Transparency in Business: Why It Matters

Posted by · June 27, 2012 12:46 pm

In many cases, the word transparency is used as little more than a buzzword, a marketing opportunity. Whether it’s a corporate executive looking to win back disillusioned consumers and shareholders or a politician making whatever promises necessary to obtain public office, this term seems to have earned a bad rap over the years. And as a result, many have come to question the authenticity of those who use transparency as a part of their normal vernacular.

While observing the steady decay of this word would be a fascinating study in itself, there is another, more beneficial lesson to be learned in the wake of this linguistic disaster—particularly as it pertains to the way businesses are run.

This lesson can be learned, at least in part, by simply rediscovering what true transparency is—what does transparency actually mean? After that, one can utilize that understanding to discern the purpose of remaining transparent in the way s/he does business, as well as the often detrimental consequences of flouting that responsibility. Finally, with that new-found understanding, one can generate useful, ingenuous action plan for increasing transparency in his or her own business.

Business Transparency Defined

In its simplest sense, business transparency means clear, unhindered honesty in the way that s/he does business. But it’s more than that. One business dictionary defines transparency as a “lack of hidden agendas or conditions, accompanied by the availability of full information required for collaboration, cooperation, and collective decision making.” The same source describes it as an “essential condition for a free and open exchange whereby the rules and reasons behind regulatory measures are fair and clear to all participants.” Meanwhile, another source defines transparency as “the full, accurate, and timely disclosure of information.”

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In other words, business transparency is more than simple honesty—much more. Being transparent is dependent not the degree and timeliness of that honesty. For example, if a company engages in a practice that costs its members or shareholders money, but doesn’t admit its responsibility for the loss until years later, that is not transparent behavior, regardless of how completely the company discloses the details of its behavior.

Unfortunately, there are some detractors who prefer that transparency retain its more strategic character, and perhaps even be thought of as a burden on companies as a result of increased regulatory constraints. Although it’s true that the messaging of transparency ought to be mended into the communication strategy of every business, it is precisely this mindset that makes this discussion so necessary.

The Purpose of Transparency in Business

In order to get around this more utilitarian, often negative disposition toward transparency, it is important to discern its greater purpose, specifically when it comes to the area of doing business. Such a rationale can be found when one considers the company that they run not only as a means of earning a profit but as an extension of one’s own personal reputation.

iStock_000023664387_FullWhether you currently are or have been an employee in the past, we’ve all heard that saying: “You are the face of the company.” All too often, though, this truth is only reinforced among the part of the workforce that doesn’t have a long-term vested interest in the financial success of the company. It is used as a call to action or a prod against worker complacency rather than a much-needed reminder—from the lowest level employee to the highest-level executive—that personal conduct is a reflection of both the person and the company s/he represents.

More importantly, however, the opposite is also true: Business practices are also a reflection on the people who adopt said practices. While the former is pertinent no matter one’s position on the employee totem, this truth is particularly relevant to the owners, executives, and managers—the decision makers.

While a poor decision might cost a staffer his or her job and at worst, create a short-lived scandal among those affected, the ramifications of a decision maker’s conduct are far more widespread. The effects reach not just into the financial interests of a company, but into the community and environment in which it does business, not to mention the lives of the decision makers themselves.

Returning to the issue at hand, it becomes clear then that the true purpose of transparency is not simply to appease regulators, to increase profits, or to please shareholders. Sure, certain industry safeguards may require a particular degree of transparency, and of course there’s a monetary incentive for businesses to be more honest. But there’s a greater reason that these things are true. A business that truly increases the well-being of all that its operation affects has little, if anything to hide. With the exception of, say, a legitimate trade secret, a business that delivers a product or service of real value to customers and greater society alike has minimal difficulty being truly transparent.

In fact, that’s why such regulations exist in the first place—to ensure that businesses are sufficiently demonstrating their impact on society. That’s why companies that provide something of real value to the people they serve and the communities in which they operate benefit financially by being completely, accurately, and expeditiously transparent about how they do business.

