Transparency in business is a highly debated topic. While businesses have traditionally limited transparency – justifying that decision as a necessary evil to avoid internal conflict – modern businesses, especially technology startups, have started a movement in the opposite direction.
Successful startups have shared salaries companywide, made company performance reports accessible to all employees and generally built transparency into everything they do. The results are striking: increased employee morale, higher employee retention rates and a boost to the bottom line.
We’ll explore ways to implement transparency in your company, why it’s crucial and some transparency pitfalls to avoid.
How to implement transparency in your business
Businesses can introduce several transparency types:
- Salary transparency
- Task transparency
- Employee performance transparency
- Hiring transparency
- Transparency with customers
We’ll discuss each transparency area in more detail.
For the past decade, salary transparency has been a huge topic of debate. Companies like Buffer have made waves by making their salaries visible to all employees (and even the general public). Generally, people recognize that being open about salaries can play a significant role in helping to end perceived and actual salary discrimination based on gender or race.
At the same time, even business leaders who don’t discriminate on salaries tend to fear internal repercussions. One of the main arguments against salary transparency is that employees paid less than their peers either will not work as hard or will be unhappier at work. That was shown to be at least partially true in an MIT study that found employees who knew they were making less reduced their output by more than 50% and actually attended work less.
However, this same study found that you can mitigate these effects if you can justify the differences in pay.
Did you know? Federal law gives workers the right to inquire about, discuss and disclose employee pay, whether their own or that of co-workers or applicants. Companies are prohibited from taking action against employees for doing so.
The accessible salary matrix
An accessible salary matrix is a way to justify pay differences. Within the matrix, each department’s roles are listed vertically by seniority (think entry-level marketer up to head of marketing). Then, each individual role has an assigned salary and projected salary increases.
These numbers are set using the following system:
- Salaries can be determined based on research into averages for equivalent roles in the area where your business is based.
- During the hiring process, people can try to negotiate their seniority level but can’t negotiate salaries within a particular role’s level. When the matrix is fixed, all employees receive equal pay at the same level.
- Outside of promotions, everyone at the company receives a raise when the company achieves a predetermined collective goal.
- All of this information is available to everyone internally.
An accessible salary matrix involves a great deal of upfront effort. You must put in the work to build a solid compensation system since you’ll be held to it. But isn’t that what you should be doing in the first place? Cutting corners on compensation will always bite you in the end.
Workplace motivation isn’t completely salary-driven, but being underpaid is a strong demotivator. This is more true now than ever, with unemployment falling to record lows and employees having many more employment options.
The silo is one of the most-used metaphors in business. We hear so much about breaking down silos because, unfortunately, it’s an almost universal issue. Business silos create bottlenecks, and information gets stuck at the individual, team and organizational levels (as well as inside software). The following occurs:
- People keep information that could benefit colleagues in their brains or inboxes.
- Teams don’t share achievements or insights that could help other teams.
- Over time, organizations develop cultures of intentionally or accidentally hiding information from employees, partners or clients.
These bad habits grow with the company, becoming more significant issues as you scale. For this reason, it pays to make task transparency part of the culture early.
- Hold weekly meetings. One way to break down silos and improve internal communication is to have an all-hands company meeting during which team leaders share wins and failures from the previous week and check in on team goals. This is a standard way to provide visibility across teams and create a culture of openness regarding achievements and areas that need improvement.
- Post information for all to see. Companywide meetings might be difficult to scale as you grow. (Does your office even have a space that could fit 50 or 100 employees?) An alternative is to ask everyone to post the information in a public Slack channel for the entire company to see or use another internal communication app.
Task transparency can help your company do the following:
- Discover new opportunities. Teams can easily find new opportunities in the work of other teams or colleagues they may not have otherwise encountered. For example, someone on the data team might see a marketing initiative they feel deserves more testing. Your customer service team might have a call with a client who could make a good beta tester for a new product.
- Improve accountability. Sharing your tasks with the team is also a way to improve accountability. Even if nobody else reads your daily update, the few minutes you spend thinking about the previous day and planning the next one has enormous value. It keeps the team on task; the fact that anyone can scrutinize these lists at any time provides healthy pressure to follow through on your planned work.
Did your company achieve its goals this quarter? How close is the company to achieving its financial, sales and other targets for the year?
During your weekly meetings – or less frequently – you may also decide to provide strategic and financial transparency. Sharing how the business is performing and whether you’re hitting your targets can empower every individual to make better, faster decisions. It can help your team prioritize – without involving senior leadership.
Being close to achieving company goals can empower and encourage your staff to put in a little more effort to reach the finish line. If not, the team can brainstorm to find out where the problem is and how to fix it.
FYI: Supportive tools for setting and tracking goals include task-management apps like Any.do, Confluence and Clear.
Employee performance transparency
Openly sharing individual employees’ progress on their goals is a controversial topic. On the plus side, visibility into goals – and progress on those goals – may help employees prioritize and empathize. For example, if you see that a colleague has achieved only 10% of a complex key result with two weeks left in the quarter, you may not bother that employee with small passion projects. Or, if you’ve made solid progress on your own goals, you may even offer to help.
