Leader's Apologies: Doing it the Right Way

Yesterday, my post on Mea Culpa described how there is some trend in hospitals for doctors to admit and apologize to patients for mistakes. The initial evidence suggests this practice saves money because it reduces litigation costs, and money aside, is a more emotionally constructive process for both doctors who make the mistake and patients and their families who are damaged by such errors.  Unfortunately, whether we are talking about doing surgery or leading an organizations, or just about anything else in life, there is no doing without mistakes, and no learning either.  As Diego and I like to say, failure sucks but instructs.

Continuing this theme, there is also growing evidence that leaders of companies who choose to apologize for mistakes may actually help their careers and their firms by apologizing in the right way.  Although most mistakes and setbacks seem to provoke leaders to cover them-up, claim that it wasn't their fault, to point fingers at others, say"no comment," or perhaps say something mealy-mouth like "I misspoke, but it really wasn't a mistake"  I especially love the term "mistakes were made," as it almost seems to be admission of error, but the leader or politician in question never quite associates the term "mistake" with "I" or "we."  It is as if errors somehow have made themselves, without any human action or involvement.   Consider the story below for a different tactic.

The Chef Executive ran a story in 2003 about a rather nasty statement made by then Goldman Sachs CEO Henry Paulson Jr. (now the U.S. Treasury Secretary). Paulson's error and recovery is instructive, and the plot line is reminiscent of the Hew York Times article on doctors that I wrote about yesterday. I quote:

'Henry Paulson, Jr., chairman and CEO of Goldman Sachs Group, recently demonstrated how an apology from the top can help repair the reputations of both a chief executive and his or her company. During a question-and-answer session at a Salomon Smith Barney conference in January, Paulson seemed to imply that between 80 and 85 percent of Goldman Sachs's employees were irrelevant to the company's success. "I don't want to sound heartless," the CEO said, "but in almost every one of our businesses, there are 15 to 20 percent of the people who really add 80 percent of the value. I think we can cut a fair amount and not get into muscle and still be very well-positioned for the upturn.

Paulson's comments drew an immediate and overwhelmingly negative reaction. Rather than wallow in explanations as to what he really intended, or suggest that the comment was taken out of context, Paulson faced the music. In a voice mail to all of Goldman's 20,000 employees, he acknowledged that his remarks were insensitive" and "glib." In other words, he apologized.'

Stories like these are heartwarming to hear. But there are still plenty of CEOs, lawyers, and PR firms who will advise leaders that that they should never apologize, and also some theory in psychology that suggests self-serving attributions -- taking credit when things go well and blaming others and outside forces when they go badly -- is an effective impression management.  BUT a series of studies by psychologists suggest that managers and leaders who apologize when things go wrong, report what they've learned, and then convey how and in what way the organization's direction will change as a result not only enjoy more favorable reputations than leaders who point fingers at others and external events, there is also evidence that their firms do better over the long haul.  There seems to be two reasons this happens, one more objective the other more subjective.  The more objective part is that by admitting mistakes and updating their behavior, this means the leader and his or her team is learning along the way.  Jeff Pfeffer and I have (borrowing from psychologists and philosophers) called this "the attitude of wisdom," which means have the courage to act on what you know and the humility to change course when new and better information comes along that you are heading in the wrong direction.   The second theme is that one of the main challenges for leaders is to convince insiders and outsiders that they are in control of the organization -- which is a big challenge because -- although there is a lot of evidence that leaders get lots of credit and lots of blame for what happens to their organizations -- there is also a lot of evidence that they have only modest control over organizational processes and performance. As such, one way that leaders fuel the illusion -- and to some extent the reality -- of control is by convincing people that when they do something good, good things happen to the organization and when they do something bad, bad things happen to the organization.   This may all sound a bit weird, but as we show in Hard Facts, there are few situations where leadership actions appear to be able to affect organizational performance by any greater than 10% (small, young companies appear to be an exception in some studies).

So to return to apologies, there are not only sound conceptual reasons for leaders to make them, there is also some interesting evidence to support apologies in this context.  Here is an excerpt from Chapter 8 ofHard Facts that provides a nice summary of major studies -- and also indicates that, although apologizing works for managers and leaders, it may not be effective for politicians, at least if they want to get elected. Here is the excerpt, plus I left in the citations for those who want to dig deeper.

'[R]esearch on winning vs. losing U.S. presidential candidates shows that – in 80% of elections between 1900 and 1984– winners avoided talking about negative events and, when setbacks were raised, winners were more likely than losers to deny blame and point fingers at others and events they couldn’t control.

