Wednesday, September 21, 2011

Netflix to Customers: Up Yours- Why Phony Corporate Apologies Backfire

As I read Reid Hastings’ letter to customers, in what appeared to be an apology for the price increase mess, my expectations were met immediately with disappointment, then disbelief.

Here’s a smart guy who shot a huge torpedo into the guts of his company, watched it blow up, and is still assessing the damages. So, he decides that what his departing customers need to hear, rather than an apology, is a bunch of management school gibberish that fails to answer two big questions: What were they thinking? And Do they really care anyway?

Instead of apologizing (although Hastings uses the word three times), working to mollify both the thousands who have left, and the thousands who will leave, he writes a letter that says essentially,” I love myself. I am really really smart and you should love me too. Let me count the ways for you.”

What follows is the mantra of American business today: never apologize, never, never, never. If you want to look like a sissy, apologize. If you want to look weak, apologize. If you want to look like a cave-in to the lesser mortals, apologize. Want to look utterly silly in front of your business school buddies (male or female), apologize. If you're a coward, apologize.

When will these business types begin to understand the two crucial ingredients of the relationship with any and all constituencies? Trust is based on providing information before the potential victims need it. Netflix failed here. And a sincere apology is actually the atomic energy of empathy, and can prevent or at least moderate the creation of critics and victims, while detoxifying bad news.

A credible apology has five principal components:

1. An admission that harm was done through the actions of the perpetrator.
2. The perpetrator explains and shows evidence of understanding the nature of the harm caused.
3. The perpetrator’s statement of profound regret, remorse, and recognition contains some of the lessons the perpetrator has learned that will help avoid similar harmful circumstances in the future.
4. The perpetrator humbly asks for forgiveness from all those affected.
5. The perpetrator voluntarily imposes some serious penance for the benefit of those adversely affected, and may even invite in outside oversight to ensure that appropriate measures have been taken to resolve the matter, and prevent future mistakes.

Instead, in what has become the classic style of business faux apology, Mr. Hastings does the following:

1. Attempt to explain what the company is doing and why. The question is: Why we should care?
2. He talks about what was “not their intent” by explaining that in fact all this turmoil was their intent “it wouldn't have changed the price increase, but it (telling you about it) would have been the right thing to do.” What on earth does this mean?
3. He talks about himself throughout the entire letter, which was supposed to be, one presumes, to help customers adjust to the company's screw-up. Mr. Hastings uses “I” a dozen times. What incredible arrogance.
4. He continues his devastating customer discussion by mentioning that there will be two websites and to make it more complicated for customers these sites will be separate and incompatible. Why doesn't he just say that they want their DVD customers to take a hike to the thousands of little red one dollar machines on every street corner?
5. He pulls the same stunt so many business perpetrators do by issuing, what amounts to a fourth phony apology at the end of the letter, “ . . . And to apologize again to those members, both current and former, who felt we treated them thoughtlessly”. Thoughtlessly? The company's action caused tens of thousands of families to sacrifice a small but crucial personal pleasure due to the yet to be plausibly explained greed of his company.

Failure to apologize effectively always leaves far more questions than answers. Yet, does Mr. Hastings respectfully invite additional inquiries and promise additional explanations?

His last sentence essentially says it all, “The Qwikster and Netflix teams will work hard to regain your trust. [How? By splitting the service in two and making everything more complicated and expensive?] We know it will not be overnight. [How many more arrogant screw-ups do you have in store?] Actions speak louder than words. [Tell us about it.] But words help people to understand actions.” [Maybe it’s time to take an empathy course, probably at a small school in Minnesota. You won’t find it in any business school curriculum.]

Translation: Up yours, strong message (We only care about ourselves.) to follow.

Rarely in the annals of a successful consumer franchise like Netflix can its legacy be so quickly and permanently stained. Yes, permanently . . . this goofy decision and its self- inflicted consequences will always be included in stories, discussions, and analyses of this company.

Bad news ripens badly. And this story and this product will still be decaying for a while.

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Monday, September 12, 2011

Chief Integrity Officer is Tailor Made for PR

The PR profession suffers from schizophrenia. On the one hand, PR people want to be at the table making decisions and guiding strategy with the boss in good times and bad. On the other hand, many want to serve as the guiding conscience of their organizations.

So far, the record for the profession in either arena is mixed. There have been some successes, some strikeouts, some absolute no-hitters and some MIAs. That’s because business and other leaders have lost or ignored their responsibility to build and rebuild integrity as a workplace principle — a workplace guiding force.

Legislators continue to pass laws imposing extensive compliance requirements and an ever-increasing stack of regulations, restrictions and oversight requirements, in addition to internal and self-imposed monitoring. Virtually none of these can restore public, investor, employee, customer or individual trust. Restoration of trust begins by focusing and rebuilding the most essential element of an ethical reputation: integrity.

The foundation for integrity is organizational trust.

Need to Restore Trust

The PR profession — if it chooses to — can play a vital role in restoring and enhancing trust. Lawyers aggressively oversee the areas of compliance and codes of conduct. That’s where the monitoring is; that’s where the police are; and that’s where the detection, deterrence and disclosure of infractions occurs.

Restoring trust and maintaining an environment of integrity occurs in an organization along two powerful tracks: the principles that guide daily processes and decisions, and uncompromising vigilance.

Here are some examples of trust-building organizational principles:

• Our goal is integrity.
• We have constructive aspirations.
• We live a philosophy of integrity.
• We have a commitment to compliance and good conduct.
• We recognize those who achieve the best work in the best way.
• Our vigilance is driven by our principles, priorities, and our conscience.
• Everyone is committed to integrity.
• Everyone is a corporate conscience.

Uncompromising vigilance means to clearly define, dramatically emphasize and relentlessly enforce organizational values and beliefs. It is the organization’s unconditional commitment to prevent, detect, deter, or ultimately, expose and learn from those activities that run counter to the ethics of the organization.

Integrity is barely taught in business schools. It is something the boss is rarely compensated for. This is a perfect place for the PR practitioner to provide extraordinary counsel. Constructive leadership depends upon integrity. If there’s one thing public relations strives to provide, it is constructive counsel to leaders.

‘Sissy Stuff’

One problem is that many bosses think integrity is “sissy stuff.” They have a hard time seeing themselves at their country club having their buddies in the locker room kid them about how they caved in to those who would rather sell out than sell up.

Standing for integrity means standing up. Standing for integrity means helping an organization unlearn inappropriate behaviors. It means helping others learn how to handle ethical dilemmas and difficult issues. Integrity also teaches how to bring out the best in an organization — the best people, the best products, the best relationships, the best work and the best practices.

If there ever was a growth area for PR — one in which most of us absolutely, positively fit — it is guiding and inspiring the relentless quest for integrity: behaving with honor; expecting everyone else to do the same; and helping everyone become a corporate conscience.

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