CEO apology

Have Asia on my mind as I am soon airborn. A few facts and stories I just learned as I am preparing to go and talk about reputation trends. These are all China-based for now….

• In four years, more than 700 million people in China will be watching online video sites. Youku, similar to our YouTube, is one such leading site. (McKinsey Quarterly, 2011). Pretty dazzling if you ask me.
• Even during the global recession, sales of luxury goods in China rose by 16%. (McKinsey Quarterly, 2011).
• An interesting incident that caught my attention. Apparently the CEO of DangDang (China’s Amazon) exploded at his bankers in a profanity-filled tirade blaming them for an IPO that undervalued his firm. The language was so profane that when reported there were alot of ****s. This all appeared on Sina Weibo, China’s Twitter.  Apparently some employees of the bankers fired back on Weibo although now there are reports saying they were not employees. Whatever the story, what I found interesting is that we focus so much on social media guidelines for employees and perhaps its time to develop them for CEOs too! Not exactly a reputation-building story.

  The trading scandal at UBS brings to mind the long journey that companies undertake to recover and restore reputations. UBS is now back at square one as they deal with the recently revealed $2.3 billion rogue trading. This reputation disaster brought me back to the days of the Societe Generale SA rogue-trading incident three years ago. If you recall, Jerome Kerviel managed to lose $7.2 billion on his derivatives scheme. The reputation drag on SocGen’s reputation today and on UBS tomorrow is quite real. The SocGen scandal has not entirely faded in the past three years. In fact, everytime one reads about what happened last week at UBS, the SocGen scandal gets replayed. This is unfortunate for those who go down the path of reputation recovery like SocGen. SocGen’s recovery program was quite extensive when you look at it from a three year vantage point – they dismissed Kerviel’s bosses, demanded that the bank move slower as new security systems were put into place and launched an internal controls program called “Fighting Back.”  In addition, other measures were set forth such as spending on new IT security, starting a newly independent accounting group, beginning a SAFE (Security and Anti-Fraud Expertise) program to oversee financial operations and training 7,800 employees about fraud. Ultimately the CEO and chairman stepped down one year later.  All these remedies for recovering reputation came from an article in yesterday’s WSJ and I was glad to be able to list these steps for other companies contemplating what to do when faced with sky rocket type scandals.

Yesterday morning started off with an email to me from Netflix’s CEO Reed Hastings. I immediately went to the Netflix‘s CEO apology on the blog.   What confused me however was the tone of the video. Although I am a loyal customer and fierce advocate of what Netflix has done for delivering movies to my home, I thought that the video apology was abit too cheery (outdoors in sunny California. albeit a parking lot) and efficient.  Maybe too rehearsed is the right word. I did not get the sense that this was a very repentent CEO who had seen his stock value decline 52% since the change in pricing occurred. But what really threw me was that he did not share the stage alone. In the video, CEO Reed Hastings had the new head of the DVD spinoff, Qwikster, Andy Rendich, joining him.  I always say that CEOs get all the credit when things go right but all the blame when things go wrong. Why did Hastings deflect some of that blame on this poor soul. I cannot remember the last time (if ever) I witnessed a CEO apology tied to the announcement of a new spinoff. I sincerely doubt that was a good launch plan for Qwikster. My sense is that there’s more apologizing to come. This poor guy Andy looked like he too was somehow responsible for the communciations debacle.

Despite these ramblings, the article on the Netflix problem in today’s New York Times made me smile. The authors wrote, “But in the short term, the risk to corporate reputations is palpable.”  It is not often that I even see the words “corporate reputation” in a top tier publication. Usually it is referred to as brand health or brand reputation or positioning.  It is fairly rare to see corporate reputation used as a commonly understood concept.  My two cents is that short term feels like long term these days when you are in the spotlight. As someone said to me, it’s like a nuclear assault whether it is 6 days, 6 weeks or 6 months. Ultimately, Netflix will be forgiven but like the SocGen example above, reputation damage takes its toll and lingers longer than most CEOs care to imagine.

    Twitterologies. Is there such a word? I doubt it.  The CEO of Vodacom, Pieter Uys, apologized for outages via Twitter (@uyspj). Despite the inconvenience to Vodacom subscribers, the CEO is getting good marks for his simple apology. While it was happening, Uys was tweeting to customers about what he could do for them and kept in continuous contact. He tweeted the following:

“I do care for every one of our customers. What happened today was not acceptable. I’ll work hard to make you smile again.”

“Words can’t express how sorry I am about today’s problem. Flat out working at making sure all is 100%. Pieter.”

“At the network switch with the engineers. All looks OK now. If you still have a problem, please switch phone off and on.”

Fairly simple way to tell your customers you care. And that you are there. Helps to keep your company reputation intact.

When I visited Amsterdam, someone mentioned an incident of a sympathetic CEO.  A discussion arose about how CEOs could make a greater show of empathy for those affected by normal day-t0-day events such as delayed flights due to volcanic ash, safety incidents, food recalls, investment losses, etc.  When I first heard the word “sympathetic” in the same sentence as “CEO,” I liked the ring of it. However, I immediately thought about how infrequently this topic has come up in all my years of following, studying and working with CEOs.  Why is that?  I think we all know why.  Empathy is not not what makes great CEO reputations. Nice to have but not necessary perhaps.

Along the same lines, I was asked why CEOs do not apologize enough. I often get asked this question and frankly, I wonder if there are too many CEO apologies today.  My fear is that it is easy to apologize and the more there are, the more dilutive the effect might be.  The sense  in our Amsterdam meeting was that CEOs do not apologize enough when things go wrong.  I usually respond by saying, “Name me one CEO who apologized that was sued.”  I really can’t think of any right now although there must be one, don’t you think?

