As children, we are taught the laws of forgiveness and encouraged to verbalize three simple words that are often the hardest to say, “I am sorry.”No one likes to admit when they’re wrong. It makes us feel vulnerable, exposed, and defenseless. We have a hard time putting down our armor long enough to see what we’ve done to the other person. As we move from the playgrounds of childhood to the “workgrounds” of adulthood, uttering those three words doesn’t get any easier.

Why are apologies important in business? Relationships are the bedrock of your business; and apologies mend relationships damaged by mistrust. Ethics expert Jim Lichtman, as quoted in Why We Talk, commented, “In business and in public life today … the thing you erode away faster than anything else is trust. Once the credibility is gone … you’re going to have to work two, three, four times as hard to get it back.”

This echoes conventional wisdom that it takes years to build up trust, and only seconds to destroy it. With such odds stacked against companies, how can they repair relationships and win back the trust of their customers?

The Power of the Pardon

Jennifer Robbennolt, professor of law and psychology at the University of Illinois College of Law, studied the relationship between apologies and legal settlements. In her experimental study, participants were asked to read a vignette describing an accident in which they were injured in a collision with a bicyclist and offered a settlement that covered their medical expenses.

Robbennolt found that when the bicyclist didn’t apologize, 52 percent of subjects indicated they would accept the monetary settlement. When the bicyclist gave a full apology and took complete responsibility for the accident, 73 percent of subjects accepted the offer (a 21-percentage point increase compared to receiving no apology). More interestingly, when the bicyclist offered a partial apology, expressing sympathy but not accepting fault for the accident, only 35 percent of subjects accepted the settlement.

In other words, full apologies are better than partial apologies, but partial apologies may be worse than no apology at all.

The Art of the Apology

Trusted brands are just as susceptible to lapses in judgment as any another brand. One difference prevails: they’re not afraid to admit when they’re wrong. They acknowledge their offenses, are slow to blame others, and often take full responsibility for their actions. To these brands, nothing less than a full apology will do.

The DVD-by-mail company Netflix sent an email on March 26, 2008 to their customers with the subject line “We’re sorry your DVD was delayed.” Netflix encountered an unexpected problem in their system, delaying their shipment of DVDs by one day. They apologized for the inconvenience, and automatically issued a 5% credit to every customer’s account. Now this minor glitch may have fallen under the customer’s radar, but the admission by Netflix was guided by higher principles of integrity and truthfulness, which further solidified a customer’s sense of loyalty to the brand.

Steve Jobs, CEO of Apple, was bombarded with emails from customers expressing their consternation about the sudden $200 price drop two months after the iPhone hit the market. The die-hard early adopters felt shafted and wanted their voices to be heard. Jobs acknowledged the oversight, “We need to do a better job taking care of our early iPhone customers as we aggressively go after new ones with a lower price. Our early customers trusted us, and we must live up to that trust with our actions in moments like these.” Jobs then offered a $100 store credit to those early iPhone buyers, with a sincere apology and a claim for wanting “to do the right thing.”

Southwest Airlines has taken a dynamic approach to handle the myriad frustrations intrinsic to air travel. As Senior Manager of Proactive Customer Communications, Fred Taylor Jr. has mastered the art of the apology. Taylor devotes his workdays finding out how Southwest disappointed its customers—in flight delays, lost luggage, diverted landings—and takes proactive measures to remedy the situation, sending out earnest letters of apology within 76 hours of the event.

Taylor believes that “an apology provides the opportunity to offer the customer an assurance that you care about their feelings.” Taylor threw out the form letter because “cookie-cutter responses water down your product,” and replaced it with a “heartfelt, homespun correspondence” peppered with personal touches.

In a real life example of Robbennolt’s study, Taylor understands that a partial apology doesn’t hold a candle to a full apology, because people, whether a customer or an accident victim, have finely tuned radars for insincerity

It’s those customer service calamities with high emotional impact—laden with frustration, irritation, and anger—that leave an indelible mark in our memories. Yet, companies have a choice. They can get defensive, use denial, play ignorant, or take the higher road and utter those three simple words.

Remember: It’s not just an apology, but an apology that comes straight from the heart, that will be the salve for your transgressions, no matter how big or small.

And yes, apology accepted.

***

See the full experimental study: Robbennolt, J. (2003). Apologies and legal settlement: An empirical examination. Michigan Law Review, Vol. 102, pp. 460-516.

