as likely to apologize after an argument or mistake as those earning $25,000 or less. It turns out that a customer’s willingness to apologize is a perfect predictor of their place on the income ladder. In addition, the relationships of those who apologize tend to be better (or at least longer lasting) than relationships of those who resist apology.
The Pearl Outlet study is consistent with social science research on apology. People today have no patience with arrogant leaders. Nor does apology have the same stigma it had 25 years ago, when apologizing was widely considered a sign of weakness and leaders feared their apology would be used against them in court. The perception of apology has shifted 180 degrees. Apology is now widely seen as a sign of confidence. Leaders who apologize effectively send a message that they are accountable, transparent and humble, precisely the qualities that most leaders are expected to model. Perhaps the biggest benefit of apologizing is that it gives leaders a platform to be proactive.
Not all CEO apologies end up with the CEO in place. JetBlue Airlines’ Dave Neeleman apologized for how unprepared JetBlue was following a 2006 Valentine’s Day snowstorm that stranded thousands of passengers. Despite his world-class apology, the JetBlue board replaced him. All apologies require a gesture of sacrifice. In many cases, just the sight of the CEO admitting error and humbling him- or herself is enough. In some cases, the apology is not complete without a resignation. In the coming months, a number of CEOs under fire for the economic downturn will confront this reality.
Transparency is Liberating
Another benefit of apology for CEOs is that it reassures people that the CEO is on their side. CEOs who acknowledge fault with a genuine apology argue against people’s suspicion that they are indifferent to the pain their companies have caused. From this position, people are more likely to forgive. The truth of this was most dramatically proved by Johnson & Johnson during the Tylenol tampering case. More recently, the same dynamic played out at Mattel Inc. when the toymaker had three recalls in one summer, representing 18.2 million toys, the most in company history, because of lead paint and design flaws.
“I started every discussion on the recall with these words: ‘I am sorry we are here. I’m sorry this recall happened,’ ” says Robert Eckert, chairman and CEO of Mattel. “Even though the lead-based toy recalls represented less than 1 percent of all the toys Mattel produced, it should have been zero. I’m sorry you have to worry about this.” Eckert just kept on apologizing in person, on TV and in print. He was even criticized for apologizing too much. But the results supported his commitment to accountability. Many analysts predicted that the Mattel brand would suffer. Instead, the company exceeded revenue expectations.
“In a world where nothing stays hidden, powerfully acting as if you have nothing to hide demonstrates real leadership,” says Dov Seidman, chairman and chief executive officer of LRN. “With the genuine apology comes a taking of responsibility, which is always the first step in reestablishing relationships and from there you can work through the situation at hand.” Without a relationship, Seidman adds, resolution is impossible.
Accountable CEOs The companies of CEOs who accept accountability tend to outperform the companies of CEOs who don’t (see sidebar “Accountability Promotes Stock Value”). That’s because CEOs who assume that the problem-whatever it may be-starts and ends with them are in a much more powerful position to actually do something about it. Jack Pelton, chairman, president and CEO of Cessna Aircraft Company is a good example of this breed of CEO. At a recent international Cessna sales conference, in front of 400 or so Cessna employees, dealers and partners, Pelton gave a report card of how the company and its CEO were doing. In the area of customer support, Pelton assigned himself a failing grade. “From a leadership standpoint, I don’t think I’m personally doing enough, and for my efforts in customer service and support, I believe I deserve an F,” he told the astonished crowd. “Customer service and support starts in my office, and I apologize to you for not having done more.” Then Pelton described the steps he was personally taking to correct the problem.
Accountability Promotes Stock Value
One of the benefits that accountable CEOs bring to their organizations is the willingness to blame poor performance on controllable internal factors rather than offering excuses outside their control. Studies have shown that the stock prices of companies with CEOs who refuse to distance themselves from bad news are significantly higher than those run by CEOs who blame poor performance on external factors.
In a 2004 study of annual reports, Fiona Lee of the University of Michigan and Larissa Tiedens of Stanford showed that stock prices were higher one year later when CEOs blamed poor performance on controllable internal factors rather than on external issues. The conclusion is that CEOs who assume that problems are of their own making are in a much more powerful position to actually do something about them than CEOs who concede they are powerless. The results are also consistent with studies that have shown that consumers reward organizations that admit failure, accept responsibility and show contrition.
The CEO’s humility made it easier for Cessna to take corrective action. Cessna, the world’s largest manufacturer of general aviation airplanes, took Pelton’s self-assessment to heart and beefed up its customer service and support. “It won’t do for a CEO to admit a weakness and then it’s off to the golf course,” Pelton says. Accountability must be followed by performance. “There is strength in recognizing a weakness, articulating it and then determining to do something about it,” he adds.
Apology and Liability
Mounting evidence is clear that the healing power of apology goes a long way to avoiding expensive litigation and minimizing damage awards. If you want to minimize liability, the best course is to keep your mistakes small. But if you make a big one, there is still something leaders can do to minimize liability. Just say you’re sorry.
Conventional wisdom has cautioned executives that an apology will be viewed as an admission of liability and will be used against them in court. But that thinking is increasingly out of touch with reality. The federal government and 34 states, including
Randall Johnston, a lawyer with Dallas-based Johnston-Tobey, is wellknown for suing fellow attorneys for malpractice. In his opening statement to juries,
Apology is the ultimate transparent act. It’s a powerful, even transformational, act of leadership.
Apology is an indicator of confidence and strong people skills focused on repairing strained relationships. CEOs who display compromise and reconciliation traits tend to advance in any organization. In the same way, people with undefended personalities who are not afraid to confront and learn from mistakes also tend to be more successful.
John Kador (email@example.com) is a contributing editor to Chief Executive. He is the author of Effective Apology: Mending Fences,