By Alex Liddington-Cox and James Fitzpatrick
AUSTRALIA: The Big Four banks are paying the price in the aftermath of the Banking Royal Commission for failing to admit guilt and falling short of what consumers believe to be a meaningful apology.
In the second instalment of our two-part series on the Royal Commission, we’ll tackle the fear of apologising, as well as take a deeper dive into the science of the apology with ride-sharing company Uber and show how to protect your organisation with honest words.
As covered in Part 1, the requirements of an effective apology have been mapped out by Vassar College associate professor Ben Ho. It has to be costly to the individual giving the apology and/or include a commitment to do better in the future.
Perhaps the biggest obstacle to making the decision to apologise in the first place is the perceived threat of liability. Individuals and organisations see less risk in refusing to apologise and lawyering up than admitting guilt and therefore liability.
Smashing the ‘admission of guilt’ misconception
While you should undoubtedly seek legal advice in critical scenarios, the advice should be balanced against other business decisions and while taking the bigger picture into account.
In a tangible example for the case of apologising: Ho applied his apology model to a study of doctors practising in America. When something goes wrong in a hospital, doctors can be hesitant to apologise for fear of their apology being used as an admission of guilt in court.
Ho’s research smashed this assumption by demonstrating that doctors were less likely to be sued in the first place if they apologised up-front. Ho theorises that many patients were only suing because they never got an apology in the first place.
To support this, many states are now bringing in ‘I’m sorry laws’ which mandate that an apology can’t be used in court against you.
States that have enacted this law has seen:
20% increase in speed of settlements
$20k decrease in settlement size for minor injuries
$50-60k decrease in settlement size for major injuries
Generally, across Australia, apology laws already exist that dissociate an apology from liability and are designed to enable the natural ‘humane response’ of apology.
Case law on admissions of liability suggests that Australian courts generally do not find expressions of regret, apology or admissions of duty of care failures as evidence of liability.
When to use an apology
In January 2017, John List, Uber’s former chief economist, wanted to test Ho’s apology model (after himself encountering a poor Uber experience and not receiving an apology – complaining to the CEO that he didn’t receive one – and being told therefore to ‘fix it’).
List and Ho teamed up with economists Basil Halperin and Ian Muir to run a large-scale field experiment on 1.5 million Uber users. List already knew that an Uber trip that was 10-15mins late cost the company 5-10% in revenue lost (i.e. after a late trip, customers would spend 5-10% less on future trips). The economists wanted to test if Ho’s different types of apologies could lower that.
They tested eight different types of apologies on users who received late trips, ranging from providing a $5 credit with a commitment apology to no compensation and no apology.
The eight combinations can be best summarised in the following process (adapted from Griswold 2018):
After 84 days, the results highlighted:
An apology with no compensation made little difference to future spending. The team theorised that this is because the status or commitment apology alone didn’t personify enough of a ‘true cost to Uber’. A private email apology was not enough of an ‘embarrassing moment’ for Uber. Without an obvious financial cost, Uber needed to show empathy and some embarrassment to a broad reach of people; a true public reputational cost.
The $5 credit or compensation had a positive effective on reversing the damage caused by the bad ride. The team saw an increase of 2% in spending after customers received compensation.
Apologies must be used with discretion. The team found that if customers experienced multiple bad rides, and therefore multiple apologies, the overuse of the apology backfired. On average, customers who received multiple apologies punished the company more than customers who received no apology at all. The team suspects this is because when you apologise, you accept being held to a higher standard relative to somebody who did not apologise.
How can the Banks use this methodology to repair their reputation?
As with Part-1, we’ve posted collective research of our Banking Royal Commission Special and combined it with our existing ‘Crisis Response and Message Strategy Formulas’ to create a brand-new approach for post-crisis reputation management; the Honest Words Methodology.
Accordingly, we’ve come up the following 5-Steps:
Use the British Standard Crisis Communication Response Process to establish:
A. Campaign Objectives (e.g. retain customers, restore public’s trust, retain government relationships)
B. Define audience & prioritise stakeholders (e.g. staff and affected customers)
C. Develop strategy (explained in next step)
D. Select communication channels (that will reach the priority stakeholders)
F. Monitor and analyse feedback
G. Adjust and go back to ‘B’
Step 2 Follow the Coombs Message Strategy Formula to develop the appropriate message strategy. We’ve gone ahead and done that and the result is:
Responsibility attribution = strong (severe threat)
Intensifying factors involved
Strategy therefore should include: Instruct, Care/Support, Compensate and Apologise
Explicitly take responsibility for the situation and ask people for forgiveness
Offer money or other compensation to people directly affected
Step 3 Using Ho’s apology model, ensure our apology includes:
An obvious public cost to us (suggest both status and financial)
A commitment (that we’re confident we can make) that it won’t happen again
Using Cerulo and Ruane apology structure, ensure our apology:
Begins by focusing on the victims
Expresses empathy and remorse
Doesn’t include any justifications or unnecessary context
Ends with restitution
Step 5 Using the Crisis Shield Message Model, ensure your message also includes:
An explanation of the key facts
What we’re doing to fix the problem
What we want you to do
We've summarise the above steps in the following image:
We’re confident in this Honest Words approach – it’s backed by research, best practice and our own first-hand experience. We take it with us to every crisis engagement.
Contact our team today if you’d like further information.