It has often been said that trust is the critical element of social bonding—the glue that binds relationships.

Taking a sociological perspective, Barbara Misztal explains in her book Trust in Modern Societies that trust has three social implications: 1) it makes social life more predictable, 2) it creates a sense of community, and 3) it allows people to work together. Without trust, social interactions are unpredictable, community building is thwarted, and people are unable to collaborate effectively.

Businesses aggressively strive to establish trust with their customers, but oftentimes neglect the need to cultivate trust in their own workplaces. In their myopia, they create antagonistic work environments with a ‘me versus you’ mentality, where employees feel the constant need to watch their backs. In this space, loyalty, creativity, and innovation are sure to die.

I am reminded of one of my first jobs as a teenager, working in a family-owned framing shop at the local mall. When the owners suspected a thief was lurking among us, they installed a surveillance camera to monitor our every move, without explanation. To add insult to injury, the family would huddle at the back of the store and sit around the television, voyeuristically watching tape after tape of us working. The minimum wage, coupled with the Big Brother culture, created zero commitment to the business. I left the job within a few months. Within a few years, the frame shop went out of business.

Think about how the owners could have chosen the higher path, using the money they spent on the surveillance system and the time they took to watch the videotapes, and invested that back into their workforce. Instead, they succumbed to the trap of conventional wisdom—trust no one, especially not your employees.

Trust Begets Trust

Economist John Helliwell researched the determinants of workplace happiness, and found that trust is the greatest contributor, beating out pay, workload, or perks. A one-point increase on the trust scale can mean the equivalent of the psychological benefits associated with a 40% wage increase. When employees trust their managers, and feelings of trust are extended to co-workers, they tend to be happier. The pay off for managers? More productivity, less turnover, less absenteeism. And when employees are satisfied, customers tend to be satisfied too.

The Container Store, the nation’s leading retailer of storage and organization products, landed its position on Fortune Magazine’s annual list of “100 Best Companies to Work for” for its 9th consecutive year. The company consistently embraces their ‘do unto others’ business philosophy, where trust is foundational at the top levels of management, and penetrates all levels of the organization. With Enron and WorldCom scandals lurking in our collective memories, we as employees expect to remain ignorant and uninformed. In contrast, the Container Store embraces a transparent business philosophy, and makes their financial statements available to everyone in the company. They simply believe that employees have a right to know. In their ‘nothing to hide’ spirit, the Container Store practices values of trustworthiness, starting at the very top.

Like the Container Store, Southwest Airlines proudly takes the higher road with their employees. Under the wings of founder and former chairman Herb Kelleher, Southwest thrived in an industry notorious for low employee morale and bad customer service. He professed, “The only way that you ever get people to respond with trust and fidelity is to treat them as if you trust them and believe they will be faithful … You have to give everyone the opportunity to show their best qualities.”

Other great brands, like DVD-by-mail provider Netflix and the entertaining and educative financial information provider The Motley Fools, expect that their employees will put their best qualities forward. Both offer unusual vacation policies, allowing employees to take whatever time off they need, as long as they get their work done. They not only give employees the freedom and flexibility to choose their work schedules, they also send a powerful message of trust.

In fact, The Motley Fools proclaim, “Just do your job and do it well. We trust you.”

Netflix also tossed out their policy manual on travel expenses, and simply tell employees to “travel as you would on your own nickel.” Netflix doesn’t enforce a per diem rate or impose restrictions on the amount employees can spend on business travel. They trust that their employees will be honest and spend within reason, as marked by the bounds of their conscience.

When companies like Netflix, The Motley Fools, The Container Store, and Southwest Airlines embrace the B-values of truth and honesty, they nurture workplaces empowered by higher principles. Trusted employees pay it forward through first-rate customer service.

It’s not enough to create trust with your customers; you must cultivate the feeling of trust from within your organization. So take an honest look inside. It’s the confluence between the inner and outer expressions of higher values that will ensure your brand’s long-term success.

So what do you say: Are you going to trust me or not?

Greek historian Thycydides aptly noted, “The secret of happiness is freedom. The secret of freedom is courage.” Choice is the act of making a decision. But it’s more than that. Choice, by enhancing one’s perception of control and freedom, can increase one’s sense of happiness.

The Psychology of Freedom

In 1975, Ellen Langer and Judith Rodin conducted their seminal study on the effects of enhanced personal responsibility and choice.

