How to Handle Mess Ups | Ep 711

This episode focuses on effectively managing mistakes in business and turning negative experiences into positive outcomes.

1. Mistakes are unavoidable in business; what matters is how they are addressed.
2. Going beyond a simple apology can turn dissatisfied customers into brand advocates.
3. Customer service should aim to exceed expectations, particularly after a mistake.
4. Negative experiences, if handled well, can transform into positive outcomes.
5. It's essential for employees to take ownership of mistakes and actively work to correct them.

1: Introduction to Business Mistakes

Alex Hormozi discusses the inevitability of mistakes in a business setting and sets the stage for the episode's theme.
Alex Hormozi: "Everybody messes up. It's part of business."

2: Personal Anecdotes

Hormozi shares stories from his experience, highlighting different outcomes based on the response to mistakes.
Alex Hormozi: "I want to tell you two stories, and then I want to drive home a couple of principles that have served us well."

3: Principles of Handling Mistakes

Detailed discussion on the principles of effectively managing business mistakes and turning them into opportunities.
Alex Hormozi: "Disney says that there's 37 magic moments that it takes to make up for one tragic moment."

1. Always acknowledge mistakes fully and promptly to prevent escalation.
2. Provide compensation that exceeds the customer's loss to ensure satisfaction.
3. Train staff to handle mistakes proactively, giving them autonomy to make decisions.
4. Continuously gather feedback to improve services and prevent future issues.
5. Create a company culture that values transparency and customer satisfaction.

“There is no more useless emotion than feeling sorry for yourself.” Today, Alex (@AlexHormozi) delves into the crucial role of handling mistakes in business and transforming them into opportunities. He provides tactical advice on exceeding customer expectations, empowering teams to proactively address issues, and the long-term benefits of customer satisfaction, all key strategies for turning dissatisfied customers into brand champions.

Welcome to The Game w/Alex Hormozi, hosted by entrepreneur, founder, investor, author, public speaker, and content creator Alex Hormozi. On this podcast you’ll hear how to get more customers, make more profit per customer, how to keep them longer, and the many failures and lessons Alex has learned on his path from $100M to $1B in net worth.

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Alex Hormozi
Everybody messes up. It's part of business. Your employees are going to mess up. You're going to mess up as a boss. Your customers are going to think you messed up.

Even when you didn't mess up, messing up happens. And so if you act every time like you have never had a mess up before, then you are going to mess up even worse. And so in this podcast, I'm going to talk to you about three different stories about big mess ups that I have done and been an experiencer of and some tactical things that you can do that have made our businesses so much better and turned one star reviews into five star reviews. And the step by step process. Thinking through that, what do you do when you mess up?

Right? Because you're going to mess up in business, you're going to mess up with a customer, you're going to bill someone the wrong amount. You're going to give someone the wrong date. You're going to forget to onboard someone. You're going to have a package that doesn't get delivered.

It gets delivered to the wrong address. You're going to onboard someone, put the wrong company's logo on it. Every one of those examples that I just said is something that we have done at some point in my career. I want to tell you two stories, and then I want to drive home a couple of principals that have served us well. Use them if you want, but they have worked pretty well for us.

And so I'll tell you two kind of polar extremes. So I buy a lot of gym equipment, even though I'm not even in the gym industry technically anymore. I have a massive gym that is in our headquarters. That's really sweet. I'll just put it that way.

We've got, like 85 unique pieces in the gym, and it's just, just for me and the team. Um, and so I, uh, all the pieces are bought from individual people. I kind of put the pieces together that I like, and so it's not just one distributor. And so I had a piece of equipment that, that I bought, and I was really excited about it. Cause I was like, oh, man, I love this piece.

It's gonna be awesome. And when it showed up, it was bent. Like, the frame was bent. Um, and the. And the weight stack was kind of off.

And so one of the main poles was bent. So then it was like this whole ordeal. And we called the company up. He was like, well, uh, I mean, you, you accepted the shipment. And I was like, yeah.

Cause the truck guy was like, what do you want me to do this. I was like, all right, we'll drop it off. He's like, well, as soon as you accept the shipment, it's your liability. And I don't know if it, like, it happened before or after that. And I was like, well, I'm telling you, it happened before.

