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How NOT to Break Bad News to Employees: Lessons from Netflix’s CEO

This morning, Netflix co-founder Reed Hastings issued an apology on the company’s blog for failing to show “respect and humility in the way we announced the separation of DVD and streaming, and the price changes.”

For those who haven’t heard, Netflix recently announced it was going to start charging its streaming and DVD-by-mail services separately (now, the latter service will be named Qwikster). Now, Netflix customers who want only DVDs or only streaming can pay less for the one service, but will end up paying more if they want to keep both.

Not surprisingly, the veiled attempt to charge customers more while pretending that they’re charging them less made for some unhappy customers.  To add insult to injury, most customers didn’t even get the news directly from Netflix itself, but through stories leaked on various blogs and news sites. (I myself didn’t get so much as an email to make me aware of this change, and had to find out through Twitter.) To say the company lacked respect and humility is an understatement: Netflix had no regard for their customers whatsoever in this situation. As a result, the company will – and already has – lost a great deal of customers and business from the ordeal.

Now, as Hastings desperately attempts damage control, not only do businesses have the opportunity to learn from about what not to do when it comes to customer service, but leaders could also apply these lessons to handling bad news- and correcting mistakes – with their employees.

5 Do’s and Don’ts for Communicating Bad News – and Righting Wrongs

  • DO: Own up to Your Mistakes. “I messed up. I owe everyone an explanation,” begins Captain Obvious’ Hastings’ blog post. Well done: straight and to the point. Some leaders frown on admitting wrong, but in Netflix’s case, the admission was necessary. So overwhelming was the backlash from customers, that for Hastings to do anything less than apologize would be an even bigger insult – and more fuel for unhappy customers’ fire. Sometimes, all customers want is to know they’re being heard, and Netflix finally took the time to acknowledge their customers’ feelings. And while many will see Hastings’ post as too little, too late, it’s at least start in a long way to winning back customers.
  • DO: Utilize video. Realizing that people have shorter attention spans today – and that angry people have even shorter attention spans -  Hastings also issued a 3-minute video apology for the many customers who likely will not take the time read through the lengthy apology and want to see and hear for themselves that Netflix is sincere in its efforts to appease customers (at least, we hope that’s the case). Video is the next best thing to apologizing in person, and it’s a quick, easy way to reach your audience – be they customers, employees or candidates.
  • DON’T: Try to make bad news sound like good news. Netflix keeps insisting that what is really a price hike is really a better deal for its customers. C’mon, Netflix. Give us a little credit. As NPR’s Linda Holmes puts it, Netflix’s attempts to sell the price change as a bargain is “like a shoe company deciding to sell right shoes and left shoes for 12 dollars each where pairs of shoes used to be 20 dollars and thinking that consumers will notice the lower 12-dollar price but not the fact that it buys only one shoe.” Tell your customers/employees the truth from the start; otherwise, they will notice that you’re hiding something from them, and they will lose trust in and respect for you.
  • DO: Listen to what people are saying about you on social media. Netflix customers used the greatest weapon at their disposal to fight the price hike – by taking to Facebook, Twitter and blogs in droves to voice their disgust. Finally, it got to the point where Netflix could no longer ignore the overwhelming criticism on social media – try as the company might have (which brings me to my next point…).
  • DON’T: Wait two $&@%ing months to make an ‘official’ announcement. Two months? That’s decades in social media time, y’all! By the time Netflix customers got the ‘apology’ from the CEO this morning, the story had already been circulating the Internet for weeks, and Netflix was way past the “My bad! Forgive us?” stage of admitting wrongdoing. This, in my opinion, was the company’s biggest offense of all. Hastings was wrong to not alert customers about the price changes in the first place, but he should have owned up to that mistake far earlier than he actually did. Customers deserve better than that, and so do employees. The more you try to ignore a problem, the worse it will get, and it’s going to take one helluva a team bonding outing to undo that drop in morale. (Good luck!)

As we’ve discussed before on The Hiring Site, your employees are your customers, and if Netflix has taught us anything, it is how imperative it is that you treat this group with respect – especially when it comes to handling bad news – otherwise, you risk losing the loyalty and respect of your employees – if not employees themselves.

Do you think Netflix was right to apologize the way it did?  Were this a company CEO addressing his employees about a leadership wrongdoing, how would you have handled the situation?