jen briggs

What do you think of when you hear about transparent organizations? Open book management?

It can be that the company’s books are open and accessible. But, to what level – are individual pay rates or ranges transparent?  Can any employee look up the company credit card transactions? Or, perhaps openness means access to the why of decision making?  To some a company who is seen as being open might be distributing leadership and decision making throughout the company and not using a command and control hierarchical power structure.

The reality is that any of these can be true. The best open book, transparent companies are those that make a plan. Where are they now and where do they want to be to manifest the desired business culture.

I believe the best way to look at it is through trust. With transparency, people are able to check congruence between what leaders say and what they do. When people are believed to be keeping secrets or have hidden agendas, it is harder to trust them. Beyond corporate transparency, the open culture can transcend the entire organization and lead to open performance reporting for all teams and each person. This type of open system creates a transformative trust where performance discussions become more fruitful for future progress and less blame centered. For this reason is it more critical for purpose-centered, mission-driven, social enterprise, and/or employee-owned business to be transparent. The stakeholder/employee shareholder model requires trust as a keystone for a healthy, successful culture.

Transparency and open book management breeds trust and can turn in to an economic driver for the company.

According to Stephen Covey in the Speed of Trust, when trust goes down, speed goes down and cost goes up. This is referred to as a “low-trust tax”. Beyond trust, transparency can tun into less bureaucracy and burdensome management oversight. If employees understand the operational framework of a business, the purpose/mission driver, and the various revenue streams, they can then make more well informed daily decisions allowing for leadership to be distributed and agency to be developed. Yes, transparency leads to better decisions in all areas of a company.

Our consumers and customers are increasingly seeking authentic brands. Social responsibly reports, reports on Glassdoor, and other public disclosures can lead to increased creditability. Brand story is an incredibly valuable asset, but if there is marketplace suspicion of the validity of that brand identity it will have a dramatic effect on revenue. We’ve seen a number of companies lately – Uber and Papa John’s come to mind – where brand perception did not line up with leader action once that leader mindset became transparent. In the marketplace, a lack of transparency moves beyond low-trust tax to lost revenue.

Culture is the pattern of attitudes and actions of a given community. For trust and transparency to be alive and well, we must take it from a philosophical value to applied, daily norms. When kept in the abstract, people will develop their own story around the meaning of transparency and divided meaning itself can lead to distrust.

Not all transparent businesses have the same degree of transparency. Some open the books at the team or project level allowing access to certain financials to manage projects or departments. Others practice radical transparency where everything including individual pay packages are disclosed. The beauty is that it can transform over time. Companies can become more open with practice. They must start by deciding what degree of transparency they will begin with then decide where they will go by visioning cultural, organizational outcomes. Leadership commitment is critical. You cannot have different leaders communicating with different levels of transparency. For example, if one leader practices radical transparency and another is more closed it will lead to misunderstanding or worse, mistrust of the information from an entire leadership team. There are certain, valid reasons for a business to not be radically transparent. But intention and attention to creating an employee community that can make an impact is what is important.

There are three general aspects to openness to consider – financial reporting, leader mindset, and decision style. Financial factors are focused on how will you control or free information and decisions on spending and investing. The leader mindset is about believing that transparency is a good idea and they are committed to leading an open stakeholder/shareholder company. Decision style is about who has control and authority and the basis of how choices will be made.  They all come together as a business system because the financial outcomes represent the story of the business and all of the dynamic decisions and actions over a certain period.

Leading in a transparent culture may be more difficult than managing in a closed culture. Leaders in a transparent culture cherish inquiry and challenges to decisions. They see these as opportunities to educate or to be educated. Agility and perpetual learning are part of how people work and how the business succeeds. Leaders in open cultures often see employee meetings as stakeholder meetings where every person serves the business. Leaders not willing to be vulnerable or who easily become defensive absolutely need to reconsider their mindset.

Often we hear leaders say, “It’s on a need to know basis”. These are good people who, often, are protecting their people from cumbersome information that might not be useful to their work. Or, perhaps they want to shorten up meetings, so they lighten their updates by excluding big-picture information that they deem not relevant to the daily. These limiting practices hinder business literacy and the opportunity for people to learn how they can build their own capacity relative to the needs of the company. This also will restrict change resilience because the more we limit the perspective of the road ahead, the less likely people will be to process change when there is a curve in that road.