And I just wanted to help the guy out who was the truck driver, like, complete his. Complete the runs that you had for the day. And he was like, sorry, dude. Um. And I was like, all right, well, I mean, can we, can we get, like, the pieces or something, like a new frame that you can ship out just that piece?

And he's like, well, that's going to be extra. And I'm like, dude, I bought this thing. It arrived not the way that I bought it. And now I'm incurring additional costs in terms of financial costs, but I also have the additional cost of now I'm talking to you when I'd rather be using the piece of equipment. And so the TLDR of that is, I basically just threw the piece out.

And I hate the person who I did business with, and I will tell anybody who ever considers buying from them that they suck. Now, let's take the alternative example. So last year, I went to Orlando for Gymcon, and we stayed at the Ritz. And when I went to the Ritz, we had our team with us, and so we went out. They have a Michelin star restaurant there, which, by the way, I found out, was actually named after Michelin tires.

Totally random. I saw, like, the Michelin tire man at the front of the restaurant. I was like, this feels weird, but it's actually what it is. Anyways. And so we go in there, and it's this really nice restaurant or whatever, but it took three and a half hours to eat our entire meal.

We didn't get drinks for, like, 45 minutes. We didn't get the appetizers until minute 90. And I was like, dude, this is. I was like, I honestly just want to go get chick fil a. Like, I don't even care, right?

And so anyways, we finished the whole dining experience, if you want to call it that. And, um, the manager of the hotel, you know, our team was like, hey, just letting you know, like, this was pretty, pretty tough. And as soon as the manager found out about that, he was so upset. He was like, oh, my God, I can't believe this happened. We had just switched staff over.

We're training some team up, and I think we were under, you know, short, you know, short staff that day. Whatever and he said, but that's 100% our fault. He said, please let me make it up to you. And so, for the remainder of the trip, like, one, he comped the dinner that we had there, which was expensive. Then we got upgraded, I think, rooms for the rest of our stay, they.

He said, please. Like, they delivered, like, fruit baskets and drinks and other stuff to our room throughout the day and my team's room. So it's not just me. Like, we had eight people with us staying in four or five rooms, and so all of everybody got taken care of. He made us reservations at two different restaurants the next, basically every other night for us to choose from.

And then he met us at the restaurant to seat us at the table. He got us the appetizers and drinks at the restaurants that he met us at to make sure that we were okay. Now, I'll tell you this. Since then, if I go to Orlando, I stay at the Ritz, and I talk to Javier, because Javier is my dude, and Javier goes above and beyond. And the other guy at the other company, I don't say anything about now.

I don't even want to say the name of the company because I don't want to give them airtime. All right? And so I think there's some really interesting principles about this that we've taken from for our business. So Disney says that there's 37 magic moments that it takes to make up for one tragic moment. And I think there's two kind of levels to thinking about this.

So the magic moments, it means it takes so many good things to make up for one bad thing. So, by all, for all intents and purposes, avoid the tragic moment, because it's going to take you so many to make up for it. But if you do have that tragic moment, then you have to do a ton. And I see that on kind of bi directionally. Now.

One of the things that, um, I like to think about a lot is, like, I never want to become someone's project. And what I mean by that is, like, if you piss someone off or you do something wrong and you know you did something wrong, you don't. You don't want that person to stew and just think, like, how am I going to destroy this person? Like, you don't want to become someone's project. And so I've talked about the angry boat, and I'm going to get to that in a second, but I actually want to hit on this point because I think it's really important, which is that a refund to a customer is an apology, but you have to do better than that.

If you hit your wife and then you apologize, it's not just like, oh, we're neutral. It's just as if I hadn't hit her. It, like. And I'm doing this as a natural extremity, but hyperbolic. But, like, you wronging someone and saying, I'm sorry is not enough.

And so let me. Let me prove the point. If you accidentally kill someone in manslaughter, society deems you saying, sorry, family isn't enough. So what are the. What does the government do?

