Leadership

How to Handle Screw-Ups

By Jessica Stillman

Updated on: September 19, 2007 / 6:12 PM EDT / MoneyWatch

Today the House Energy and Commerce Subcommittee held a hearing on toy safety. (A minute by minute blog of the event, for anyone interested, is available here.) The Senate held a similar hearing one week ago. Both events serve as a reminder, in case we needed one, of the recent rash of screw-ups committed by large, well-respected companies. If they can do it, it's at least conceivable that your company could too. How would you respond?

An incredibly informative piece from the Wharton School out today, contains everything you need to know about handling a crisis and issuing an apology. First, the article breaks down screw-ups into three groups:

Customer service issues- for example, Dell's problems shipping its new, colorful laptops on time
Failures of competence- Mattel's lead laced toys are certainly a good example
Screw-ups not related to core competencies- for instance, Martha Stewart's conviction for insider trading

Once you've decided what kind of crisis you have on your hands, the next step is to craft your response. And in this age of the Internet, you need to do it fast. "The traditional news cycle, where daily newspaper deadlines dictated how companies managed crisis communications, doesn't exist any more," Wharton warns. Ron Culp of public relations agency Ketcher, recommends quickly posting your response to the company web site. Bloggers will pick it up from there, and the traditional news media will follow them.

What form should your apology take? According to Wharton marketing professor Lisa Bolton, "three key components ensure that an apology will work: The CEO must deliver the message, a solution to a problem must be outlined and some remuneration should be in place." Don't scrimp on the remuneration. Many recent apologies have failed because the remuneration was inadequate. (Apple, are you listening?) Though, of course, the level of your response should be dictated by the severity of your screw-up.

Lastly, you might not be facing a crisis now, but it's not too soon to start preparing for one. Wharton professor, Thomas Donaldson, notes:

The old saw that a reputation takes years to accumulate, but can be destroyed overnight, is only half true. If you have a good reputation, you are given the benefit of the doubt. If a company has a bad reputation, it gets the detriment of the doubt.

So it pays to build a "reservoir" of customer goodwill before a crisis hits. If you have your customers' trust, rush to nip potential problems in the bud, and follow the advice outlined here, your company stands a good chance of getting out of a serious screw-up with your good reputation intact.

(Image of apology note by veganstraightedge, CC 2.0)