To be sure, the purpose of transparency is to demonstrate that a company is truly the kind of business that it wants people to think it is.

As one writer puts it, “transparency is assurance,” and “less information means less certainty for investors.” Unfortunately, the definition of investor has become so narrowly defined that it only means those with a direct financial stake in the company. But in reality, those who provide financial support are only one type of investor. Customers, employees, communities—they all hold a stake in the way that a company conducts itself. And in many ways, the risk these groups take cannot be measured in dollars and cents.

How to Make Your Business More Transparent

In all fairness, though, the idea of exposing the internal operations, structures and even the culture of a company can be a scary thing. In an instant gratification economy such as ours, where brand perception can often trump the quality of the good or service being sold, it might be troubling to consider the potential fallout once customers become aware of the amount of time and money that is spent investing the in the perception of a product, rather than the product itself.

But that should be a call to action, not a reason to be more reclusive. It ought to be seen as an opportunity to reallocate resources in a way that creates increased value for customers and communities, which in turn will yield increased profitability and long-term sustainability for the company. And whether you are a solo operation, own a small business, or help run a large multinational corporation, a few guidelines apply universally in efforts to increase business transparency.

Don’t Be Disingenuous

People can smell you-know-what from a mile away, so don’t decorate your transparency initiative with needless fluff that will at best distract from your message or worse, cause direct harm to it. This means talking about what you know and being who you really are—both as a company and as an individual.

As Mashable’s Sharlyn Lauby puts it, “It’s just as important to be viewed as a person with a lot of talented resources as it is to be viewed as an expert.”

In other words, make sure that those who come in contact with your business are able to know the people who actually run it. Instead of the overused stock photos, professional actors, and paid referrals, give people a real glimpse of who you are and who actually provides the good or service.

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Honesty Really Is The Best Policy

officeIf it’s relevant to what you do, the people affected have a right to know. All too often, critical details of how a company operates are divulged on a “need to know” basis. However, as soon as one of those details becomes public knowledge, that business’s reputation—and the reputation of the people running it—are compromised.

Lauby continues, “If you neglect to include something—that others might have thought was important—this will impact your…credibility as much as lying outright.”

People and communities deserve to know the ins and outs of a company’s operation before they begin to patronize it or, if applicable, provide the space, infrastructure, and labor necessary to open a new location. Keep this in mind: As much as people celebrate good surprises, they tend to give just as much, if not more publicity to bad ones.

Remaining honest is also important as companies adjust and adapt. By involving the community in that process, companies are able to maintain a high quality of rapport with the public, as well as get a better idea of what consumers actually want or need. Both of which reduce the costs of needless changes while increasing the appeal of the good or service your company provides.

Timing Is Everything

The best time to respond to a concern or increase transparency is yesterday. But today’s not such a bad time either. Given the countless real-time tools we have at our disposal—no matter what the size of the enterprise—there is no excuse for being slow to act. Blogs, social media, email campaigns—all of these outreach mechanisms allow you to maintain a continuous dialogue with customers and community alike.

When something’s wrong, don’t wait until you have to react to someone else pointing it out. Get in front of the issue and make sure that the people that have entrusted you to do business in their community know you’re doing all you can to resolve it. The longer you leave people hanging, the more likely they are to think the worst and look to replace you—and depending on how serious the issue is, perhaps even remove you.

Perhaps the best way to remember the importance of full and complete transparency in business is to remain mindful of the fact that a business is meant not only to cultivate a community of people interested in the product or service it offers, but to offer something that benefits the community that contributes to or is affected by that company’s actions. Yes, transparency is certainly an appealing means to a lucrative end, but it’s also an end in itself.

Transparency doesn’t just help businesses become financially successful. It makes them good citizens. And good citizens never go out of business.

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  • Tom

    Great article. I’m a big believer in transparency in all sections of society especially in all kinds of leadership position whether in a business or political position. If you’re an employee or a business owner make sure you get everything in writing. In today’s world you have to be 100% sure.m

    Tom
    http://www.tjarrold.com/toms-tips/