Sentence you, and they put you in prison. So they say you have to say sorry, and you have to pay ten years because of involuntary manslaughter. They say, sorry isn't enough, and so refunding someone isn't enough. If. If Javier at the Ritz had just refunded me the meal, I wouldn't be, like, stoked.

I would have been like, well, you wasted three and a half hours my night. And it's. And, like, the food was cold. Like, all these other things. Like, I'm not.

Like, I'm not back to neutral, right? Like, one tragic moment, he gave me a magic moment. Okay, give me a refund. And so one of the things that you have to wrap your head around, and this took me some time, is, like, you actually are going to go negative on refunds, meaning, like, you're going to lose money. You're not just going to be like, oh, well, you paid me $100.

I'm going to pay you a $100 back. Now we're even. It's no. Because there's additional costs that they incur. And so, like, they got dressed up, like.

Or, like, if we got dressed up to go to this nice restaurant, we have expectations of the evening that are going to be really good. And so not only did we pay money, but we paid time. And every person, you know, the gals on my team got all dolled up and all that stuff. And all of this goes completely into the tragic perspective. And so, as a customer, or one of your customers, has one of these experiences, it's like, dude, refunding them is not enough.

And so we have to do have to go above and beyond. And so one of the issues that happens, though, is that when. When it happens, and this is. This is now me talking to the teammates. So people who work in businesses, like, what you can't do.

And I'm just. I'm just. Please, I'm begging you. What you can't do is try and minimize it to the customer. Right?

Like, Javier could have been like, oh, I mean, like, basically by saying, you're being ridiculous. Don't be a victim. Like, that's what. Like, that's whatever you say when the person's like, hey, the food was late. The what?

All you're doing is trying to invalidate them. You're basically saying you're lying or you're not telling the truth. Or, I mean, pick. Pick your poison. And you're basically saying that you don't matter.

That's what you're saying. And so what happens is, is that people then escalate to be like, yes, I do matter. And you don't understand. And not only that, but I'm going to punish you. And so what do you think one star reviews are?

Think about it for a second. A one star review is a customer's way of being the judicial system and saying, okay, this person refunded me, but they needed to do more. And so I'm still going to jam them. I'm still going to put them in prison. Even though they apologize for killing my husband in manslaughter.

Right. Even though they apologize. That wasn't enough. So I'm going to punish them with a review because that's all I can do. Those are the things that they have control over.

And so we have to go above and beyond. And so I'll give you an example. Recently, and so we had a scheduling mishap, and we had seven people who were going to fly out to our headquarters, and basically they came here and there was nothing happening that day because the sales team messed up times. And so it's like, and five of these are international. Think about this.

You travel across the country, across the world to, you get your expectations up. Some people have to apply for visas, like, big, big, big expectations, big work, big money, all of these things, like, beforehand, right? And they show up and nothing's happening. There was a scheduling mishap. Right.

And so what do you do? Right? Like, that's a big, big mess up. That's a big mess up. It's absolutely unacceptable.

So here's what you don't do. You don't say, hey, you should have checked the email, or, hey, we sent some other correspondence that, that might have, you know, conflicted. Like, you don't go into any of that because it doesn't matter. They don't care. What matters is that it's always immediately your fault, and you have to be angrier about it than they are.

And this is the angry boat. The thing is. Is that even though I preach this, it's still hard to do when you're in the moment because no one wants to accept fault. Because fault is associated with all these negative things in our past. Because in the schooling system, if you say your fault, you go to detention.

Like, you get punished by saying it's your fault. So you always want to blame. Hey, Timmy's the one who's, who turned the music up, not me. So Timmy gets punished. But the reality is that in business, you always want it to be your fault, because if it's your fault, it's under your control, which means you have the power to fix it.

That's what's key. And so as soon as you have that instance, you jump in the angry boat as fast as you can. You want to be quicker to the draw, getting angry than the other person. And a lot of times, customers will have one of these experiences, and they'll shoot out the situation to wait to see how you respond because they want to. They want you to be upset about this because they are already angry and they're trying to contain themselves, trying to contain their emotions.

