How to Make Transparency Work in Your Startup

How to Make Transparency Work in Your Startup

Let’s say you’re at a dinner party and making small talk with a few guests seated near you. One guest talks loudly and excitedly about their work, dishing dirt on their boss and office drama. The other responds to questions with single word answers and smiles enigmatically, not revealing much about their life. And the third guest shares entertaining anecdotes about their children, and speaks openly and honestly about their passion for local politics.

Who would you want to spend the rest of the evening talking to? Who would you trust with your own views and opinions? It’s likely that you would want to focus your attention on the third guest, who is able to establish a sense of ease and comfort in the conversation.

This social dynamic is present in the business world, as well. You have entrepreneurs who build their brand through overshare and personal drama. You have old-school business types who prefer guarding their practices and deals. But there’s a growing movement of startups that operate like the third dinner guest: they’re willing to be honest, open and share insights into their inner workings. They’re being transparent, and doing it with tact and style.

Transparency has become a buzzword lately. Marketers are talking about how brand transparency is becoming more important in the age of social media. Big brands like McDonald’s are making calculated efforts to encourage the practice (although their recent campaign has drawn criticism for putting too much of a PR spin on their engagement).

Buffer, the social sharing app, seems to be the poster child for the movement. The company publishes their monthly investor report on their blog, making public the growth in user base, revenues, cash position and more. You can even access data about employee salaries at any time. Buffer founder Joel Gascoigne has incorporated the concept “default to transparency” into the company’s core values, and living up to the promise.

Video conferencing company, Blue Jeans, also opened themselves up when they invited the whole company to watch a livestream of a board meeting. While there were some concerns that this open forum would inhibit investors and possibly make employees uncomfortable, they discovered the opposite happened. Knowing that they were on the spot and accountable, every department in the company had an incentive to be accurate and open about the status of their operations.

Startup marketer Mark Evans recently observed that being transparent can give startups “a competitive edge” by driving credibility with key players. However, while he supports the idea of opening lines of communication, he notes that startups should explore its advantages and disadvantages.

There are reasons that complete honesty and openness isn’t the norm in business culture. People find it difficult to launch such an initiative. It can make people feel uncomfortable. Leadership fear they may be held accountable. The results are unpredictable.

To Be Transparent or Not To Be Transparent

As with anything, there are pros and cons to open communication. While it seems to work for Buffer, it’s important to assess whether it reflects the culture of your startup and to be sure that you have systems in place for feedback.

Before deciding to be transparent with your employees and/or the public, consultants advise you take a good hard look at your business with a critical eye. Can you both take in this feedback on it as well as make it actionable? What are the potential pitfalls that could result and how will you address them?

Ask yourself - are you truly ready to launch this kind of initiative within your organization?

Opening Up Has Its Benefits

The “culture of trust” that Blue Jeans observed after their open board meeting can be viewed as the greatest benefit to come from transparency. Fast Company calls trust “the most important and fundamental aspect of building a strong company culture,” as the positive effects from it ripple throughout every aspect of a company.

As trust builds in a team and communication flows freely, employees will feel better about their work and workplace. Beyond the internal effects, positive results extend beyond the company. A Northwestern University study revealed that there is a direct relationship between employee and customer satisfaction. If employees are empowered with trust and ownership over their work, this will be transmitted to the customers that they’re working with, ultimately leading to better customer relations overall.

Another resulting benefit from introducing more open communication is that decision-making powers will be distributed throughout the company, decreasing time lags and bottlenecks that accompany top-down decisions. “Transparency allows employees to make decisions in a much more similar capacity to the leadership,” writes software engineer Justin Sermeno on his blog. “This increases the pace of the startup.”

But There Can Be Drawbacks

It’s important to know when baring all isn’t a good idea for the culture of your startup. VC Mark Suster cautions against “total transparency,” saying that staff aren’t hardwired for risk and failure in the way that CEOs are. He believes that it’s possible that revealing “the full level of data and knowledge would be detrimental” to employees, and would have an adverse effect on company morale.

