An increasing number of companies are leaning into tell-all policies. Honesty is good for workers – up to a point.
Most companies have secrets. They’re not necessarily sinister, but many things – salaries, profits and losses, failures, personnel issues – tend to be kept close to the vest, known only to a select few at the very top of a company’s ladder.
But a lack of transparency has been a workplace problem for years. A 2013 survey showed management transparency to be the top determining factor in employee happiness; data from Slack’s 2018 Future of Work Study, which surveyed 1,400 US workers, showed that “80 percent of workers want to know more about how decisions are made in their organization and 87 percent want their future company to be transparent”. Not only are workers happier in transparent workplaces, but they may also be more likely to stay in their jobs; research shows when communication is poor, many workers are more likely to consider leaving their positions.
Red-flag data like this has pushed some companies to pivot toward “radical transparency” – pulling back the curtain on corporate innerworkings, once held back from collective view.
The term radical transparency isn’t new; it emerged in the early 1990s, as Ray Dalio founded Bridgewater Associates, now the world’s largest hedge fund management firm. In his book, Principles, Dalio explained the choice to institute policies that allow anyone at Bridgewater to access everything from financial records to the minutes of meetings among executives, and to weigh in on company direction and decision-making.
“I want independent thinkers who are going to disagree,” wrote Dalio. “The most important things I want are meaningful work and meaningful relationships. And I believe that the way to get those is through radical truth and radical transparency. In order to be successful, we have to have independent thinkers – so independent that they’ll bet against the consensus. You have to put your honest thoughts on the table.”
Perhaps the most high-profile example of radical transparency in action is global streaming-media company Netflix, which employs more than 12,000 people. In Netflix’s set-up, decision-making processes are public: the company uses a tactic called “sunshining”, where people openly explain their controversial decisions. Anyone at the director level and above has access to the salaries of every company employee. And when employees are pushed out of the organization, executives are encouraged to explain publicly why people were fired.
There’s plenty of evidence to suggest radical transparency can be helpful for companies and their workers – but only if organizations employ the policy correctly. Implemented wrong, this practice can mire organizations in politics, kill creativity and innovation and even scare workers out of being open – entirely defeating the purpose of transparency.
Open for debate
Companies across the globe have leaned into their own versions of radical transparency.
At Finnish software consultancy Reaktor, radical transparency means company policy and business decisions are put up for discussion in an open online forum. Through their policy, says Kati Vilkki, an organizational coach at the company, workers at all levels are able to weigh in on company policy and strategy. This not only makes them privy to internal discussions, but also invites them to join in conversations that might have once happened privately.
As a result, there’s often wide-ranging debate, says Vilkki; input comes from people who are brand new to the company, those with years of experience and everyone in between. Hearing feedback from everyone, as opposed to depending on a tiny group of senior managers to make decisions and then decrees, levels the playing field, she adds.
“People immediately feel valued and that they’re contributing and their opinions matter,” she says. “You don’t have to wait until you’re there five years and somebody asks, ‘What do you think?’. We believe there is so much wisdom, and so much experience embedded in the organization and in the people we have, we want to get all the possible arguments in order to make good decisions.”
In many corporate situations, set-ups like this can benefit employees. This model of “top-to-bottom, inside-out transparency has the benefit of inspiring trust among workers, and a greater understanding of decisions”, says Ethan Bernstein, an associate professor of business administration at Harvard Business School.
You don’t have to wait until you’re there five years and somebody asks, ‘What do you think?’ – Kati Vilkki
However, radical-transparency policies aren’t a silver bullet for innovation and equity – they may even gum up the works for progress. Bernstein says soliciting input on every decision, from the very start of a debate, can complicate things.
“Politics can get in the way of a decision being made,” he says. “Every time you made a statement, it’d be public, and people would have opinions that are then necessary to address.” He doesn’t believe radical transparency is a “bad practice”, but he believes “you maybe can’t have every conversation out in the open and get things done”.