And what you need to do is be the one who gets emotional for them. And side note here with the angry boat is one. You want to confront it head on. You don't want to pussyfoot around it. You got to say, like, this was our mess up, and I'm super pissed about it.

Second, you want to get in fast. Third, validate. Validate. Validate. You want them to feel seen.

You want them to feel heard. You want them to feel felt. You want them to feel felt. You want them to feel like you. You feel their pain more than they feel their pain.

Because here's the. Here's the reality, and this is the. This is the. This is the underlying highlight point. There is no way that you can minimize someone's pain.

Only they can minimize it. You cannot invalidate away someone's feeling about being wronged. The only person who can say, you know what is not a big deal is them. And so the only way for that to happen is for you to be more upset so that they say, hey, it's not that big of a deal. Calm down.

And then they said it, not you. Because if you say, hey, it's not that big of a deal. Calm down, they're going to be like, rup, yes, it is. You need to validate me. And then you're like, oh, my God, you're right.

I should kill myself. They're like, duo, don't kill yourself. And you're like, right. And they're like, it's not that big of a deal. Like, okay, fantastic.

They come back down and I say the, I use, I use hyperbolic extremes to make a point, which is if you want someone to feel better about something that you did that wronged them, they have to initiate it. And the only way they're initiated is if you make it a bigger deal to you than it is to them. That is the Ultimate Validation is that something bad happens, and you say, that's ridiculous. That's unacceptable. Oh, of course we're going to give you your money back.

Of course I'm going to refund all of your travel expenses, which, by the way, is what we did. We give. Give them their money back, give the travel expenses. But that's still not enough. It's not enough because if you traveled across the world, you're like, okay, well, great, my flights.

But, like, I just lost four days of travel, and I had these expectations that weren't met. And so we're taking the whole, you know, the seven people out for 3 hours. We're going to go to dinner. We'll talk. Probably.

I'll probably end up doing 3 hours of personalized consulting for each of these businesses, which is not something that I would normally do in an effort to go above and beyond to make up for something that, that otherwise shouldn't have happened. And the reality is, is this, like, let's be. Let's put our, let's put our hats on for a second. Is this my fault? Alex's fault?

Was I the one who took the call? Was I the one who messed up the scheduling? No, but guess whose fault it is? It's mine, right? I pay the people.

I'm the, the buck stocks with me. And so the idea that sometimes I see business owners saying things like, well, that, you know, my team messed. Dude, you fucking messed up. Like, that's the thing about the entrepreneurship game. It's like, you get the upside, but you get the downside.

You get it both. And you've got to be able to be comfortable with that. And the thing is, you have to accept. And I want, like, this is the thing. As soon as I go in, my mind is, like, I flip this switch or becomes a game of, how can I blow these people away, all right?

That as soon as I have, like, a clear and obvious wrong and it happens, we mess things up. We're human, and humans work for us, and humans make mistakes. And so when. As soon as, as soon as that happens, it becomes this game of, oh, Roi is out the window. I'm already gonna lose money on this.

Duh. Right? Like, you're gonna give the money back, plus extra costs that they incurred, plus now you're still going to incur the costs that you would have normally done to do deliver whatever it is that you do, right? But the thing is, is I am in a fucking advocate of the Ritz Carlton in Orlando, and Javier, I tell everybody when they're like, hey, where should I go? I'm like, go there.

Go to Javier. He's the fucking man. And I tell everybody that. And so I'll bet you they have more than made up for the transgression of the one restaurant experience and him meeting me at the other restaurants and sitting us down and taking five minutes before two or three or four other experiences we had while we were there, those little minutes meant the world to me, because I know what kind of business owner, what kind of entrepreneur, what kind of operator operates that way. It's somebody who gets it.

You get the game, which is that, did Javier mess up? He's not even. He's not even responsible for the restaurant. It's not even his division. But he did it because he knows that I don't care.

And he had the power to fix it. So even if it wasn't his fault for the transgression, he had the power to fix it. And so it becomes his responsibility to make it right. And so I want to. I want to do a quick transition to employee stuff around this.

So if you are the person who messed up, like, you're the actual person now, of course, it's the entrepreneur. It's. It's always our fault, for sure. But on some level, if you're the person who messed up on the team, let me tell you what not to do. Don't try and skirt along.