On the other hand, it turns out that company executives are different than politicians.  Leaders who claim that “it isn’t my fault” and “ I couldn’t have done anything about it” aren’t doing themselves or their organizations any favors over the long haul.  Deflecting blame might help them keep their jobs for a time, enjoy better mental health, and persist in the face of failure.  But ducking the heat shatters the illusion of control.  Investors, customer, employees, and the press conclude that leaders who don’t take responsibility for mistakes and setbacks lack the power to make things better.  Controlled experiments by Fiona Lee and her colleagues show that hypothetical managers who took responsibility for bad events like pay freezes and failed projects were seen as more powerful, competent, and likeable than managers who denied responsibility. 

The wisdom of acknowledging blame is confirmed by two studies that tracked Fortune 500 firms over long periods.  Both were careful studies designed to rule out alternative explanations.  Gerald Salancik and James Meindl examined 18 Fortune 500 firms over 18 years.  They found that, especially in firms with wild swings in performance from year to year, performance was superior down the road when executives attributed both good and bad performance to internal actions.   Similarly, Fiona Lee and her colleagues examined yearly stock price changes in 14 companies over a 21-year stretch.  They found that taking blame for setbacks wasn’t just effective in companies with wild performance swings. In years when senior management blamed their firm’s troubles on internal and controllable factors, stock prices were consistently higher the next year, compared to when executives denied responsibility for setbacks.

What do you think? Should leaders apologize when things go wrong?  If so, what is the most effective way to do it?  

Here are some of the key references:

Lee, Fiona., & Robinson, R. (2000). An attributional analysis of social accounts: Implications of playing the blame game. Journal of Applied Social Psychology;

Lee, F., & Tiedens, Larissa. (2001). Who’s being served? “Self”-serving attributions and their implications for power. Organizational Behavior and Human Decision Processes, 84:254-287.

Salancik, Gerald., & Meindl, James (1984). Corporate attributions as strategic illusions of management control. Administrative Science Quarterly, 29, 238-254.

Lee, Fiona, Peterson, Christopher, & Larissa Z. Tiedens (2004) Mea culpa: Predicting Stock Prices from Organizational Attributions.  Personality and Social Psychology Bulletin. 30:1-14

Comments

[Newt Bailey]

Hi Bob,

I think apology actually lies on a spectrum from sincere regret to harsh self-blame. I absolutely believe there are many valuable reasons for leaders to express their sincere regret about their decisions and actions which led to unwanted outcomes. "Here's how I contributed to the problem, here's what I plan to do so that this won't happen again. And here's the support I'd like to request to that end...etc."

However, I feel that harsh self-blaming "apology" is not recommended, especially if you want to lead a team where people are willing to take risks. Watching you self-flagellate at the end of the conference table could inspire thoughts like "Man, I could never do what the boss is doing right now - I'd better play it safe."

[David Christiansen]

It isn't just executives who benefit from apologizing when they screw up. I am a project manager at a Fortune 100 company and last year I made a fairly momentous mistake on a project I managed. The result? We were more than 200% over budget, and the project schedule had to be extended significantly.

I was tempted to blame others for my mistake. Ironically, it was the engineer who had tried to warn me of the consequences of my actions that my instincts told me to blame. "He should have done more to make me understand - he gave up too easily," was one of the angry thoughts that tempted my ego.

When the project was over it was reviewed by my peers and the management chain. At the review meeting, the executive in charge asked me to explain the project's failure. I swallowed hard and tried to smile. "It was my fault. I screwed up - I was advised not to take the course I took and I ignored it." Nobody knew what to say. They'd never seen ANYONE in our organization own up that way. After the review was over, a lot of my peers told me they would never have the courage to do that.

The executive in charge made some comment I don't remember exactly that amounted to "we all make mistakes" and the review moved on to the next project.

At the end of the year, I got the most favorable review of my career and I regained the respect of the colleague whose advice I had ignored.

My mother likes to say that there aren't very many problems that can't be solved if no one throws a fit or has a tantrum. She also likes to say that the sooner you admit you screwed up the less bad the consequences will be. This experience reinforced this lesson and supports your argument that a**holes don't prosper.

[Michael Netzley]

Hi Bob,

A very nice post. A colleague and I were discussing apologies in Asia, and especially in cultures influenced by overseas Chinese communities. Here, saying you are sorry and meaning it will often not be enough. The offending party needs to, by our perception, engage in self-criticism, explain what was done wrong, and then demonstrate it will not happen again.

Considering globalization and recent misunderstandings across cultures, this might be a very high bar for some leaders to get over.

Prof. J. Davis and I would still love to have you on the podcast!