An open culture also comes with “the risk that information may be distorted, misunderstood or misrepresented,” as organizational consultant Dr. Drumm McNaughton points out. There is the possibility that you may unintentionally give away information that makes your startup “unique and competitive.” This fear of people stealing their idea is one of the leading arguments made against transparency.

The openness and communication that comes with a transparent culture can result in more time being spent in meetings and conversations. Entrepreneur Dane Atkinson discovered this when he disclosed employees’ salaries, and while he encouraged the dialogue, he also noticed that he was spending a lot more time engaged in discussions with his staff.

As well, the decision-making process that Justin Sermeno spoke to earlier can have the opposite effect. Rather than increasing the pace of development, it can slow things down as there are “too many chefs in the kitchen.” GoCrossCampus’ failure was attributed to having a five-person founder team all being involved and contributing to analysis paralysis.

Baby Steps to Transparency

So maybe you’re not ready to livestream your board meetings, publish an audit on your company’s performance to date, or post your staff’s salaries on the internet. But there are several ways that you can encourage more open and honest practices within your startup and move towards embracing this philosophy.

1. Have Effective In-Person Meetings:  A simple way to encourage internal transparency is to schedule more face-to-face meetings and in-person conversations, rather than relying on email or third party communication between employees. In-person meetings establish trust, along with positive emotions and stronger relationships.

Meetings have gotten a bad rap in the workplace, mainly because they can be inefficient and detract time spent doing the work. Be sure to have a clear purpose, actionable goals and a concrete end time so the meeting feels useful, rather than distracting. Daily stand-up meetings – 15 minutes max, and as the name suggests, done while standing up – can also keep projects on track.

2. Communicate Company Goals: 44% of workers can’t name the goals of the company they work for. They may be able to articulate what the company does, but they have little idea of what they are collectively working towards.

This may seem pretty basic, but it’s important to regularly communicate the goals of the company in order to ensure that all employees are aligned. You don’t need to schedule this during your daily stand-up meetings, but do check in with employees on a monthly, or even quarterly basis to make sure that everyone is on the same page.

3. Share Numbers: This is where CEOs start to feel uncomfortable. Buffer and customer support software startup Groove (another leader in the movement) broke barriers when they posted their incomes and financial goals. While you may not feel ready to unveil these numbers in a public forum, start by sharing basic balance sheets with employees.

Remember that not everybody has a head for numbers, so present this information in a user- friendly format (ideally with visuals and graphs) to avoid overwhelm.

Baring All: Ready, or Not, For a Transparent Startup

Transparent practices could very well be what takes your startup to the next level. They’re not for the faint of heart, though. Practice being transparent with internal stakeholders and employees, before broadcasting your figures and policies to the world. It’s difficult to measure something as intangible as trust, but you’ll be able to pick up on subtle indicators in the office.

Buffer claims that their recent achievements are the result of the culture of transparency within the business. Within two years, their revenue increased exponentially from zero dollars to $1 million per year. Internal openness (from emails that are accessible to the whole team to goal-setting personal development apps) has helped to improve productivity and creativity amongst their remote employees. External efforts have generated buzz and made Buffer a company to watch. If their monthly reports are any indication, their user numbers, traffic and revenue continue to climb.

Being transparent isn’t that different from being the ideal dinner guest. It’s a matter of knowing when to tell the right story, what details to reveal, and how to engage the other guests. Transparency, when done with sincerity and respect, can build trust and authentic relationships.

How transparent is your startup? Is your team open and honest with one another? Do you plan on using this technique in your company? Let us know in the comments section.

Photo Credit: Unsplash

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Great article Renee, thanks for sharing both sides of the coin! It’s very important to assess how transparent you should be about your startup. We at Hubstaff (https://hubstaff.com/), recently released our public revenue metrics dashboard (https://hubstaff.baremetrics.com/dashboard) and I can confidently say that the pros have definitely outweighed the cons for us. This level of transparency also motivates our team to perform better everyday.

And we’re not just transparent about our revenue metrics, we’re transparent about what marketing strategies we put into place, how we run our company, how we manage our remote team and what tools help us grow. You can check out growth timeline here to get an idea- http://blog.hubstaff.com/grow/

 

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