On the other hand, knowing that a colleague is not performing as expected can lead to conflict, pressure and shaming from peers.
One way to get around this problem is to periodically solicit anonymous informal feedback about every employee, including management and the executive team. Managers can review each employee’s feedback and combine it with that person’s employee performance data.
With the understanding that no one is perfect, managers can communicate this information to the employee one-on-one; the team member can use the feedback to improve their performance in areas where they’re falling short of expectations.
“Hiring” and “transparency” are rarely heard in the same sentence. When you find a candidate you want to hire, you don’t want to share anything that might push them away from the job. If you’re unsure whether they’re the right fit, you don’t want to give them too much access. You also don’t want the power dynamic to shift in their favor, especially in salary negotiations.
However, being upfront with new hires sets the tone for a positive work environment. New hires understand that no company is entirely free of challenges and problems, and being prepared for them reduces stress and builds their trust in management.
One way to increase transparency in your hiring process is by bringing candidates into your work environment for a pilot project. Bringing a potential new hire in on a contingent basis allows them to experience what a workday looks like and lets the company test that candidate’s skills during the hiring process.
They’ll have lunch with the team, interact with employees, ask questions and get a true sense of what it’s like to work with you. This will give you (and the potential employee) a good idea of whether they’re a cultural fit.
Transparency with customers
While it’s beneficial to have all employees in your company on the same page, it’s equally important to be transparent with your customers. Hiding information from customers is viewed as shady and can backfire, wiping out any advantage you were trying to achieve.
According to a 2020 study on transparency from Label Insight and The Food Industry Association, 81% of shoppers say transparency is important or extremely important. Corporate executives surveyed by Deloitte agree, citing these top reasons consumers lose trust in a consumer product company:
- Brands not being open and transparent (90%)
- Brands not meeting consumer environmental, social and governance expectations (84%)
- Brands engaging in greenwashing (82%)
To earn customer trust, be transparent with customers about your pricing, your product ingredients, your company’s labor and sustainability practices, and how you are using customer data. If you make a mistake, own up to it, and let customers know how you are planning to fix it and prevent similar mistakes in the future.
Did you know? Groups for whom transparency is most important include millennials (85%), Gen Xers (84%), college graduates (85%) and higher-income households earning $100,000 or more (88%).
Why is transparency important in business?
We’ve already mentioned some of the potential outcomes of greater transparency, including higher employee morale and retention. Here are a few benefits you can add to that list:
- A larger pool of job candidates
- Greater internal collaboration
- Quicker project turnarounds
Transparency is critical for the following reasons:
- Transparency levels the playing field. The primary reason transparency is so essential in business is that it levels the playing field through information accessibility. It’s a powerful sign of trust when all employees have the same access to information, regardless of role or seniority. You’re showing the team that you trust them with the information and have nothing to hide, increasing their trust in you. For this reason, transparency has a massive impact on retention and team morale.
- Transparency encourages decisiveness. By providing an even playing field, you’re empowering your team to make more educated decisions independently. They no longer have to pry information from those in the know to move projects forward. This decisiveness leads to more accurate deliverables and quicker turnarounds.
- Transparency boosts efficiency. Additionally, since people are more informed when entering conversations, transparency reduces work duplication and increases the efficiency of your internal communications.
Downsides of business transparency
Being transparent with your employees may also present some challenges:
- Transparency can lead to distorted information. One potential problem is that information you share with employees could be distorted, misunderstood or misrepresented. If you have employees who are unhappy, feel alienated or don’t feel appreciated, they may use the information you’ve shared to attack the company, internally or with competitors.
- Transparency can foster blame assignment. Full transparency can also set up a situation where poor performers are blamed rather than helped to improve.
- Transparency takes time and effort. In addition, communicating all the information needed for transparency will take some time and effort, especially at first.
Take these steps to counter these issues:
- Provide context. If you’ve made a decision, it isn’t enough to inform your employees. Explain why you made this decision, how it conforms with your company’s values, and how it benefits the company and employees, customers or other stakeholders.
- Touch base. After divulging certain information, you may want to talk to individual employees to ensure they clearly understand it and see how they feel about it. This can prevent problems before they start.
- Communicate your expectations. If information is sensitive, tell employees that it is not to be shared outside the company and how doing so could negatively impact the company and its employees. If your employees have signed an NDA (nondisclosure agreement), this would be the time to remind them.
Transparency in forward-thinking businesses
Is greater transparency in business such a radical idea? If you look at all of these ways to implement transparency, it can be summarized this way:
- Be open about salaries, and use research, not negotiations, to set them.
- Be open about work because it creates accountability and opportunities for collaboration.
- Be open about performance because it creates a culture of empathy, drive and pride in your work.
- Be open about hiring, because it attracts candidates and allows both parties to see if they’re a good fit before they go all in.
These seem like logical and forward-thinking steps, not radical changes. While transparency in business may not be the norm, when has sticking to the norms ever spawned exceptional companies?
Marc Boscher contributed to the writing and research in this article.