Don't try and pretend like it's not a big deal when you say to the team, don't try and minimize and be like, oh, yeah, I kind of messed up the dates on. On that thing. Don't fucking do that. Because it's the same thing in reverse. Because the owner, your manager, your leader, the entrepreneur, he's the customer.

She's the customer in this incident. And I'll tell you what I want to see. I want to see you losing your fucking mind over how upset you are at this mess up. Because the thing is, if you're not upset enough, I'm going to make you upset. One of us is going to make you upset.

And you want it to be you, not me, being really real with you. And so what? I'll tell you what. I'll tell you what I told the individual. I said, listen, I know.

Cause I know the person. Obviously, it's multiple parties, blah, blah, blah. But at some point, sometimes the buck can stop with somebody. I said, listen, I know that you're beating yourself up over this and you're beating yourself up over it in silence. I was like, but the thing is, no one cares.

No one will give you credit for beating yourself up in silence. They will give you credit for two things, making it right and making sure it never happens again. That's it. That's all that matters. And so there is no more useless emotion than feeling sorry for yourself.

It changes nothing. Like, no one gets better by feeling sorry for themselves at all. And so if you did mess up, just skip past the guilt part, skip past the shame part, skip past that, and go immediately into the what can I do to make it right? What can I do to make it better than right? Sure, you hit your wife, sure, you said sorry, but now what?

We got to take her out to dinner, get her a nice necklace, get her some flowers, and then go to fucking anger therapy and make sure that, you know, like, whatever. Like you, you do all the things to go from tragic to neutral, and then you go above neutral to try and make them into a champion. And then you do all the things to make sure it doesn't happen again. That's the point. Hey, guys, real quick, I'm going to give you a little Easter egg.

If you screenshot this episode right now and you tag me on the gram, I will share it, but put the word make it right. All right? So say make it right in the tag, and I'll know that you got to this point in the podcast because you are hardcore and you are always trying to make your business better and trying to do right by other people and yourselves. And so it's also a way that helps me know that I'm doing a good job so that I can make the little voice inside of me say that I'm proud of me. Anyways, if you got value from this, it would mean a lot to me, and I will do more of it.

Too many businesses basically think that a refund is the highest level of what they can do to make it right. They're like, I gave him his money back. What else does he want? A shitload more. That's what, that's what they want, way more.

And the thing is, and I'll tell you this, is that if you incur the cost of the refund plus the additional costs, and you lose actual money, actual resources trying to make it right, guess what you try not to do? You try not to fuck up so much in the future because, you know, the real cost of it isn't just like. And, like, don't even get me started on companies that won't give a review. Like, don't. Don't give a refund on stuff.

Like, if people. If a huge percentage of your customers are asking for refunds, fix your shit or stop selling it. Like, either you're selling it wrong, and you're setting crazy expectations that no one. No one can. No one can live up to.

Or your just delivery sucks. But, like, if you're getting lots of refund requests, and then you're like, well, I can't give the refunds, otherwise, I won't be in business, then maybe you shouldn't be in business.

Fix your shit. I get jazzed about this. I, like, I came into the team this morning. I was like, oh, I know what I'm gonna talk about, because this is hot, because we just messed this up. We just had this mess up happen, and, like, you have to own it, and you have.

Refunds aren't enough. Refunds are apologies. No one cares about apologies. People want more than an apology because they will punish you. And society believes that, too.

You don't just say, I'm sorry I killed somebody. I'm sorry I was a drunk driver, and I killed your kid. Sorry's not enough. A refund is an apology. A refund is sorry.

And people want more than that. And so you got to get them to neutral. And then. And here's the cool part. So this is my silver lining for this, is that if you do turn a tragic moment into a series of magic moments, afterwards, you can create brand champions.

You have a higher potential to take somebody and make them a true believer in what you do. If, when you mess up, you own it and you make it better than right. Because they're like, these guys messed up, but they went so far out of their way. And if anybody's ever had this experience, and I hope you have at least one time in your life where a business owner went above and beyond, they didn't just make it right. They made it better than right.

