AOL's Tim Armstrong Played the Blame Game and Lost
AOL's CEO, Tim Armstrong, did precisely the thing that they tell you to do in public speaking classes: Tell a story to illustrate why you're doing something (or why you should do something). It helps people relate, it builds empathy, and it allows your audience to understand where you are coming from.
The only problem is, what he was doing was lowering an employee benefit, and the story he told was about how two very "sick babies" cost the company. What Armstrong said:
"We had a $7.1 million bill from the Obamacare act in general, and we had multiple other things that happened at the company healthcare-wise. Two things that happened in 2012 we had two AOLers that had distressed babies that were born that we paid a million dollars each to make sure those babies were okay in general. And those are the things that add up into our benefits cost."
Now, I don't doubt that these statements are true. When people talk about health care benefits, they often forget that someone is ultimately paying the bill. And sometimes bills keep coming. Armstrong wanted to illustrate his point that AOL had been hit hard with changes in insurance requirements, and he could have done this by ending after the first sentence. But he threw in a line about the two babies.
People Like Babies
People have empathy toward babies. People do not have empathy toward big companies, and they certainly don't think about the trials and tribulations of paying out actual health care costs. Insurance doesn't equal free; it just means someone else is writing the check.
Armstrong made a big mistake in talking about the babies, but he made another mistake in emphasizing the reason for the change. What was the change? If you haven't been following the story, you probably think it has something to do with health insurance. It doesn't. It's about AOL's 401(k) matching program. Instead of giving the employees the matching funds throughout the year, AOL was changing to a lump sum at year's end.
It is nice to explain why you're doing something and exactly what that is. But in this case, he went too far. If he had simply said AOL was changing how matching funds were applied, people would have groaned and then gotten over it, even though they were the ones taking the financial hit.
How does that hit happen? If you still get the same dollar amount in matching funds, should it matter if you get it in installments or in a lump sum at year's end? In actuality, yes. You miss out on gains from the new money--in investing terms, that's called dollar-cost averaging. And if you quit before the payout date, you forfeit the matching funds. So, it's kind of a big deal. Also, AOL would get to make interest on the money it wasn't giving you and keep the money forfeited by resigning employees.
But, honestly, people wouldn't have noticed and those who had would not have pitched a big fit. But because Armstrong chose to single out sick babies as the cause for the change--even though that was $2 million compared with the $7.5 million from Obamacare--he had to reverse course.
I don't know about AOL's financials, and I don't know if this reversal will have a negative effect on its business, but it's done a number on the company's public image. For instance, an article by Deanna Fei, one of the babies' mothers, about the experience has garnered more than 65,000 social-media shares.
Making Unpopular Decisions
So, what do you do when you have to make an unpopular decision? Yes, you have to tell your staff, but you don't blame your staff. You don't say, "It's because of something bad you did." You just state the change. Yes, you can talk about cost savings, the competitive marketplace, or the need to make sure the company continues being profitable. But you don't blame the individuals.
As Fei wrote, "Yes, we had a preemie in intensive care. This was certainly not our intention. While he's at it, why not call out the women who got cancer? The parents of kids with asthma? These rank among the nation's most expensive medical conditions. Would anyone dare to single out these people for simply availing themselves of their health benefits?"
So think about that when you make a hard financial decision. Think about how this will play out in the media. (And yes, even small businesses need to be concerned about this.) You can make your decision, but don't blame your employees. Especially not adorable babies.
SUZANNE LUCAS | Columnist
Suzanne Lucas spent 10 years in corporate human resources, where she hired, fired, managed the numbers, and double-checked with the lawyers.