AOL CEO Tim Armstrong is back with another PR blunder that contributed to, if not prompted outright, an embarrassing corporate about-face. His latest gaffe came last week after AOL made a change to its 401(k) matching policy for employees, revealing that it would only match employee contributions at year’s end instead of throughout the year, and only for employees who are “active” through December 31.
Bad enough to adopt a miserly policy that robs employees of potential stock market gains in their retirement portfolio, but Armstrong added to the firestorm by blaming the change on Obamacare and on two “distressed” pregnancies that cost the company $1 million each in healthcare expenses. “We had to decide, do we pass the $7.1 million of Obamacare costs to our employees? Or do we try to eat as much of that as possible and cut other benefits?” Armstrong said, digging a deeper hole by going on to discuss the expensive pregnancies.
Too bad for Armstrong that AOL announced, at virtually the same time, a 13 percent increase in quarterly revenues, its best growth in a decade. The next day, he announced that AOL would reverse its 401k decision and apologized for singling out the two new mothers, but not before one observer recalculated his salary in terms of distressed babies per year.
THE PR VERDICT: “D” (PR Problematic) for Tim Armstrong and AOL for bad timing, bad policy, and bad employee relations.
THE PR TAKEAWAY: Avoid scapegoating. Armstrong, like so many other CEOs, looked stingy in blaming Obamacare for forcing cuts elsewhere – especially with AOL’s simultaneous rosy earnings announcement. (Is anyone managing communications flow at the company?) He doubled down by essentially blaming two specific employees for having the audacity to need expensive health care – pregnant women at that. Why not blame black rhinos for being hunted to near-extinction for their careless habit of having horns that poachers will kill for?