And then what happens? You become a customer for life. You have a higher potential for being a customer for life. And I remember there was a. An acquaintance of mine who was in the hot sauce business just kind of random.

And he had a customer. So he had, he had sent them a hot sauce kit or something, and it didn't have caps, and so he couldn't, they couldn't use the hot sauce because it didn't have a cap in the kit. And so he sent a handwritten note to them, and he sent extra caps, not just enough, but, like, more of them, just in case or whatever. And they said they sent him back a note being like, wow, that was so nice of you. Like, you went above and beyond whatever.

And so he actually started sending the kits with handwritten notes with an extra cap because of that experience, because that person then went, changed their one star to a five star because of the great experience. And I don't know if you've ever done this or you've seen this, like, updated reviews where people say, hey, I left this one star. The company, the founder, reached out to me. He got on the phone with me. He made it right.

The thing is, is that people want to punish you when they feel invalidated. And you can. Absolutely. You can. You can make them feel validated.

Like the reason malpractice. So they did a bunch of research, like, as both my parents are physicians, um, there's a ton of, ton of research on malpractice. The people who get sued for malpractice are doctors that people hate, not people who make the most mistakes. Isn't that interesting? So they tell this story of a lady who had some sort of thing that happened that was wrong in, like, a clear lawsuit, and she had had, like, two or three physicians that she was going for, like, cancer or something, whatever it was.

And when the, she hired this malpractice attorney because she wanted to go after this physician. And so after doing more research, the lawyer was like, hey, it's not this guy who actually technically made the mess up. It's this one, your primary care, your general physician. And the lady was like, oh, Sarah. Oh, I love Sarah.

No, it's fine. And so it had nothing to do with the transgression. It had to do with the fact that they actually hated the person. And so the thing is, people want to punish you if they don't like you, and you increase the likelihood that they do like you by going above and beyond. And so here's one tactical thing, one more last tactical thing from my notes that I'll give you.

If you deal in a business that has lots of transactions, high volume transactions every day, what you want to do is you want to give someone a box of responsibility. You want to give a box of decision making power. And so they do this in the hotel industry. And this is why I like stealing things from one industry and putting it to another. And so, for example, if someone wakes up in the middle of the night because they smell smoke, right?

And they come, they call to the front desk and they say, hey, I smell smoke, I can't sleep, blah, blah, blah. That front desk person, if they have no power to fix it, the customer still holds them responsible. So they basically, you give them a losing card. They can't do anything. But if you say, these are the things that you have within your responsibility, that within your power, you can give someone free, free drink credits, you can give someone a free meal, you can give someone a free upgrade.

All right, so these are the three things you can do based on the level of the mess up, right? If someone had to wait 20 minutes for a bellhop, okay, is that, like, end of the world? Probably not. Here's two drinks just in case you're awaiting or for tonight, to make it special before you go out. All right.

Now, if someone can't sleep because there's smoke and they shouldn't have had smoke in the. That's a pretty big mess up. So what do we do? Well, if the front desk person has the power to upgrade them for the next room for the next night, then you probably refund them for the night before and give them a free upgrade for the next night. But you have to give people, you have to give your team the two or three things that they can do and then just say, listen, if we're.

If you're using up more than five of these a month, then, like, we need to fix a process here. But these are things that you can give out as freebies that you bake into the profit margins of the business so that you know that you can make things right when things do inevitably grow. Because people are human and humans dealing with humans leads to mistakes. Messing up is a part of business. And if this was not a mess up of an episode for you and you actually did get some value from it, uh, to counter some of those one star views that I have, I don't think I have that many.

But, um, even if I did, uh, a five star review, if you've ever gotten value from the show, especially recently, um, would mean the world to me. And so, uh, it encourages more people, more business owners to watch and listen. And, hey, I think this particular message, I think if every business acted this way, I think we'd all be happier customers. Also, those businesses would make more money in the long run, and that's the key point in the long run. And hopefully you're not in this game to get in and out, but you want to play it for life, and that's what the game is about.

So please leave review, enjoy the show, and I'll see you soon.