Apologies have been the centre of attention in the UK news recently. What is a real apology, a half-apology or a non-apology?
It is a topic we sometimes discuss with our clients. When things go wrong, when is an apology appropriate and how is it best done?
These questions are often harder than they sound. For example, let’s examine some scenarios from the asset management world where a firm might find it hard to determine the right level of apology:
- They underperform for their clients because the market turns against their investment style.
- They invest in a stock and it turns out that management have been misreporting revenues, resulting in a collapse in the share price and poor performance for the asset manager.
- They invest in a company on the basis of a turnaround that turns out to be unsuccessful, resulting in poor returns.
For example 1, you could suggest an apology is not needed. The asset manager has done what they said they would do, and it is not their fault that the market has turned against their approach. On the other hand, to simply wave away concerns about poor performance from their investors is unlikely to go down well. Saying, “It’s not us, it’s the market” can sound like you’re shirking the blame.
For example 2, an apology might be needed if the asset manager missed something when doing their due diligence. On the other hand, how can we blame them if management (and auditors) gave no reasonable indication of any problems?
For example 3, this might be clearer. You could argue that the asset manager clearly got something wrong. Again though, it is not simple. At what point do you decide that the turnaround has not worked? It can take years to see if a turnaround has been successful, so when do you apologise?
There are no easy answers to the questions above. What is clearer is what is needed for an apology to be effective.
5 essentials for an apology to be well received
- Be timely. Apologise as soon as you have decided that you have made the wrong call. If you delay your apology, it can sound grudging.
- Focus on the victim, not yourself. Rather than excusing yourself, recognise the pain you have caused for the victims. For example, ‘We recognise that this mistake has resulted in poor performance and recognise the pain this causes you as a client’.
- Incur personal cost. This could be financial (a refund or compensation if appropriate) or to your status. Showing how much time and self-reflection you have done is another way to show how much you care, e.g. ‘We have done our full review of the research process for this stock and issued updated guidance for the analyst team. We have also looked at all similar stocks in our portfolio challenging the original analyst’s assumptions in the light the of this case. The result of this exercise is…..’
- Show remorse. ‘We are truly sorry and know this is not you expect from a fundamental, bottom-up manager such as ourselves’.
- Commit to change. ‘We will continue to put into practice the lessons learned from this process. We are also happy to share the results of our analysis of similar stocks across the portfolio to explain why we still believe they offer exceptional value.’
One thing that runs through the points above is that the apology needs to be feel authentic. If you don’t believe in your apology then it is likely you will get one of the above points wrong.
Let’s hope you don’t have to put these techniques into practice too often. But if you do apologise (and apologise well) it can strengthen trust in a long term relationship. We all make mistakes but how we react to them is often what we are judged on.