Corporate values: Why do companies bother saying 'sorry'?

Sometime saying "sorry" is just not enough. To mean something it should come from the heart. But what about when it comes from a company?

Recently, Germany's national railway operator Deutsche Bahn felt the need to apologize to football fans for late trains and overcrowded conditions during the UEFA European Football Championship held in the country. 

Michael Peterson, a Deutsche Bahn board member, said he understood the criticism. "Deutsche Bahn is not currently offering the quality that everyone deserves. But at the same time, we are doing everything possible to bring passengers reliably to their destinations." 

Deutsche Bahn is one in a long line of companies like Facebook, Netflix, Uber and Coca-Cola to say sorry. Plane and vehicle makers like Boeing, GM, Toyota and Volkswagen are serial apologizers. But does it change anything? Can an apology make fans who missed matches feel any better?

Why bother saying 'sorry'?

Every company will make mistakes. Some will say sorry. For businesses there is a lot to think about when considering an apology. It is a combination of crisis management, skill and psychology.

Clearly bad behavior, corruption or illegal activities must be apologized for — at the very least. But what about other things that aren't illicit or episodes that only affect one person?

Since an apology is not a time machine, it doesn't change the initial problem and just brings attention to it. For companies there is a cost-benefit calculation for saying sorry. Their legal team is likely to try and hold them back for fear of lawsuits or calls for financial compensation.

But the power of social media has changed the power dynamics. Previously, most people wouldn't even know about a problem. If it leaked, a statement released to the local paper was often enough. Today, a single complaint — usually a dramatic video — can go viral leaving no place to hide. 

Blame it on technology

It is this technology that is making apologies more common, and making companies more proactive in trying to restore public trust, thinks Nicola Lacetera, a professor in the department of management at the University of Toronto Mississauga in Canada.

"With the additional scrutiny that digital technologies give citizens and consumers, and the ease of communicating and spread information about malpractices, companies may feel more pressed to respond quickly, because it is more difficult to silence discontent," Lacetera, who has a Ph.D. in behavioral and policy sciences from MIT, told DW.

For Lacetera, active word choice, credibility and timing are key. Companies should not wait too long before acknowledging wrongdoing, as foot-dragging may give a sense that a company is trying to sweep the issue under the rug. 

One good example of hoping to wait it out is Volkswagen, the German carmaker which has been criticized for its long delay in acknowledging what became known as the Dieselgate emissions scandal.

Saying 'sorry' is hard to do

"Firms apologize because their reputation matters. It matters to consumers who shop at the brand they trust. It matters to regulators, who keep companies in check. It matters to employees when deciding where to work," said Benjamin Ho, a professor of economics at Vassar College in the US and the author of a book titled "Why Trust Matters: An Economist's Guide to the Ties that Bind Us."

Ho has looked into apologies for a number of years and though he doesn't have the data to prove it, he feels that companies are apologizing more often and with the "right" words, he told DW.

However, the right words are often not enough. Bad apologies abound and usually make excuses or fail to take responsibility.

"Companies really need to include tangible changes, take responsibility for their actions, and make concrete benchmarks for future performance, in order to make sure their apologies are taken seriously," said Ho.

Earlier this year, the chairman of Toyota, Akio Toyoda, apologized at a press conference because the automaker cheated on various certification and safety tests. 

"We are not a perfect company. But if we see anything wrong, we will take a step back and keep trying to correct it," said the grandson of the company's founder and offered a low bow.

The costs of saying 'sorry'

Yet apologies may work better in some sectors and not in others, said Nicola Lacetera. "In certain industries, the expectation is that companies are more of the cutthroat type, and as such, apologies may not be expected and even be a sign of weakness," he said.

Nevertheless, a good apology requires sacrifice and some sort of cost, Ho thinks. "This cost could be a tangible cost, like a monetary payment, or it could be less tangible, like a willingness to call attention to past mistakes, or a promise to do better in the future."

Though an apology can be more costly than some companies would like, deciding to make an apology or not generally doesn't impact stock prices. But when a company does apologize there is a difference between how "bad" or "good" apologies are interpreted.

Ironically, shareholders sometimes seem to like it when a firm shifts the blame to others. "In a recent study of corporate apologies, we found that companies that made 'bad apologies' experienced a better stock market response than companies that made a 'good apology,'" said Ho.

Customers on the other hand, want something more. Ho and a small team also looked at 1.5 million Uber users who had experienced late rides and were offered different apologies.

"We found that the most effective apologies included a coupon for future rides, or a promise to do better in the future," he said. "Apologies that were seen as empty words were ineffective or could even backfire, if customers experienced more late rides."

Saying 'sorry' the right way

Experts point out ways to make apologies believable and effective.

"Arguably no apology is better than a bad apology," says Prudence Gourguechon, a US-based psychoanalyst and consultant who specializes in the psychology of business and leadership.

For her a good business apology has the following components:

1. A clear and specific statement that acknowledges a mistake was made.

2. An unequivocal expression of responsibility for the error.

3. An expression of true regret for the hurt or injury that a person or group suffered as a result of the behavior.

4. A statement that specific action will be taken to prevent a recurrence.

Despite such clear guidelines, many companies still have a hard time saying sorry. Unfortunately, there is not a one-size-fits-all way to apologize and putting the apology puzzle together can be a minefield with hard-to-measure results. 

Yet, be assured companies will keep making mistakes and then try to make amends and regain customer trust.

Edited by: Ashutosh Pandey