The lack of transparency breeds uncertainty. Uncertainty breeds fear. And fear breeds suspicion, mistrust, and a breakdown of communication and relationships among people.
When an organization fails to address the concerns of its employees, employees are forced to speculate and come to their own conclusions. These may often be inaccurate and can cause major adversities for the organization internally and externally.
While HR leaders often mull transparency as a solution, it can serve little purpose unless a full-scale commitment to transparency is undertaken.
A recent Tiny Pulse survey reported that transparency in the workplace is the #1 factor determining employee satisfaction. The focus on transparency extends to customers as well. 85% of Americans are likely to stick with a business during a brand crisis if it has a history of being transparent.
People value communication. It builds trust and loyalty. In a transparent environment, ideas are shared freely, creativity flourishes, and individuals feel empowered to bring their best selves to the workplace. But what happens in its absence? What happens in an environment of secrecy?
The ugly truth about corporate secrecy
Workplace secrecy can have a detrimental impact on organizations and their employees, breeding mistrust, resentment, and fears of favoritism. In such environments, power dynamics play a crucial role in decision-making, and employees can feel alienated and powerless. This ultimately leads to a toxic work culture that erodes employee morale and job satisfaction, resulting in high turnover rates.
“I think the greatest tragedy of mankind is that people have ideas and opinions in their heads but don’t have a process for properly examining these ideas to find out what’s true. That creates a world of distortions.
That’s relevant to what we do, and I think it’s relevant to all decision-making. So when I say I believe in radical truth and radical transparency, all I mean is we take things that ordinarily people would hide, and we put them on the table, particularly mistakes, problems, and weaknesses. We put those on the table, and we look at them together. We don’t hide them.”
— Ray Dalio, Founder, Bridgewater Associates
There may be several reasons companies may choose to hide information—the most common one being the perception that transparency could harm the company or leak crucial information to competitors. However, transparency doesn’t necessarily involve the publication of sensitive information that may expose the company to competitive disadvantages. It’s more about staying accountable and open to an extent where employees are kept informed about decisions that affect their relationship with the company.
When employees are kept in the dark about major decisions affecting their careers and livelihoods, it can lead to a sense of distrust and disillusionment.
Keeping people in the dark is costly
The cost of workplace secrecy goes beyond just the immediate damage to employee morale and job satisfaction. Poor transparency can have long-term effects on an organization’s performance. Here are some examples of ways in which poor transparency can cost you dearly:
- Lack of Trust: When companies keep employees in the dark about important information, it can erode trust and create a culture of suspicion. Employees may feel like they are not valued or respected by the company, which can lead to low morale and decreased productivity.
- Poor Decision-Making: When employees do not have access to relevant information, it can be difficult for them to make informed decisions. This can lead to poor decision-making, which can negatively impact the company.
- Reduced Engagement and Retention: Employees who feel like they are not being kept in the loop may become disengaged and less committed to the company. This can lead to high turnover rates and difficulty attracting top talent.
- Miscommunication and Confusion: When information is not shared openly and transparently, miscommunication and confusion can arise. This can lead to misunderstandings, errors, and delays that can negatively impact the company's operations.
Legal and Regulatory Risks: Companies that are not transparent with employees may be at risk for legal and regulatory violations. For example, if a company does not disclose important financial information to its employees, it may be in violation of securities laws. Additionally, companies that fail to be transparent about workplace harassment or discrimination may face legal action and reputational damage.
How radical transparency can be exceptionally rewarding
Radical transparency is a management and leadership approach that emphasizes complete openness and honesty in all aspects of a company's operations—be it company finances, performance metrics, or decision-making processes. This means that companies share all relevant information with their employees, stakeholders, and the public and operate with a high degree of accountability and integrity.
The term "radical transparency" was popularized by Ray Dalio, founder of Bridgewater Associates, one of the world's largest and most successful hedge funds. In his book Principles, Dalio describes radical transparency as a core principle of his company's culture and success.
It can create a more positive and healthy workplace culture by fostering greater trust and engagement among employees. This can be immensely beneficial to organizations, as illustrated by the two case studies below:
How Buffer benefited from a full-scale commitment to radical transparency
One extreme example of radical transparency is the social media management platform Buffer—the company has fully committed to radical transparency in all aspects of their operations. They have released data on their team's diversity, salaries, profit sharing, and charitable contributions, as well as how much they spend on perks and benefits.
They have even integrated transparency into their workflows by requiring engineers to mark every team member in emails, even if they are not directly involved. By doing this, Buffer has created a culture of trust, accountability, and shared purpose, which has contributed to their success, giving them a 229% increase in quality job applicants!
Zappos CEO Tony Hsieh’s “Holacracy” approach to time management
Yet another interesting example of radical transparency is Zappos, an American online shoe and clothing retailer based in Las Vegas. Zappos implemented “holacracy” across its organization. Holacracy is a management system that distributes authority and decision-making power across self-organizing teams rather than relying on a traditional hierarchy.
In October and November 2015—typically the busiest time of the year for retailers preparing for the holidays—Hsieh received 54% fewer emails and worked 15% fewer hours per day compared to the same period in 2014. It was one of the most significant changes in the company during that year.
What does it take to create real transparency?
The problem of workplace secrecy is often deeply ingrained in organizational culture and structure. Research published by the Journal of Business Ethics has shown that a significant, full-scale commitment to radical transparency is required to create a more positive and healthy workplace culture.
While Buffer and Zappos may be extreme examples, they don’t constitute the only means towards radical transparency. Transparency may manifest differently across industries. But on a general basis, here are some significant changes you can implement today to cultivate radical transparency in your organization:
- Share performance metrics: Share key performance metrics with employees, such as sales numbers, customer satisfaction ratings, and productivity measures. This keeps employees apprised of reality and helps them understand how their work contributes to the company's success, fostering a culture of accountability.
- Have transparent hiring and promotion practices: Be transparent about your hiring and promotion practices by clearly outlining job requirements, salary ranges, and promotion criteria. This helps reassure employees that you’re hiring and promoting based on merits and not biases.
- Implement open communication: Practice open communication by providing employees with regular updates during town halls on company performance, finances, and goals. This includes sharing information about new initiatives, changes in strategy, and any other relevant information.
- Elicit employee feedback: Give employees regular opportunities to provide feedback on their experiences working for the company. This includes conducting surveys and focus groups to gather feedback and implementing changes based on the obtained data.
Showcase social responsibility: Be transparent about your social and environmental impact. This includes sharing information about your sustainability practices and carbon footprint, as well as initiatives you have in place to promote environmentally conscious operations.
Radical transparency requires a shift in organizational culture
The cost of poor transparency can be detrimental to any organization, including lost productivity, employee turnover, and negative publicity. On the other hand, a transparent workplace culture can lead to greater trust and engagement, communication, and informed decision-making. HR leaders play a critical role in acknowledging the truth about workplace secrecy and taking steps to foster a more open and collaborative work environment.
Transparency is a must-have for any organization that wants to thrive in today's competitive landscape. And implementing it requires a major shift in the internal processes of your organization. With a full-scale commitment from HR leaders, it reaps gradual but significantly positive outcomes over the long term.