01/02/2014 02:41 pm ET Updated Mar 04, 2014

What Happens When CEOs Tell The Truth?

Looking ahead to the new year, one wish I have for 2014 is that more CEOs will make New Year's resolutions to dish out straight talk about their company's performance. As we start listening to earnings calls, wouldn't it be refreshing to hear some unvarnished truth about areas where our corporate giants need improvement?

In 2013, we've had more than a few CEOs deliver mea culpas covering admissions of product failures and substandard customer service (to name just a few: Apple, United Airlines and Lowe's). But these are rarely met with thank you's or cheers.

Although some CEOs are simply acknowledging truths consumers and shareholders already know, the media and blogosphere stand ready to pounce on anything that smells like an admission of guilt or attribution of blame. This came to the headlines most visibly in April when IBM's CEO, Ginny Rometty, identified Big Blue's salesforce as a factor in its missed earnings. While some rose to defend Rometty's candor, many argued that her "public spanking" and "yell-at-everyone-in-public" attitude would lead to her undoing.

Several months later, the CEO of restaurant chain Cosi, Stephen Edwards, was taken to task for throwing his staff "under the food truck" after saying in a Businessweek interview that "service is where we are experiencing the greatest shortfall."

Rather than celebrate this dose of honesty, it seems we still prefer to get our corporate insights via off-the-record comments or leaked memos, as happened when McDonald's executives warned franchisees earlier this year that "service is broken" in a webcast intended for internal consumption. Or, even better, we wait for top brass to say something as silly as Comcast's CEO, Brian Roberts, recently did by implying his company's atrocious service record -- among the worst in any industry for multiple years running -- is the unavoidable result of having too many customers. Plenty of pundits and customers have responded caustically, noting how much they'd love to cut the "monopolistic cord" binding them to his company.

The challenge seems to be that whenever a high-powered senior executive talks openly about underperforming functions or business areas, it's hard to escape the perception that Goliath is beating up on the little people. It seems inappropriate for the CEO to finger point in public. Isn't he or she the person who's supposed to defend and develop the frontline workers who too often suffer at the hand of corporate bureaucracy? Doesn't the proverbial buck stop with them? It's easy to interpret CEO criticism as the superficial assessment of an out-of-touch, arrogant, cover-my-ass CEO. Images spring to mind of pharaohs smiling as workers on the pyramids are mercilessly bullwhipped.

An Inside Look: An Honest CEO

I recently had a chance to speak to Stephen Edwards of Cosi to get an inside view of why he so publicly declared that his company's service stinks, and how the company's messaging on service seemed to briefly spin out of their control. To be candid, I wasn't sure what to expect of Edwards before the interview. It wasn't hard to imagine that the newly appointed CEO, with his private equity background and Harvard MBA, really was a cerebral know-it-all using public forums to bully workers.

Instead, Edwards came across as serious, sincere and straight-talking. As he said, "I didn't want to get on the earnings call and reiterate the same story, sing the same song. I wanted to be direct about the problem and let people know that curing it is important for the survival of our business."

As it turns out, Edwards had never actually spoken to the Businessweek reporter, and his contributions to her story came in one email paragraph. Some of those comments, in turn, were taken piecemeal and often out of context by other writers who cast him as a villain. "I didn't expect," Edwards shared, "that it would turn into this CEO-throws-workers-under-the-bus story."

Edwards also had much more to offer than rhetoric on the subject of service. In the five months since he has been at the helm, Cosi has defined "Class A hospitality and service" and trained all employees on how to deliver this. And there are more employees around to actually provide service. Edwards realized his company had a problem when he walked into a store on a Sunday afternoon and there was only one employee to perform all the jobs. He realized the company's lean staffing, outdated scheduling system and failure to plan for staff absenteeism had helped to keep costs low, but were ultimately killing service.

Edwards also noted that the company has started to simplify processes while teaching employees to be friendly and chatty with customers. "Not in a fake way," explains Edwards, "but just enjoying a conversation." Cosi employees had historically been measured on their ability to adhere to systems and procedures without much discussion of how to brighten a guest's day. To reinforce this message, all employees now sign the Cosi Pledge to "treat every customer as our best customer" and "uphold the highest standards of cleanliness, friendliness and quality food."

More than a gimmick, the pledge is used by Edwards and his team as a teaching tool. Preferring the direct approach, Edwards says his frequent store visits are about teaching Cosi's workers how to deliver the pledge's commitments. "People are surprised when I pick up a rag to wipe tables or sweep the floor, but everybody needs to be committed to this -- whether it's me, a district manager or somebody in our store." It's a singular message that Edwards isn't afraid to reiterate with his employees, shareholders or the media. His most recent earnings call continued to hammer this theme, albeit without offering any sound bites that might go viral.

Despite the willingness of the few like Edwards who stick their necks out to tell the truth, I don't expect much more forthrightness in 2014. Rather than encourage CEOs to deliver honest appraisals of their company's performance, we seem inclined to castigate them for their candor. Hopefully we can encourage a little more frankness in this year by digging deep enough to know whether they're blowing self-serving hot air or ringing a legitimate alarm bell.

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