The scenario is fairly common in corporate America and in politics. Someone makes a mistake, there is an outcry of some sort and then there is a response. Depending on what that response is, the problem will either grow in importance or disappear entirely. Ultimately, this comes down to a question of credibility and trust, and fortunes have been made and lost on how people have handled this issue.
Obama is currently experiencing a loss of credibility and trust among his supporters for a perceived lack of leadership.
RIM has spent the summer trying to recover from the perception that it has lost its way completely as a leader in PDA technology. (See blog article here about an open letter in June from a “high level” employee complaining about the direction of the company.)
Apple experienced this to a certain degree when their iPhone 4 came on the market during the summer of 2010.
Looking at each of these examples, we can draw some interesting conclusions about what works and what doesn’t in the world of trust.
First, let’s look at the research:
Dr. Fiona Lee wrote a paper in 2004 titled “Mea Culpa: Predicting Stock Prices From Organization Attributions” which essentially illustrated a powerful connection between the rise or fall in stock prices of a company depending on whether they attributed mistakes to internal issues or external ones. This research is also cited in the popular Goldstein, Martin and Cialdini book YES! 50 Scientifically Proven Ways to Be Persuasive. The gist of the report is that whenever a company took ownership of a mistake and credited it to some internal fault, the stock prices grew within the year and whenever a company tried to attribute blame to an external factor (like political climate, economic collapse, unexpected conflicts in the Middle East), their stocks fell. The correlation is counterintuitive, but it appears to be that admitting you made a mistake (or owning the mistake even if it wasn’t entirely your fault) makes us trust you more as long as you can follow it with something positive you are doing in response. Show us that you have a plan or that you are working on moving us forward.
In a recent letter from Obama to past donors, he wrote (or someone wrote), that the mistake he made when he first came into office was that he didn’t realize how bad the economy really was, leaving me to think that he was basically blaming the previous administration for the current situation. While I think that there is probably some truth to that, I am looking for a bigger apology than that. The erosion of trust with Obama (among his base) is centered around the perception that he doesn’t really know how to lead or take a stand. The perception is that he is so focused on compromise that it is unclear what he really stands for.
Now, I’m not exactly sure how this should be worded, but what I am looking for is an acknowledgement of how his constituents feel about his lack of leadership. Own this and then show us how you are going to move forward.
In the case of the RIM employee and the company’s response (which can be found in the link above), their reaction is essentially to disregard all of the complaints. What they do own is minimal compared to what the employee is complaining about. The result is that what could have been seen as a weak complaint by a disgruntled employee, now seems like a prescient look into the credibility of that company.
Finally, in the case of Apple’s iPhone 4, this is a great example of what happens when you own something without giving up anything. When the iPhone 4 first came out, the response was huge. Wow amazing, but the design doesn’t work because when I hold it, the signal cuts out.
The immediate response was silence.
Then Steve Jobs came out and said that people were holding their phone incorrectly, showing a video of how to correctly hold the iPhone.
The result of these two responses was a huge, huge backlash among the tech community. I returned my phone that week.
Then Steve Jobs did something pretty smart. He admitted that there was something going on, but that it could be fixed with a case. Then he offered free bumper cases to anyone who wanted one as a limited time offer. The backlash pretty much retreated to the far corner of the internet where the Apple haters live out their lives.
What did he do? He owned the problem in the best way for a company to do it, with its wallet.
If we all took this to heart and understood that trying to cover up a problem or deflecting the issue is not going to build credibility, then we would understand how powerful vulnerability and owning our mistakes is in the world of corporate trust.
If a corporation can do it and be successful, then we should be able to do it in our personal lives.