In ESOP owned companies, the employees are shareholders in a trust and there is no requirement to treat them like shareholders. But, when leaders treat people like task-only contributors they will act like task-only contributors. When leaders treat people like shareholders and foster corporate citizenship people will act like long-term investors being more cognizant of how their attitudes and actions create a long-term integrated impact. After all, there is a healthy co-dependency on the success of the community. Worker owned cooperatives also have a built-in shared value driver opportunity with dividend, profit sharing, and other member economic participation opportunities. In short, there is a shared profit motive.

Transparency and open books are for all companies, not just employee-owned companies. Leaders always need to be prepared to share a stake in the outcome for improved performance and value creation.

At New Belgium, we practiced open book reporting, participative management, high involvement culture, and environmental stewardship. All financials were open with the exception of individual pay levels. However, employees could see labor costs in a given group or department. Numbers were consolidated and reported, but also employees could look up credit card transactions. As far as I know, no one ever did, but just simply knowing that it was available was a source of trust. We also participated in the B Impact Assessment and both employees and consumers were able to see the results.

Through all-staff meetings, team meetings, blogs, e-mails, and an annual shareholder/learning/influencer meetings people were able to learn about the company and influence through the power of the collective by participating in strategic thinking and input opportunities. At the team level, managers used participative and agile management techniques to build productive participation. Mini-games provided a framework to take business and financial literacy into daily-task action that will save costs and build value. Budget over/unders were not only transparent but a tool for better business management.

It can’t be understated how important commitment and alignment is with regard to transparency. In one company that was having challenges, a top leader communicated some critical numbers and actions to her teams. Another leader did not. No ill will, he just wasn’t as open. But, when employees started talking and comparing notes these mixed levels of transparency caused concern that developed to mistrust. “Why wouldn’t he tell us?”. “What are the real numbers?”. “Why is she involving her team, but he’s not involving us?” Humans are story-making beings and in absence of information, we tend to fill in the gaps. When times are tough, that fill in will tend to be more suspicious. Truth builds trust. Truth builds perspective. Perspective builds commitment. Commitment builds engagement.

Becoming more transparent is a process for most business and follows a spectrum. Being more transparent builds trust and transparency is a delicate piece of the business operating system. Moving from philosophy to practice necessitates agreement on three key areas.

• Financial disclosure and activities. How open and available will financial documents be? Will they be openly accessible to employees? What type of scorecard can be developed to help people align their efforts behind what the company must do to win? To what level of detail and how will information be itemized or consolidated (eg. will individual wage rates be open?). How will employees learn about the information and ask informed questions? How will financial information be communicated? How open will spending governance be? How can people discern between an investment and an expense?
• Leadership mindset. Leading a transparent business is different. Employees, and in certain cases consumers, will be given access to information that was the basis for decision making. Leaders will always need to be prepared to be vulnerable and open to explaining the rationale for the decisions. Even more critical is the bond of the leadership team and how they make choices and agree when there is tension. Can leaders be inquisitive, non-defensive, and progress builders? Being open about challenging times while developing the grit and perseverance of a corporate community is a must-have skill for transparent, mindful leaders.
• Decision style. The financial plan and results are being shared. The long-term projections and potential are being shared. But how are choices defined and decisions made? The first step is simply explaining decision logic. The deeper step is using the power of we to make better choices. Even if a company is financially transparent, if people cannot understand choices and decisions, that trust will not flourish. The financials are only the financial snapshot. Decision making is what feeds the financials. Distributed decision making increases the speed and quality of decisions throughout the company.

Your next step – make a plan. How open are you now with financials, leader mindset, and decision making? Where do you want to go? Being open is a more rewarding way to run a business, but it takes both planning and practice.

Resource: Slides: Are You Ready for Open Book Management? Open book management transparency readiness

Resource: Create support/agreement alignment on how open and transparent the business will be. Spectrum of transparency worksheet