“But how best to accomplish transparency? It’s a delicate balance — you want to keep employees in the loop, but you also want the company to function smoothly.” – TinyPulse

Many modern companies, particularly tech startups, have transparency as a core value.

Transparency as a core value for all stakeholders including employees, customers, partners, vendors and the media. Often, this means being transparent about company goals, strategies, and decisions. But in some cases, this can also mean radical transparency for aspects of the business that would usually be carefully guarded such as customer churn, revenue, profitability, salaries and more. For a good look at companies leading the charge on transparency and why this article from The Next Web covers it well.

There are many benefits to transparency, the least of which is that it builds trust, accountability, and alignment across all constituents of the company. It’s good for company culture.

Also, it just sounds modern and cool, doesn’t it? I’m only half joking. Sounding modern and cool can help with recruiting and being modern and cool can help with employee retention. There is nothing wrong with that. In all seriousness, transparency is critical for employee engagement and retention today. And I don’t think there could be anything more important than that.

Being transparent is just the right way to run a business. People don’t want to work for organizations that aren’t transparent. This is particularly true for the most important employees you have—the engaged ones. They are engaged for a reason, and it’s because they feel connected to their leaders, their work and the direction of the company. A lack of transparency leads to a lack of staff engagement.

Also, transparency helps the broader business community. Want an idea of salaries at other companies?Buffer shares theirs with the world. Want to know how much customer churn is typical for a company your size? Check out Bare Metrics. Want to know what the VC process is like? The founder of Moz lays it all out for you, in gory detail.

That’s radical transparency.

Being thoughtful, and realistic, about transparency

But I can’t help but wonder if radical transparency is a concept that is somewhat idealist and theoretical—something that works for a few companies under a specific set of circumstances, but doesn’t work for most. And isn’t always beneficial in all situations.

A leader’s job is to build value in their company. Sharing the ins and outs of every single aspect of the company—the good, the bad and the very ugly—won’t always align with the job of building value.  The bad and the ugly can be distracting. The bad and the ugly can cause worry. The bad and the ugly, with perspective, is just a molehill. Without perspective, it’s a mountain.

I do genuinely believe in, and value, transparency. But I don’t believe in radical transparency because I think it’s distracting and can diminish business value. Here are some examples.

• The board is thinking about selling the company. Tell the staff, and they will worry about what will happen to them long before an acquisition is even on the table. Tell the customers, and they may start to stray to competitors. Suddenly a potential acquisition becomes all anyone can think and talk about, instead of focusing on the core mission of serving customers and growing the company. And this could be 12-18 months before an actual acquisition if it even happens at all.
• A high-visibility founder publically shares all, and I do mean all, of the details of his trials and tribulations unsuccessfully raising venture capital. VCs may be wary of investing in the future because of details he reveals about the process. That’s a real story, Rand Fishkin said he had VCs tell him they wouldn’t consider investing in his company after he published his widely read article, “Misadventures in VC Funding: The $24 Million Moz Almost Raised”. (Although, he later FOUND his venture partner through this same post, so in the end, it did work for him!).
• An employee is fired for poor performance, but only after being coached (and then warned and written up) extensively. It’s not anyone’s business why he was fired, and it will embarrass the former employee if the reason is shared. This matter is confidential. But in wanting to be transparent, a manager might say something like “Joe was fired for performance reasons.” I don’t know about you, but that feels like a disclosure that is nobody’s business but Joe’s and his managers. A simple announcement like  “Joe is no longer with us. It wasn’t the right fit for either of us, and we wish him well.” would suffice, but that might not feel transparent enough. When transparency is expected of that manager, the staff will wonder. They will want to know. Was Joe fired? Did Joe quit? Did Joe get laid off to budget cuts? If these questions aren’t answered directly, people may feel a lack of transparency.

These are the authentic, and complex, aspects of transparency as a core value.

A simple formula to lead with transparency

I passionately believe in transparency as a core value.  Companies and leaders should be as transparent as is possible, without distraction or disruption to the business. Here are the guidelines I think work well.

• Share as much information as can be shared, that is not confidential, distracting or hurtful to any involved parties (the company, customers, staff, media, other key stakeholders, etc.); When considering what to share, ask: Does it benefit all parties? If the answer is no, I think it bears consideration.
• Share this information with team members, often and consistently:
  • Company roadmap, strategy, and goals.
  • Company performance.
  • Context on decision making; include staff in decision-making when relevant and realistic.
  • Company strengths, weaknesses, opportunities and threats.
• When you share information, don’t just throw it out there and assume everyone will consume it, or understand it. Present data and information with as much context and background as you can to help ensure the information is received and processed. Information needs to be framed for it to be understood in context.
• Answer questions honestly and directly. Even in situations where everything can’t be disclosed, it’s important to share what you can, and never give dishonest or inaccurate information.  You may sometimes, depending on the situation, need to be vague or noncommittal but you never need to be dishonest.

In doing a bit of surfing on the subject of corporate transparency, it’s apparent that this concept means different things to different people. I’ve seen ‘recommendations’ for transparency that range from “update your teams often on strategy and company performance” to “include employees in decisions” to “openly share financials and salaries.”

In that surfing, I stumbled on this, and while it is long, it sums up my personal experience and beliefs on this topic.

“ …transparency is a means, not an end. The goals of any business should be to better its performance and to improve the lives of its employees. Better performance means that the company is delivering more value to customers than before. Improving the lives of its employees means that it’s rewarding the people who deliver the results.

If transparency serves those twin goals, well and good but if it breeds discord and resentment in the workplace…it’s not so good. If it overwhelms employees with information that they can’t use and don’t care about, also not so good.” – Forbes

Can a company always be transparent?

YES. Every company needs to determine what level and style of transparency are right for their culture. I think the above guidelines are simple and work for most (they have never failed me), and are the minimum a company should do when it comes to transparency.