They gave residents on one floor of a nursing home (the experimental group) messages that emphasized their sense of personal responsibility. They had the choice to decide which movie night they would attend, if they chose to attend at all. They also received a plant and given the choice to take care of it themselves.

Residents on a different floor (the control group) were given communication that stressed the staff’s responsibility for them. These residents were told which movie night they were scheduled to attend. They too received a plant, but were told that the nurses were responsible for watering and caring for it.

Results of the study found that, compared to the control group, residents with more personal responsibility reported significantly greater increases in happiness; they were more active and alert; and their movie attendance was higher. A year and a half later, they were still doing better, and their mortality rate was half that of the residents in the control group.

Rules, Rules, Rules

Many of us can relate to the feeling of being in an institution without any perception of control. Remember that job when you were required to punch in and out of a time clock? What about those times when you couldn’t leave the office a minute early, impatiently waiting for the 5 o’clock hour to strike like a school kid waiting for the 3 o’clock bell?

I bet those jobs didn’t bring a great deal of satisfaction or happiness to your life. It’s the ball-and-chain mentality that continues to plague our attitude towards work. We’re bound by rules all day, which are detailed in employee handbooks and passed around in memos, written in a don’t-do-this-don’t-do-that type of prose. We graduate from high school, experience a few years of freedom in college, only to return to the jailhouse mindset of the working world.

Goodbye Rules, Hello Freedom

Like the experimental group in Langer & Rodin’s classic study, several companies who follow the principles of Cult Branding are embracing a radical new way of promoting freedom and personal responsibility in the workplace.

Best Buy, the nation’s leading electronics retailer, transformed their work culture by implementing ROWE, “Results-Only Work Environment,” where there are no mandatory business meetings and no set schedules. Under this new model, performance is based on output instead of the number of hours clocked at the office.

At Best Buy, you can leave the office at 3 o’clock to pick up your kids, take a two-hour work break to go grocery shopping, or not come in at all. People have the freedom to work whenever and wherever they want—at home, in a coffee shop, or on the beach. Jody Thompson, ROWE’s co-founder calls it “TiVo for your work.” The results? Some ROWE teams report that voluntary turnover rates have decreased by as much as 90%, and on average, ROWE teams have demonstrated a 41% increase in productivity.

Last year, DVD-by-mail shop Netflix made a similar unprecedented move among large companies and declared their new vacation policy for salaried employees, an oxymoron really, in that it’s more of a non-policy. It’s simple: Take as much time off, as long as you get your work done.

Netflix explicitly states on their website, “Rules annoy us. We believe in freedom and responsibility, not rules.” They explain that rules inhibit creativity and entrepreneurship, which inevitably leads to a lack of innovation. Without innovation to drive business forward, everyone suffers. The answer? Take care of your employees, foster freedom and control in the workplace, and they’ll give you their best work.

Netflix CEO Reed Hastings calls face-time requirements and vacation limits “a relic of the industrial age.” The “culture of autonomy” is reflected in Hastings’ original vision: “We want our employees to have great freedom—freedom to be brilliant or freedom to make mistakes.”

Like Netflix, financial information provider The Motley Fools embraces this radical vacation policy. In their “work and have a life too” philosophy, they encourage employees to “do an amazing job and take the time you need.” The Fools take pride in their unpretentious workplace where suits, neckties, and pantyhose are artifacts of the past. They have a game room on their premises, which is always open, and they explicitly tell their employees to “take the time to shop online.” What other company do you know encourages employees to take advantage of corporate time for personal use?

In the Cult Branding Workbook, BJ Bueno explains the need to “Sell-In to Your Internal Team.” To sell-in, companies must create a vision that the entire organization can be passionate about. If you pride yourself on upholding B-values like truth and autonomy, those values must be embraced at the organizational level. When these values permeate the entire culture, you have happier and more productive employees who will ultimately serve your customers, the way you serve your employees.

Foolish practice? We don’t think so.

See the full article about Best Buy’s ROWE program in Business Week.

See the full article about Netflix’s Vacation Policy in the Oakland Tribune.

The original psychological study can be found at:
Langer, E. J., & Rodin, J. (1975). The effects of choice and enhanced personal responsibility for the aged: A field experiment in an institutional setting. Journal of Personality & Social Psychology, 34 (2), 191-198.