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Todd Thomas, associate professor of leadership at DeVos Graduate School of Management at Northwood University in Midland, Mich., was about to start teaching a class on Sept. 20, 2011, when he checked his e-mail. There was a note from Netflix CEO Reed Hastings to all of the company’s customers, acknowledging missteps in how Netflix had handled its recent decision to change how it delivered movies and to alter its pricing structure.
As he read the e-mail, Thomas thought, “Well, there’s a gift.” His class was on attribution and accountability.
Hastings made several missteps in the missive, Thomas said. As a result—evidenced by the comments posted on Netflix’s
Facebook page and
blog—customers were angrier than ever. More than 26,000 comments were posted to the blog page, and more than 10,200 comments were posted to the Facebook page. Netflix shares have dropped from $210 to $130 in a week, and communications to shareholders indicate they expect to have 1 million fewer customers at the end of the third quarter of the year.
Here are some lessons learned from Hastings’ missive, according to Thomas:
He said too much. “When I read the first sentence of his e-mail (“I messed up”), I was impressed,” Thomas said. “Then he didn’t stop talking.” The e-mail was over 600 words long, and the blog post was even longer. Hastings acknowledged that customers felt that Netflix “lacked respect and humility” in the manner it had announced changes in pricing structure and movie delivery. But then he went on to re-explain the reasons behind the change, reminding readers all over again of why they were upset in the first place.
“If you’re going to give an apology, it should only be an apology. This moved into a justification [of the changes] under the guise of an apology. People see through that,” Thomas said.
An example of an apology executed well is
Jeff Bezos’ apology for Kindle suddenly yanking books off customer’s e-readers. In less than 100 words, Bezos acknowledged the error, took responsibility and promised to do better.
He over-interpreted his importance. Hastings made the apology via e-mail. And blog post. And video. And he described his “greatest fears” for Netflix. An apology shouldn’t be about the leader. We all remember BP’s former CEO Tony Hayward attempting to apologize for the Gulf of Mexico oil spill. The only sentence we recall: “I want my life back.”
He misdiagnosed the problem. Hastings apologized for people not understanding the reasoning behind Netflix’s changes. As evidenced by the thousands of comments on Facebook, Twitter and Netflix’s own blog, that’s not why customers are angry. They are angry because they now have to log onto two websites, manage two accounts and pay two bills—plus pay more for the services—instead of obtaining mailed DVDs and instant streaming all from the same source. “He was apologizing for not communicating clearly—‘You didn’t understand me, so let me repeat it,’ ” Thomas said. The apology “needs to be about what the people are upset about. It came off as insincere, because nothing [about the pricing structure or movie delivery] has changed.”
He spoke down to his audience. The blog and Facebook comments “were pretty coherent,” Thomas said, about why people didn’t like the pricing structure. They didn’t need the situation explained again “slowly and simply,” he said.
He reminded us why we were mad at Netflix. Hastings announced more about the company in the e-mail, such as the fact that the new DVD delivery system would be called Qwikster. “He took the part we weren’t happy with, reminded us we weren’t happy about it and made it worse with the [new] branding,” Thomas said.
Netflix might not have needed to apologize at all. The company could have taken all the feedback as “intelligence,” Thomas said, and used that to make further strategic decisions. In hindsight, perhaps Netflix should have created a forum for its members to suggest ways to make the company better, or pitched the idea to split the services and asked members for their reaction.
“Then you are making the announcement from an informed place, and you indicate you care what your customers say,” Thomas said. Referring to comments on the Netflix blog, he added, “If you had that input six weeks ago, you would have done this differently.”
Beth Mirza is senior editor for HR News. She can be reached at
Top Ten Biggest CEO Apologies
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