Transparency – Where to draw the line

Transparency in Business

 “What your employees don’t know can hurt you!’

It is always worthwhile to consider the importance of transparency in your strategic planning.

Generally, transparency in an organization helps to build and maintain trust; its absence leads to inflated misconceptions. For example, when we work with clients to implement the engagement/incentive program Ownership Thinking one question we like to ask is “on a million dollars of revenue, what percentage is profit before tax (PBT)?”

We get all kinds of answers! On more than one occasion participants have suggested 100% of the revenue is PBT! Obviously, that’s an extreme misconception which assumes no employee wages or overhead. But, the average of all responses is actually 26%; that means the average person believes their employer makes 26% PBT, when, in fact, the figure is around 7%.

If you’re not transparent about important information, people will almost certainly come to their own conclusions, and their assumptions may well be way off base. Not every business chooses to share financial information, and that’s just fine. This example demonstrates how easy it is to exaggerate and misinterpret, but transparency – in this case, sharing financial results – mitigates the problem.

Transparency in an organization is not black and white. Circumstances may demand a limit to sharing: being completely transparent about a Human Resources issue might culminate in breaking privacy laws; being cautious about sharing information to spare someone’s feelings might be considered inappropriate by some, but appreciated by others.

Ultimately, creating a strategy that establishes a common set of transparency guidelines across the organization is recommended.

Ways to establish transparency in your company:

  • Being open and honest while considering sensitivities and legal requirements
  • Scoreboards with relevant KPIs that are shared within the organization so everyone knows what’s going on
  • Looking at problems objectively rather than focusing on where to cast blame
  • Sharing the reality when something goes off the rails, without trying to deflect
  • Creating an environment where it is safe to fail, with a focus on learning from the experience
  • Clearly defining parameters of transparency, such as the need to protect competitive information

It’s important that you establish a common set of organizational guidelines. Regardless of individual points of view on boundaries for transparency, people who know what ‘acceptable’ looks like are happier to stay within the rules.

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March 3, 2020

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