May 30, 2018

Should you introduce transparency into your organisation?


As soon as a company or government body does something wrong, there are calls to introduce organisational transparency at the business in question.

This happened with Volkswagen after the car maker was found to be cheating on its emissions tests, and in the UK during the MPs expenses scandal, when politicians were discovered to be spending taxpayer money on unnecessary items (and houses).

Although it’s easy to assume organisational transparency is an unequivocally good thing, there are some downsides to it, and it’s important to remember transparency can be on a spectrum.

The pros of transparency

There are three principal types of transparency, all of which hold some clear benefits for businesses:

  1. Pay transparency – Big names in business such as Buffer and SumAll began releasing information on employee salaries, and (crucially) the reasons why people are paid what they are. This helps employees understand why some people are paid more or less than them, and gives them something to work on if they do seek a pay rise.
  2. Internal transparency – This tends to mean transparency in information and communications within a company. It helps employees understand what’s going on in a business and why, which may reduce grumblings when controversial decisions are made. This is because people will understand why the change is happening and will have known about it earlier.
  3. External transparency – Involves letting the public know about key information, such as big decisions, turnover and executive pay. This helps to increase trust in a business and in turn inspires loyalty.

The cons of transparency

While transparency leads to many positive feelings both within a company and in the public, it also has some caveats that it’s important to be aware of:

  1. It could create a blaming culture, letting people know what mistake was made and who made it but not actually helping people understand why it occurred. That’s why it’s important not to hold transparency as a quick solution to organisational wrongdoing in itself, but just one of a range of tools to help root out malpractice.
  2. Transparency may also mean information gets suppressed in the long run. For example, if a CEO appoints a committee to help make a big decision but asks for transparency in their recommendation, this could mean that people don’t reveal everything they know to the committee, and therefore may give a less appropriate suggestion than they otherwise would.
Being open about pay can improve employee sentiment.Pay transparency can hold a number of benefits for businesses.

Transparency is on a spectrum

It may seem contradictory to discuss transparency as being on a spectrum, but in practical terms the only way it will work in business is if it’s applied to the most appropriate areas. For example, if people are complaining about salary, pay transparency may help solve this.

It’s up to boards and executives to find out where organisational transparency will work and where it’s best left out.

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