For the second time in six months, AOL CEO Tim Armstrong stuck his foot in his mouth.
Last week Armstrong explained to AOL employees that the company was getting rid of its regular 401(k) matching contribution in favor of a less attractive annual lump sum match. To justify the move, Armstrong blamed the change on Obamacare and the company having to pay millions of dollars to cover the medical costs of two mothers with “distressed babies.”
His words sparked public outrage, and one of the mothers implicated by Armstrong wrote a scathing article on Slate. “I take issue with how he reduced my daughter to a ‘distressed baby’ who cost the company too much money,” Deanna Fei wrote. “How he blamed the saving of her life for his decision to scale back employee benefits. How he exposed the most searing experience of our lives, one that my husband and I still struggle to discuss with anyone but each other, for no other purpose than an absurd justification for corporate cost-cutting.”
Armstrong later admitted his poor judgment in an email to employees and reversed the 401(k) program changes.
Small business owners can learn from Armstrong’s mistake. It may be tempting to explain to employees why the company has to make tough benefits cuts or lay off employees. After all, providing honest explanations of controversial business decisions may engender more trust and understanding.
The problem with Armstrong’s choice of words was that he laid the blame on employees—not to mention those who’d experienced traumatic, life-threatening experiences. It exposed, though perhaps not directly, specific and sensitive information about employees’ medical conditions. (The Daily Kos recently wrote that Armstrong and AOL seem to have violated federal Health Insurance Portability and Accountability Act of 1996 [HIPAA] rules.)
At small businesses, it can be particularly easy to make such a mistake. All the employees likely know one another. One employee with cancer or another major medical issue can quickly drive up health insurance premiums and company leaders may have to try and explain why their premiums are going up so dramatically.
But it's up to company leaders to manage that tricky balance between explaining why the company needs to make tough cost cuts and not recklessly pointing fingers at employees or violating their privacy.
Had Armstrong simply explained that health care costs were rising—and not pointed fingers or gave away such explicit details—he wouldn’t be dealing with the public relations nightmare he is today.
Read more articles on employee benefits.
Photo: Getty Images