Collaboration

Transparency in business: the next wave in company evolution

Take it from experts at Zappos and VSCO—honesty is the best policy, especially when it comes to your company’s long-term health

Author: Devon MaloneyNovember 30th, 2019

In the past, transparency in business was a taboo concept. From food recipes to employee salaries, the more opaque your organization’s operations were, whether to the public or your own workforce, the better your chances to succeed.

In today’s market, however, companies that jealously guard the secrets to their success increasingly may run the risk of producing the opposite effect, discouraging employee engagement and stifling their potential for brand affinity in the marketplace. In an increasingly interconnected world, transparency is the new gold standard. Rising companies are making a killing—both economically and reputationally—by sharing everything, from how much money leaders make to how diverse their staff is, all the way down to where and how they source their materials.

But what exactly does an organization have to gain by opening itself up to scrutiny and competition? Here are some of the biggest perks as reported by companies that are already doing it, employees who want more of it, and consumers whose decisions are driven by it.

1. Transparency attracts premium talent

The available data correlating employee happiness with transparency in business is overwhelming. A whopping 87% of workers surveyed by Slack in our 2018 Future of Work study said they hoped their next job would be transparent; another study from employee-feedback company TINYpulse surveying more than 40,000 workers found that transparency was the number one factor contributing to their overall happiness.

This means that the majority of today’s workforce, which is more mobile than ever, wants to work for ethical companies. When the best workers have their pick of jobs that will make them the happiest—including your current employees, who could be considering new opportunities at more-open companies—transparency has never been a more valuable asset in acquisition.

2. Transparency builds trust

In the eyes of customers too, transparency in business is synonymous with ethical. One survey from consulting firm Label Insight found that 94% of consumers prefer brands that practice transparency. When companies aren’t forthcoming, consumers will likely seek that information elsewhere. Why let a third-party source siphon off that customer loyalty when you could be earning it yourself?

Calls for transparency in business are likely coming from inside your organization as well. Slack’s Future of Work study also found that 80% of workers want to know more about how decisions are being made by their employers. While 55% of leaders believed their organizations were very transparent, just 18% of their employees agreed.

And when psychological safety has become a valuable commodity for high-performing teams, giving employees access to and ownership of information and insights about the business they work for is a crucial step in earning that trust.

“My job was so much easier once I admitted that, while I have some good ideas, I don’t have all of the answers,” says Katy Shields, the vice president of people and places at photo-app startup and creative community VSCO. “Your people are closest to the work, they’re the closest to the customers, they’re going to know what’s best for your company. You, of course, will have context that they may not know, but they’re also going to have ideas that you may not think of, so sharing needs to be part of the company culture.”

3. Transparency in business generates better performance

Employees can only be as effective as the information they’re privy to and the decision-making power they’re delegated. That’s why VSCO has been reorganizing from its original top-down structure toward a more decentralized decision-making strategy by:

  • Creating internal wikis
  • Making all Slack channels public (aside from budget-planning and sensitive human resources matters)
  • Empowering employees to make big decisions and act on potentially game-changing ideas without waiting for approval from leadership

“Every employee thinks like an owner, because they are,” says Shields. “The more, and earlier, that companies can give up control, the more you develop the right kind of self-correcting culture where employees will be your biggest advocate—and also your biggest critic, if you’re not doing what you need to do as a team. Giving employees ownership and information gives you the information you need too.”

4. Transparency improves efficiency

The online shoe retailer Zappos made a name for itself with its commitment to building a cultural model for transparency in business, from a “vendor extranet” to internal databases that allow employees to view every transaction, budget and expense, as well as all documentation of individual roles and team projects. According to Fred Mossler, who headed up the Zappos merchandising team for nearly two decades, these measures ensure that employees and business partners are on the same page, cutting down on time and resources that might otherwise be wasted through employee disengagement, mistrust or a simple lack of big-picture understanding.

5. Transparency strengthens business accountability

One need only look at the impact of 2001’s Fast Food Nation and 2004’s Super Size Me on the fast-food industry to understand why cutting corners on transparency to stay competitive is bad for the sustained health of an organization. In this era, companies—especially big ones—already have to work against widespread public distrust.

By making data readily available to employees and the public, leaders can hold their businesses accountable and ensure that every step the organization takes is in its own best interest. The external return on investment checks out too. Numerous studies, including the aforementioned Label Insight survey, have found that consumers are willing to pay more for products made by transparent companies.

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