The Transparency Edge. How Credibiltiy Can Make or Break You in Business

Overview

If we are lucky, what will come of this sorry mess is a wider awareness that virtue is rooted in surely acknowledging where we have gone wrong.

—Ellis Cose, “LESSONS OF THE TRENT LOTT MESS,” NEWSWEEK, DECEMBER 23, 2002

Mike Ruettgers, executive chairman and former chief executive officer (CEO) of EMC Corp., a publicly held technology company, has been successful in part because he has learned how to clean up some serious messes. When he joined EMC in 1988, the company’s data storage products were failing at a rate of almost 50 percent, a crisis that was pushing EMC toward bankruptcy. In an attempt to contain the damage to the company’s reputation and credibility, Ruettgers tirelessly traveled the country to meet with customers, apologizing for the problems associated with EMC’s products and promising to make things right.

The meetings were extremely difficult for Ruettgers, then executive vice president of operations and customer service. He experienced first-hand the far-reaching effects of EMC’s product failures and played the humiliating role of the company punching bag. One customer, Ruettgers recalled, broke down in tears. “He started crying and said, ‘If you don’t get this fixed, I’m going to get fired.’”

After patiently listening to their complaints, Ruettgers offered customers a humble apology and a choice—a new EMC system or one made by competitor IBM but paid for by EMC. At the time, many of EMC’s customers were small to medium-sized businesses that depended on EMC’s products to run their operations. “We felt we had to offer replacement systems or these businesses may not have survived,” Ruettgers told me. “Yet providing those substitute products was very expensive—it almost bankrupted us.” Indeed, so many customers chose IBM storage systems that during several months of the following year, most of the boxes shipped by EMC contained its competitor’s products.

Ruettgers’ strategy allowed EMC to keep all but one customer, and today the company has a truly amazing reputation for customer service and boasts a customer retention rate of 99 percent. Its service unit uses a “guilty until proven innocent” approach to all its customer inquiries, tackling system problems that ultimately may prove to originate with a competitor’s piece of equipment (about 20 percent do). Much of EMC’s reputation and tremendous growth—annual revenues were $123 million in 1988 and grew to $7.1 billion in 2001—are due to the leadership of Ruettgers, who during his tenure was named one of the “World’s Top 25 Executives” by Business Week, and the belief that how you handle mistakes actually may be more important than getting things right the first time.

In a world where perfection, confidence, and winning are pervasive values in work and life, it seems ironic that there could be success in admitting mistakes and saying that you are sorry. In fact, admissions of failures and, if appropriate, genuine apologies offered and accepted can be very powerful. Even with its inherent risks—such as appearing weak, incompetent, or otherwise less than perfect—confessing mistakes signals courage, accountability, and humility. Indeed, mistakes are an opportunity to visibly demonstrate a commitment to honesty. And handling mistakes with a high degree of responsible transparency helps to build a leader’s reputation of credibility.

When details behind the Enron scandal began to trickle out and the finger pointing began, it became evident that many involved knew of foul play long before the company’s collapse. Until the subpoenas began to arrive, Enron managers and executives at Andersen, the accounting company that enabled Enron’s bad moves, kept their heads down. No one yearns to blow the whistle on his or her company’s wrongdoings—too many risks and repercussions, like making enemies or losing a job. But we are not talking about serious white-collar crime here. If you are part of Enron-type illegalities, you are definitely not practicing transparency, and credibility is the least of your worries. With more honest mistakes, the everyday human errors we can all make in business, how well we handle them can seriously affect our credibility. Airing mistakes and apologizing require great care and excellent judgment in order to minimize possible risks and repercussions, such as a dip in others’ loyalty, trust, and confidence or the loss of a customer, friend, or job, depending on the level of the crime.

Not airing mistakes can be just as risky, though. These days, it is almost impossible to keep your bad moves a secret because too many opinionated and well-informed people have access to e-mail and the Web or they are onto you via plain old good intuition. After the recent string of corporate scandals, if you do not lay all your cards on the table and look failures in the eye, people just may assume that you are a cheat. Indeed, this is part of the reasoning behind the wave of companies that now strive to appear transparent.

This chapter offers suggestions aimed at helping you to handle your mistakes well so that you can strengthen your relationships and your credibility. Do you handle mistakes in ways that build credibility? Or do you choose behaviors that might chip away at your hard-earned reputation for credibility? Assess your performance with this quiz.