Culture of transparency

Engaged employees

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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Author: Kris

Kris Fleckenstein is a successful businessperson, college instructor, consultant, and volunteer with a particular acumen in financial and organizational architecture.

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