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Apologizing for Bad News? Be Careful With the Video

Executives increasingly are turning to video to communicate with stakeholders. Here are some tips for doing it right.
David Rosenbaum, CFO.com | US
April 16, 2012

Two years ago this week, on April 20, 2010, BP's Deepwater Horizon drilling rig exploded, killing 11 workers and spilling millions of gallons of oil into the Gulf of Mexico. On June 3, 2010, BP chief executive Tony Hayward went on YouTube, promising to "make this right." By the end of July, Hayward had been fired.

Perhaps no chief executive could have survived a disaster of Deepwater Horizon's magnitude, but Hayward's YouTube video was a disaster of another sort. Coming over a month after the explosion, it was late. And before apologizing, he spent 38 seconds — an eternity on video — describing what BP's response would be, and promising the company would "honor all legitimate claims," a statement that could be taken to imply that BP was as ready to dispute claims as to address them.

As Abbie Lundberg of Lundberg Media, a communications advisory firm, says, when an executive appears in a video, "It's important for that person to be seen as sincere and genuine and to be taking responsibility, not trying to shift blame." Hayward's failure to appear either sincere or genuine was ridiculed in a South Park video a few months after his firing.

Increasingly, business executives are using video to communicate with both internal and external stakeholders. Lundberg suggests this may be a generational trend, a way to reach audiences demanding that information be presented to them in a greater variety of formats. A recent study co-authored by Frank D. Hodge of the University of Washington's Foster School of Business and published in The Accounting Review examined the impact of using video to announce bad news, specifically financial restatements. Hodge and his co-authors, W. Brooke Elliot and Lisa Sedor, discovered that announcing restatements (a bad thing, as the recent Groupon restatement vividly illustrates) via video is only beneficial when top management, according to Hodge, "accepts responsibility for the restatement."

"Video is a magnifier, either on the positive or negative side," says Hodge, who launched the study to examine the difference between video and written text because "younger shareholders are demanding information in different ways"; that is, through video and on the Internet. The variable Hodge and his co-authors focused on was trust. "Video magnifies the impact on trust of negative information, and trust affects investment decisions," says Hodge. And the key to being seen as trustworthy, he says, is accepting personal responsibility.

According to the study, "Even when the violator [of the investor's trust] issues an apology, accepting responsibility by making an internal attribution repairs trust to a greater extent than does denying responsibility by making an external attribution" — that is, shifting blame.

It's long been known that negative expectations and experiences have more power over us than positive ones. "Bad," writes Jonah Lehrer in How We Decide, "is stronger than good." People hate losing money more than they love making it, which is why, according to loss-aversion theory, they will react more strongly to bad news than to good news. Or, as Hodge puts it, "People weigh negative events more than positive ones if both are equal." Consequently, when executives announce bad news via video, he says, "it requires very special care."

"Video stimulates more senses — sight, hearing — than written text. It affects you more strongly," adds Hodge. "You have a much stronger reaction to what's being presented. Executives that use this intelligently can benefit."

Unfortunately, not all do. NetFlix CEO Reed Hastings, for example, took to YouTube last fall to announce the infamous Qwikster rate hike and failed to apologize or accept responsibility, admitting only that NetFlix may have "handled communications" poorly. The Hastings video seems to have been shot in a conference center parking lot. He's grinning and casually dressed, and, says Lundberg, it was "not the right tone to take." And when Groupon CEO Andrew Mason apologized for a delivery snafu in Japan, he was, in Lundberg's view, poorly lit, and looked "pasty" and disheveled — not, she says, like someone on top of things.

By contrast, when Toyota Motor Sales USA president Jim Lentz apologized for the company's brake-pedal problem, he was in a studio wearing a suit and tie, looking directly into the camera, and taking responsibility almost immediately.

"When you're doing video," Lundberg says, "you have to make sure that everything in the visuals is appropriate. And when you're announcing bad news, you need to be serious, personal, and direct."


Lundberg has some other tips for executives appearing in front of the camera:

• Make your message clear and simple.
• Look directly at the camera.
• Think about your clothes, the background, and how you're lit.
• Practice in front of the camera.

Of course, says Lundberg, "Executives have varying degrees of being open to taking direction. At the end of the day, they believe they know what's best and they're going to do what they're going to do."




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