Failure to Apologize Costs United $1 Billion / Hour

Companies screw up every day. Social media is forcing them to acknowledge failure and make amends much more quickly. Here are three instructive examples:

Jet Blue stranded passengers for seven hours on a Hartford runway in 2011. Eventually, the passengers mutinied.

Price Waterhouse mixed the envelopes at the 2017 Oscars. The Academy gave its Best Picture award to the wrong movie and had to correct the error live on global television.

United Airlines this week forcibly removed a paying passenger, injuring him in the process, in order to make room for an employee.

Next time you hear about one of these cases, start your stopwatch. It’s now a good measure for CEO quality. The CEO is going to apologize. Sincerely. Repeatedly. Without pride or excuse. They will reflect publicly on the pain they have caused, make economic amends, and follow-up to prevent recurrence. The only question is when.

Bad CEOs let the damage to their company and its brand worsen for a day or week or two until the apology is forced from them and weakened by the delay. Good leaders face the music, take the time to clean things up fully, and move on.

PWC was brilliant. Their CEO apologized within the hour and promised a fast investigation. By the following morning, he issued a second statement accepting full responsibility for the fiasco, noting that  “For the past 83 years, the Academy has entrusted PwC with the integrity of the awards process during the ceremony, and last night we failed the Academy.”

Result: red faces at PWC. I doubt they invoice the Academy for services this year. Much tighter procedures in the future. If PWC retains the account, a mistake like this is very unlikely to happen again. Nobody is talking about taking revenge against PWC. I doubt that anyone will sue successfully. The Academy will not renew their contract without a lot of discussion — but their conduct was professional and does not require that they be replaced.

Today a CEO will apologize or no longer be CEO. We are long past the time when Harry Truman’s “Don’t ever apologize for anything” was good leadership advice (although in truth, Presidents rarely apologize for bad decisions while still in office). P.G. Wodehouse, creator of Jeeves, explained the logic of the old-fashioned policy in The Man Upstairs:

“It is a good rule in life never to apologize. The right sort of people do not want apologies, and the wrong sort take a mean advantage of them.”

This no longer works. When a company screws up, everyone knows it and lots of people tweet it. They look to leadership for a response: do we defend the indefensible or acknowledge the pain we have caused and make it right? Today, a leader needs to declare something to the effect that “I am sorry — we let you down. I apologize to those we hurt. We did not mean to do that, we make no excuses, we will pay you for your suffering, and we will do better in the future.” Then make it right, make damned sure it can’t happen again, and move on. No need to grovel — but you cannot simply pretend that all is well either.

A proper apology can be healing (after he left office, Clinton apologized deeply to Rwandans for ignoring genocide in their country — easily his biggest foreign policy error. Obama will do the same with Syrians someday.) A proper, heartfelt apology can be restorative, as any married man knows.

Done well, an apology can be disarming. David Neeleman, the Founder and CEO of JetBlue demonstrated this after Hartford. His apology began:

“We are sorry and embarrassed. But most of all, we are deeply sorry. Last week was the worst operational week in JetBlue’s seven year history. Many of you were either stranded, delayed or had flights cancelled following the severe winter ice storm in the Northeast.”

Now JetBlue was not the first airline to royally screw passengers by leaving them couped and canned on the tarmac — but this was the first time a CEO had apologized for it. Needleman backed his words with $10 million of ticket refunds, $16 million of vouchers, and an “Airline Traveler Bill of Rights”. It isn’t exactly habeas corpus but it does commit the airline to pay passengers when they blow it next time. Which assuredly they will, given how tightly all airlines now schedule equipment and flights. Jet Blue ran full-page newspaper ads in every big market in the country saying “You deserved better — a lot better — from us last week and we let you down”. Figure $5-10 million for an ad campaign like that.

Did the market hammer the stock? Nope — despite the operating losses, the refunds, and the expensive “I’m sorry” campaign, the stock went up more than 2%, leaving JetBlue shareholders $40 million richer at the end of the day than at the start. Apologizing restores and in some cases increases trust. Trust pays.

Which brings us to the United Airlines incident. United is learning that social media and cell phone videos means that their dumb policies (whether using police to remove a passenger or denying boarding to the children of employees based on how they are dressed) will be videoed, tweeted, and widely viewed within minutes. Start your stopwatch.

First, United issued a tin-eared defense of indefensible conduct. Twelve hours later, a stiff corporate apology. Twenty-four hours later, having suffered bad publicity that caused the company to lose $41 billion in market cap — a job-threatening drop — the CEO appears contrite and without a tie on TV, expressing utter remorse and promising full refunds to all involved. He will no doubt settle generously with the passenger whose teeth he broke. Check the stopwatch: the damage to United is about a billion dollars an hour. Even CEOs respond to those incentives.