Over the last few months, several of our clients have shared their ideas about transparency. As the term evolves to become a strategic imperative, it’s important to identify the practices, benefits, and limitations involved in transparency.
Transparency, which involves openness, communication, and accountability, is practiced in companies, organizations, administrations, and communities.
Practicing transparency can enrich or disrupt organizational life.
- As a value, transparency typically involves increased accountability leading to enhanced visibility.
- As a mindset, transparency implies openness via communication and accountability from the willingness to share the necessary information to collaborate.
- As a culture, transparency begins with a commitment to cultivating trust from a lack of hidden agendas or conditions. It involves greater visibility from a willingness to disclose complete information, thus encouraging collaboration, cooperation, and collective decision-making.
Commitment to Transparency
Transparency in business involves being open, truthful, and straightforward about various company operations. Often missed in transparency literature is the commitment needed to develop this culture.
Commitment relies on practices and agreements instead of secrets, power, and manipulation.
Transparent leaders and organizations embody agreements and practices to become more open with their customers, clients, and employees. These cultures share information related to performance, business and unit budgets, revenue, internal processes, sourcing, pricing, and business values.
A study published in the Journal of Business Ethics tested the consumer/corporation relationship between transparency, social responsibility, trust, general attitude, and purchase intent.
According to the researchers, a company’s transparency and social responsibility affects consumers’ general attitude toward and trust in the corporation. Competence, reliability, and integrity are identified as vital components of this trust (detailed in a previous blog).
A study on operational transparency supports these results. Customers are more satisfied and less impatient about wait times if they understand the process behind fulfilling their request.
Practices to Embody Transparency
Full transparency about every part of a business isn’t necessary. However, we can embody practices that focus on what matters most to consumers, clients, and employees.
1- Open and honest communication cultivates trust.
Pride and secrecy may be two of the main impediments that undermine commitment to a culture of transparency.
Openness cultivates a culture of trust and integrity that encourages free-flowing information (#2 and #3 below) and feedback (#5 below).
Honesty means acknowledging mistakes and demonstrating accountability. When something goes wrong, or a mistake is made, transparent companies do not default to hiding it. Instead, they surface issues and own up to mistakes.
2- Disclosing information leads to loyal customers.
According to GE Capital Retail Bank, 81% of retail shoppers conduct online research before making a purchase. Disclosing complete information and updating accurate information ensures consistency in pricing, policies, and practices, and it also avoids surprises.
If a customer incurs hidden fees or discovers discrepancies in return policies either on the company’s website or in another agreement, trust suffers.
3- Open-book financials boost employee morale.
Most secrecy and distrust seem connected to financials. Commitment to sharing financial management and information with employees helps employees to not only do their jobs effectively but also understand how they contribute to the company’s goals.
John Case (1989) and John Stack (1983) advocated for the concept of open-book management, concluding that companies perform better when people see themselves as partners in the business rather than hired hands.
An extension of this “open-book” concept involves sharing wage and salary information for colleagues, as was recently implemented by the city of New York. Such policies ensure equity, assure competitive salary ranges, and can save companies from possible bias or discrimination, even if unwittingly.
4- Communicating changes fosters trust and inclusion.
Uncertainty about an unclear process, vague direction, or rapid change can make customers and employees feel powerless.
To reduce uncertainty, show or tell customers what’s happening during wait times. Inform and update callers during calls, use codes to track packages, and send confirmation messages to provide updates can reduce customer confusion. Online businesses can create a status page or use social media accounts to inform customers of technical issues, scheduled updates, website downtimes, etc.
Transparent leaders and managers ensure that employees understand changes and clarify direction. They discuss and explore changes to minimize impact. They clarify the level of responsibility and authority in the organization. They include people who are affected by decisions in the decision-making.
5- Encouraging feedback drives performance.
Feedback, both positive and negative, drives innovation and growth. Still, some companies have issues accepting negative feedback and even fight it.
If customers or employees speak up about issues or offer compliments, the transparent approach is to listen, respond, and capture details and patterns.
Feedback is free R&D. How much might you pay consultants for the same data? Feedback can prevent missteps, offer course corrections, reveal necessary processes or structures, or identify blind spots.
Too Much Transparency?
Practicing transparency brings facts to the surface. Out of context, however, facts do not reveal why something happened. Instead of figuring out why a mistake was made, we only know what the mistake was — and who made it.
Too much transparency may also be counterproductive in several significant ways. Without context, we can focus too much on the “what” and not enough on the “why.”
WHAT: Increased transparency begets increased visibility. Employees who feel like they are in the spotlight may become overly cautious and hesitant to innovate for fear of messing up. This stifles creativity.
WHY: Resolving the fear of messing up involves communicating that learning — not creating the perfect idea — is the goal.
WHAT: Having too many people with too much information can encourage people to weigh in on every decision without fully understanding the context or circumstances. Accordingly, management rejects those ideas, and employees harbor negative feelings.
Widespread information sharing can also cause organizational drag when decision-making processes involve too many people; this makes accomplishing anything impossible.
WHY: Management must share relevant information with those who need it to succeed in their jobs. For those wishing to participate, it is best to offer specific criteria.
WHAT: Transparent managers start paying more attention to team activities, asking for information on decision-making processes, and requesting frequent reports. This shift can come off as micromanagement and show a lack of trust in employees.
WHY: Management can proactively discuss the reasons for their increased openness. As a result, employees will come together to improve their transparency rather than feel demotivated or distrusted.
Benefits of Transparency
Transparent cultures and leadership can have several positive effects.
Recruiting, Hiring, and Retention.
Detailed and accurate job descriptions, timely and honest communication from recruiters and open discussion between collaborators during the interview process are all examples of transparent practices.
Including the salary range in the job posting can also support better fit and suitable hires, ensure competitive ranges, and improve retention.
With peer evaluations and continual quality feedback beyond annual reviews, transparency offers insights early on, often, and at the ground level. These factors lead to a less intimidating review process, which boosts employee engagement.
Relevant information and open communications help supervisors gain an accurate view that supports revising decisions and predicting course corrections.
Overall Company Performance.
An open process for goal setting that includes more voices with open books supports better decision-making. Beyond effective scheduling, transparency enables quality feedback to enhance direction and involvement, which encourages employee initiative.
Perhaps the only secret left in a transparent environment is how this commitment, when practiced, can directly impact a company’s overall culture, from employee engagement and client satisfaction to the bottom line.
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