If all goes well, radical transparency can create an open environment, leveling the playing field across employees of different ranks. But this result is contingent on each member of the organization trusting their opinion will be equally heard and respected. For instance, situations in which teams openly pick apart failures and shortcomings of employees at any level can only work if the company has a foundational environment in which workers feel comfortable speaking up without retaliation.
“If you have openness but people don’t feel respected and trusted, it won’t work,” says Vilkki. “It can cause people to start protecting themselves, because we all want to look good. If you make a mistake and you don’t feel respected and trusted, you’re more likely to hide it.”
This can breed fear and an unwillingness to share, she says, which stunts innovation – and poisons the entire purpose of implementing radical transparency.
The reality of transparency?
Although workers may express excitement at the idea of radical transparency in a company, the reality of the workplace practice may fall short of employee expectations.
While it can be good to hear what’s going on at the top echelon of leadership, or be able to express a controversial opinion in front of a wide audience, radically transparent workplaces also invite close monitoring of what employees are doing. This includes how well they are – or are not – performing.
In his research on the “transparency trap”, Bernstein found people generally chafe against the feeling of being too closely watched. “Wide-open workspaces and copious real-time data on how individuals spend their time can leave employees feeling exposed and vulnerable,” he wrote in a Harvard Business Review article. “Being observed changes their conduct. They start going to great lengths to keep what they’re doing under wraps, even if they have nothing bad to hide.”
This means transparency can not only become useless and the practice self-defeating – but it could also breed work anxiety and demotivate employees. Subsequently, workers in a too-transparent environment can become less motivated and much less open, says Bernstein, and “over time, do less good work”.
Even when it comes to pay transparency, which can help close wage gaps and empower workers, radical openness isn’t necessarily the best approach. In most studies, says Bernstein, while people support the idea of companies publicizing pay by position or employee level, they don’t, in fact, want their individual salary published alongside their name.
“Objectively, we love transparency,” he adds. “We’re just not as fond when it means things about us will be revealed. So, what I worry about is that radical transparency will make workplaces less transparent, because I’ll hide what I don’t want people to know.”
Additionally, it can be a rude awakening for employees when their personal information is aired like dirty laundry. Firing, both company-culture experts and workers agree, is a prime example.
Objectively, we love transparency. We’re just not as fond when it means things about us will be revealed – Ethan Bernstein
US-based CEO coach Kim Scott believes too-open systems, like the one at Netflix, which publisizes the reasons people lose their jobs, are harmful, and firing should almost always be a private matter. “If [a company] ends up in the situation where somebody is fired, there are things that just can’t be disclosed,” she says. “We need to take care of the rights of the individual.”
It’s worth noting not every company that labels itself radically transparent handles the most controversial personnel issues entirely out in the open; Netflix and similar companies’ radical transparency around in this area is particularly radical. At Reaktor, for instance, firing – like hiring – is done by committee. However, Vilkki says those conversations happen behind closed doors, and the reasons for firing someone mostly kept under wraps.
Candor over transparency?
Given radical transparency comes with both benefits and drawbacks, some experts propose a tempered alternative: “radical candor”.
In some of his management courses, Bernstein teaches the concept of radical candor, a term coined by Scott, in her book of the same name. “Transparency comes with the expectation of observation, and means everything will be known, whether you like it or not, so often workers end up feeling they’re on stage, performing,” he says. “Candor is a volitional choice: I’d like to share this information, and we have a culture in which I can share it.”
Scott herself believes candor, rather than transparency, is a healthier approach for employees and organizations alike. The difference, she says, is providing feedback in a compassionate, personal way, and being willing to listen to the concerns of employees and colleagues. “If you’re going to offer criticism,” she adds, “you want to do that in private.”
In Bernstein’s research across industries and types of companies, those that built candor into their culture and instituted transparency around some things while maintaining boundaries of privacy around others ended up on top. It’s possible, he explains, to create zones of privacy around things like feedback and evaluation, and around individual teams “to avoid exposing every little action to the scrutiny of a crowd”.
Ultimately, he says, there’s a sweet spot between transparency and privacy, and it’s up to companies to figure out how to perform the balancing act.