Culture of transparency

I’ve been asked a lot lately about how transparent employers should be with employees. This is a fair question because business owners often feel like they need to protect their employees in the downtime and that it’s not the employees’ burden to bear. There is also a fear of losing good employees if they know how bad things are. Further, when things are going well, the business owner might be concerned about the employees knowing how much money the business is making. Any of these relate to you? If so, you might benefit from instilling a culture of transparency.

The need for a culture of transparency

I’ve had businesses that were doing super well and businesses that were on the brink of collapse. I now believe there is hardly a time that you could be too transparent. But this is in part about communication. In bad times, I agree, it’s not your employees’ burden to bear, but don’t kid yourself; your employees know when things aren’t great. They know by suppliers calling, your tone, and general rumours. In small towns or communities, this is significantly increased.

Control the message to reach a culture of transparency

The best thing a business owner can do at this point is to communicate. “Yes, things are bad, but we are doing x, y, and z to try to survive” is a good approach. It’s up to you to control the message, and the best way to do that is to provide the information yourself. People get anxious when there is a disconnect between what they know and don’t know – help them with that. You will lose some people, but chances are if your business is struggling, so are many others in your industry. You will also gain significant engagement from the good ones on your team because they want to help you make it through the hard times. Make a note of those people.

Transparency in the good times

Regarding transparency in the good times, a common misconception about businesses out there, and I think if owners were more transparent, that would help ease the misunderstanding. The illusion being that business owners reap all the rewards. First, business owners should reap some compensation for the risks they take and apply their knowledge to generate the successes they have had. That said, the average net profit for businesses falls below 10%. Assuming that the business owner is paying themselves a fair wage, they get the paycheck plus a few percentages of the overall revenue.

For most of my business life, the employees and suppliers had consistently better income from the company I had than I did. If you then combine that with tough times, and the business owner takes no salary and receives no dividends, the employees are in a good spot comparatively. Maybe helping your employees understand the financials and being more transparent might shed some light on what is going on. At the very least, assisting employees to understand the financials will develop them into eventual managers and leaders. Empowerment is a good thing and very rarely comes back to haunt you.

Encouraging information flow

But wait, there’s more. There is a hidden gem to having a culture of transparency. Although I’ve mainly talked about financial transparency, I think having an overall transparency culture is critical. For example, I’m against safety awards that award going a certain period without an incident. However, I am all for safety awards that encourage reporting of relevant hazards. As a business owner, I don’t want to be blindsided. Having a culture of transparency helps with that in the short-term.

Organizational learning

In the long-term, a culture of openness encourages organizational learning (and individual learning too). If we have a culture of transparency and allow people to fail, and encourage them not to hide it, they will embrace failure. They will also reflect appropriately on the failure in a state of curiosity instead of a state of fear. Embracing failure with curiosity and a hunger to learn will allow the employee (and organization) to reflect on the event and learn from it properly. Further, having transparency does something similar for wins too. In transparent organizations, people are more likely to reflect on success versus just celebrating it, maybe bragging about it, and then moving on in a hurry for another win.

What do you have to lose?

Here’s the reality right now though, if you are in trouble, struggling to survive, you probably have nothing to lose by trying to be transparent. I suspect the results will surprise you. You’ll see a loyal core team emerge that take ownership. You’ll see who your future managers and leaders are. And finally, you’ll see an increase in engagement.

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Communication problems

In business, like most of life, most problems come down to a failure to communicate. If you have human resource (HR) issues, you likely are having internal communication problems. If you have challenges reaching your customers, getting them to buy, or even knowing who they are, you probably have external communication problems. The point being, if your business is struggling, look for communication problems.

If your expenses are too high for your revenue, you might have communication problems on both sides of the coin – internal and external. You might be lacking the communication that expenses can not be that high and not connecting with your customers.

The question now becomes, how do we fix communication problems. Arguably, this may be where things differentiate from your personal relationships. Businesses can fix most communication problems in business by simplifying the message and the medium. The message is what needs to be said, while the medium is how it’s delivered.

External communication

When crafting messages to external users, this holds. Simplifying the message of what problem you can solve, or better yet, be the guide to help the client solve is a good start. The client probably has a direct, external problem that you can directly solve. However, there are probably other problems that can be solved by solving those external problems. Those other problems are the ones that provide a true benefit to the customer.

For example, the virtual assistant solves the problem of getting the letter written for the client. However, the client’s real benefit is focusing on higher return activities – client acquisition, billable work, etc.  

Internal communication

A lot of communication problems internally can also be fixed by simplifying the message and medium. Reducing the number of channels can also help fix internal communication problems. A channel is a path for communication. You can calculate the number of communication channels with the following formula: n(n-1)/2 where n is the number of channel members.

To give you a sense of how the numbers of channels can change dramatically, here’s an example. Bev has a small business, and it’s her and two employees. Between the three of them, they handle everything. With three people, there are three communication channels (3(3-1)/2). Bev decides to hire one more person, now there are six communication channels (4(4-1)/2), and Bev finds herself spending a lot more time correcting the communication. The same thing happens in businesses, especially small businesses that are growing. If you ever wonder why big companies or government struggle getting anything done, this is largely why.   

Dealing with internal communication problems

There are ways you can reduce internal communication problems. First, make sure roles and descriptions are clear. Second, make sure you don’t have more people than you need to have. As businesses start to make a bit of money, they often hire people to fix problems. However, because of what happens with the number of communication channels, hiring can compound problems. Third, instill a culture of being direct with people. Make sure you communicate expectations and allow your people to share back with you. Foster an environment of transparency, and you will likely find you’ll have a more efficient workplace.

I will write more on transparency in the future, as I have found that small business owners fear such. As always, if you need anything, by all means, contact us.