Those are my thoughts for the day. The sun is out and I am going out to play and be sympathetic.

 My journeys in Europe continued all week although I am now safely home and enjoying the first warm weather of the past two weeks. One thing that struck me in retrospect was that there was no market that did not talk about recession-weariness. Everyone mentioned how tough times had been with the global recession and might be getting worse as Greece faced its debt crisis, the EU bails out several members and the Euro was dropping. My presentation on The New Normal was perfectly timed.

• In Amsterdam I learned that some companies were rising to the challenge of the recession. Dutch airline Martinair had offered a similar program to Hyundai Assurance in the US where people who booked transatlantic flights could cancel their flight without cancellation fees if someone lost their job. It is called Boek Gerust Verzeking or worry-free booking insurance.  As well, the CEO of KLM, Peter Hartman, was applauded for going on YouTube to sympathize and apologize about the flight cancellations caused by the volcanic ash a few weeks earlier. A perfect example of CEOs resetting their reputations.  In addition, several people in our panel discussion mentioned the book The Truth about Ikea when we discussed this new  “tell all” and “see thru” world that has emerged. I also learned about an online site where you can “couch surf” or find a couch to crash on in another city so you can save some money. Smart alternative to paying for a hotel if your finances are strained. The Dutch also have a group buying site —  ichoosr.com – and their CEO had joined our panel to discuss the site’s success in this new age of austerity or what we were calling the New Normal.
• In Paris, at our luncheon discussion, one of the guests mentioned that they were moving their communications and marketing back to print since they were not convinced that the ROI online was working as well as they would have liked. Also had my first experience in Paris being interviewed in-person by bloggers. Turned out to be quite a lot of fun. This fits into my prediction that face-to-face communications will be back as a new channel for communicating.
• London was fascinating because I arrived the evening when the new coalition government was announced. The first day of the “new politics” or “plural politics” was brisk and spring –like, the perfect day for a new beginning. In our breakfast seminar, it was hard not to discuss what the new governance model in Great Britain meant but one idea I had was that the future would undoubtedly include more coalitions in business partnering over the next few years. Additionally, I thought that the outcome of the election was indicative of the new normal in that there were no winners and losers (except Gordon Brown) but something in-between. Not black or white, but just grey all the time.
• I could have sworn that Heathrow airport in London is scented. I could not believe my nose! There was a great scent in the air and although I can not find an article on why it smelled so therapeutic (aromatherapy), I think it might just be the air from the spa facilities inside. It is a great idea if it is true.
• Madrid had just heard their Prime Minister Zapatero talking about civil service workers’ salaries being frozen, pensions cut and other budget-minded recourses when I arrived. Like other cities, people instinctively knew that frugality was back with a vengeance. I had read in the paper before I arrived  that Zapatero had said it was the toughest speech he ever gave. I considered that quite humble although I doubt most Spaniards felt the same way upon hearing the news. In the world of reputation, leaders get all the credit when things go right and all the blame (and then some) when things go wrong. An interesting experience during my media interviews was that each journalist asked me what I thought the future of journalism was.  I think this happened everywhere I went when journalists took the floor. The reputation of journalism is sure taking a hit in this new digital world. I recall in Brussels how a journalist said that online was killing them off one by one. Is a global phenomenon and one I have a lot of sympathy for.

Now that I am back on solid ground for a few days and not spending my days and nights in airports and hotels, I can more easily get back to posting more regularly about reputation matters.  However, reputation is everywhere. Danny Rogers, the editor of PRWeek in London wisely pointed to the frequent mentions of the word “reputation” in media coverage. It was not always like that.  It is unavoidable these days.

I had a great time with my colleagues at Weber Shandwick and meeting clients and journalists, bloggers,  among others. Mind-expanding is good for the soul.

Today’s New York Times had an interview with the CEO of Goldman Sachs, Lloyd Blankfein. He was asked about lessons learned from the recent and ongoing financial crisis. Blankfein makes a clear argument for ongoing internal communications. Worth reading the entire interview but the banking CEO reiterated one of the most powerful tenents of reptuation recovery during tough times: 

“What I did more of–and then I kept doing more and  more of it as it got validated as a strategy–is that I talked to the firm very frequently. So in the last year and a half, and particularly in periods of peak stress, when people were wondering what was going on, when the press was as bad as it was, almost every day I would send a voice mail to the whole firm. I’d walk around the firm. I’d answer people’s questions. And generally this firm has a walk-around culture. But I really emphasize that.”

One of the more fascinating attributes of the Goldman culture is that they use an all-employee voice mail system to communicate.  Several years ago I wrote an article on Hank Paulson’s apology for a statement he made and I mentioned how he apologized using their  all-employee voice mail system.  I believe he felt that it would be quick, immediate and show how deep felt his apology was in his voice.  I also recall having studied communications best practices for a client and interviewed a few people at Goldman Sachs who spoke about how they were more of a voicemail than email culture.  Voicemail certainly provides the emotional and qualitative texture that email does not. More companies should consider all-employee voice mails in addition to all the newer technology such as webcasts and podcasts that we have on hand today. It requires less executive preparation and might just be the right cup of tea when morale is low and employees uncertain.

  A picture is worth a thousand words (or 765.8 billion yen, equivalent of $7.7 billion) in the past quarter. Toyota’s president Katsuaki Watanable is seen here deeply bowing in apology: “We were lacking in scope and speed in dealing with various problems and for that I am sorry.” This is CEO responsibility and accountabilty at its finest.