Facebook's false choice: What it should have done to preserve trustOctober 18, 2010: 12:42 PM ET
How the largest social network can pursue both its own objectives and its customer needs.
by Inder Sidhu, contributor
No. 6 on the list of "Most Hateable Companies Not Named BP"?
Ouch. That's got to hurt.
So how did Facebook, a destination of choice to more than 500 million people, get cast in such a poor light? The same way a lot of technology companies falter: it made a false choice that it never should have.
Facebook provides a great service. According to the company, users spend 700 billion minutes per month on the site. But millions are upset over the company's attempts to make money from their personal information. Encouraged to share personal information under one set of privacy principles, Facebook users feel betrayed that the service provider later adopted another.
These concerns will likely escalate after the latest revelations that some of Facebook's most popular applications transmit personal information to advertisers and Internet tracking sites, according to the Wall Street Journal. How Facebook handles these charges will be telling -- even its most recent attempt to appease users has been criticized. Introduced earlier this month, Facebook Groups has led to a new round of complaints from users who find themselves added to groups without their explicit permission.
What should Facebook have done differently? It should never have put itself in a situation where it chose its desires over those of its customers. That was a terrible choice that too many companies make.
What's worse is that the choice was unnecessary. Facebook tends to give little notice to users of impending changes, and even less opportunity for users to provide input or direction before they happen. With a more careful process, it's entirely possible Facebook could do more to secure users' privacy, and satisfy the users that criticize the company's every move. Sometimes surprises are inevitable, but by repeatedly catching users off guard with tweaks and changes, rather than engaging them in the process, Facebook tests its users' goodwill.
Many business leaders wrestling with the question of whether to satisfy their own needs or those of their customers have realized that no matter what they choose, the ultimate result will be fractious disagreements, unfortunate trade-offs and lingering resentments. Therefore, they decided that their so-called "choice" was no choice at all. The only way to move forward was to do both – pursue and fulfill their own interests as well as their customers'.
The right choice
Consider the story of Bank of Hawaii (BOH). Named the nation's "best bank" by Forbes in 2009, it has been on a financial roll this year. In the second quarter, net income jumped 50% over 2009.
While earnings dipped in 2008 and 2009, Bank of Hawaii did not suffer like other institutions during the downturn. Rather than pump up profits by charging exorbitant overdraft fees or investing in sub-prime loans, the 113-year old bank stayed true to its original mission of serving local communities responsibly. To retiring CEO Allan Landon, "boring but good" benefited not only the bank, but also its customers.
"Bank of Hawaii has avoided the excesses of size, complexity, leverage, risk and compensation that have impaired some in our industry," he wrote in the company's 2009 annual report. As a result, it neither had to gouge customers nor beg the government for help to make up for foolish deeds.
Another company that has satisfied customer needs while meeting its own objectives is pet food maker Nature's Variety. The company, which makes premium pet food, faced a tough decision in early 2010 when its Organic Chicken Formula Raw Frozen Diet foods were feared to contain Salmonella: pull them from the shelves at great expense, or downplay the problem and hope it would go away.
Worried about the fate of its customers' pets, as well as its own reputation, the company went into high gear to alert both resellers and consumers. Within days, it announced a massive recall, posted information on its web site, and contacted retailers and veterinarians. A month later, Nature's Variety voluntarily broadened the recall to minimize any harm to animals.
In an interview with Veterinary Medicine, Anthony Holloway, CEO of retailer K9Cuisine, praised Nature Valley for its quick response. "Within minutes of the [recall] announcement, our company was contacted by our Nature's Variety representative," he said. "We were told that there was a recall, gave us the details, answered our questions, told how the company would handle affected product and probably most important where customers could get answers."
As you can imagine, consumers were equally quick to praise Nature's Variety for balancing its interests with those of its customers.
That's something Beth Israel Deaconess Medical Center of Boston has achieved in the most trying of circumstances. Last year, the company faced a severe budget crisis that ordinarily would have meant mass layoffs. But CEO Paul Levy worried that reducing janitors, nurses, technicians and secretaries would adversely impact patient care. So before enacting budget cuts, he gathered the medical center's workers in an auditorium and asked if they could help come up with better ways of saving money. Some offered to forego pay hikes. Others volunteered to work fewer days, while 13 department heads agreed to donate $350,000 to help keep as many staffers as possible. In all, Levy received 600 ideas for cutting costs. Thanks to the measures ultimately taken, the medical center saved 450 jobs.
Imagine how many patients benefited from this effort.
The Bank of Hawaii, Nature's Variety and Beth Israel Deaconess Medical Center are just three examples of companies that pursue both their own objectives and customer needs. Many others thrive by doing both, too.
It's not the only way to stay off the list of "most hateable companies not named BP," but it's an excellent place to start.
Inder Sidhu is the Senior Vice President of Strategy & Planning for Worldwide Operations at Cisco, and the author of Doing Both: How Cisco Captures Today's Profits and Drives Tomorrow's Growth. Follow Inder on Twitter at @indersidhu.