The Power of an Apology in Building Trust

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Not long ago Robert Greifeld, CEO of NASDAQ OMX Group, apologized to the investors who lost money during Facebook’s IPO process as a result of the technical problems in NASDAQ’s system. His firm soon structured a multimillion-dollar make-good to compensate many of the aggrieved traders.

As technology catapults us into the e-social era, you can expect corporate apologies to become more and more common. Not only because companies get caught making mistakes more often, but also because rising expectations of trust demand that they apologize when they do. It’s a lot more expensive, and often impossible, to keep something secret in the Age of Transparency. For a business, this new transparency acts like a disinfectant: It will clean and protect the wound, but it stings like hell.

Interactive technologies are super-sizing our social natures, turning the entire human race into an always-connected, interactive network of information, feedback, advice, and gossip. For thousands of generations we could only interact with others face to face, but now we have phone, e-mail, status update, online chat, SMS, Skype, or FaceTime. We converse around the world, and we queue up our discussion so the other party’s response can come when they get to it, rather than while we’re standing there asking for it. When we “like” something, from a person or product to a restaurant, photo, or infographic, a single click will “share” it with others via Twitter, Facebook, Google+, or LinkedIn.

Moore’s Law: Every 15 years, computers become a thousand times more powerful.

Zuckerberg’s Law: Every 15 years, we interact a thousand times as much with others.

Because one of the most important ingredients in any interaction between two people is trust, the more we interact, the more trustworthiness we demand. If you trust the other party to complete an interaction, then you don’t have to waste time or money checking sources or verifying details. Instead, you can immediately use the new information to order a product, choose a movie, pay a bill, or take a trip. Untrustworthy interactions, on the other hand, are so…inconvenient.

The result of all this technological progress is that we all now have higher standards for what constitutes acceptable and trustworthy behavior in a business. Any customer within range of a Wi-Fi connection expects the company on the other end of an interaction to be proactively trustworthy, or “trustable.” And many of the best companies, with the highest customer service ratings, are rapidly adopting this new standard. Amazon.com, for instance, will warn you if you’re about to buy a book that you bought from them once before, and JetBlue will proactively deposit any refund due on account of its “Customer Bill of Rights” in your FlightBank account with the airline, so it’s automatically available for your next purchase.

But as we document in our new book Extreme Trust, trustability is still the exception. The majority of companies operating today haven’t yet adjusted to the hyper-interactive world we live in. They don’t realize just how transparent things have become, and how easy it is, therefore, for customers to find things out that used to be easy to conceal.

Most of these firms believe that if they just follow their own fine print and do what they say they will without running afoul of regulators or the courts, they're golden. It hasn't occurred to them yet that if you offer a lot of fine print for customers to read, while you may be technically trustworthy, you’re still not trustable – not in the proactive, “I’ve got your back” way that defines how friends treat friends. But this is exactly what customers are increasingly coming to expect of businesses.

To compete successfully in the age of transparency, companies will have to practice “extreme trust” which means:
  • Do things right. Invest in making sure you don't screw up, so customers can save time and have a good experience. Don't give them stories to tell their friends about how hard you are to do business with.
  • Do the right thing. Respect your customers’ own interests. Don’t take advantage of them. If you make more money when customers aren't paying attention or don't know quite how things work, then you’re on the wrong track.
  • Proactively do the right things. Don't wait for customers, or the media, to discover problems you've created and force you to fix things. Get in front of it. Fix it. Make it easy for customers and partners to get compensated, it makes the most sense. And apologize when you screw up. Say you’re sorry. Admit vulnerability.

When your company makes a mistake, take responsibility. Fix the immediate problem, reimburse for losses if you've caused any (without making customers ask), and explain what you’re doing to make sure it never happens again.

People will forgive honest mistakes. No one expects companies to be perfect, not even NASDAQ. What they can’t forgive is dishonesty, and in the Age of Transparency, not admitting a mistake is tantamount to dishonesty by omission. The apology from NASDAQ won’t right the wrong all by itself, but not apologizing would have magnified it immensely.