Is Radical Transparency Right For Your Business?

The long-standing walls of corporate secrecy are crumbling. For better or worse, a recent trend for universal clarity is shining light on entire corporations.

Transparency in business offers open and free sharing of information to all employees, consumers and shareholders through a direct stream of communication. In theory, this honesty has the potential to build brand trust, healthy communication and harvest a reputation of good ethics… but does it make for profitable business, and is it ever possible for this dialogue to go both ways?

I read a very interesting article in the Harvard Business Review by Professor Francesca Gino of the Harvard Business School on the subject of radical transparency being able to reduce bias if it’s done correctly. The link to the full article is here but I’ll summarise the key points for you.

Gino’s article centers on the business practises of Ray Dalio, founder of Bridgewater Associates, the largest hedge fund in the world, managing almost $160 billion. Dalio is considered something of a savant in the hedge fund industry since he demands a very unique culture at Bridgewater, one that could only be described as ‘radically transparent’. He demands total honesty and openness from his colleagues, particularly when it comes to mistakes. Rather than waiting to be pandered to, Dalio has instilled a culture of ‘thoughtful disagreement’ without creating lasting conflict, even when the ideas were deemed controversial or subverted the usual hierarchy (i.e. a junior member respectfully picking holes in a more senior partner’s idea).

In Dalio’s words:

“I think the greatest tragedy of mankind is that people have ideas and opinions in their heads but don’t have a process for properly examining these ideas to find out what’s true. That creates a world of distortions. That’s relevant to what we do, and I think it’s relevant to all decision making. So when I say I believe in radical truth and radical transparency, all I mean is we take things that ordinarily people would hide, and we put them on the table, particularly mistakes, problems, and weaknesses. We put those on the table, and we look at them together. We don’t hide them.”

 

 

Quite. As science proves, humans are affected by many biases, not least confirmation bias, or the tendency to focus on evidence that confirms our beliefs and assumptions rather than looking for data that contradicts it. More shocking is that according to organisational psychologist Tasha Eurich, around 95% of us think we have strong self-awareness, but only about 10% to 15% of us actually possess it. Worse still, the higher we ascend in our careers, the less self-aware we become.

Why does this matter?

This chasm between perception and reality can be very damaging when it comes to making key decisions in our professional lives. Feedback that challenges these assumptions of ourselves is often dismissed adroitly: research that Gino conducted with Paul Green of Harvard Business School and Brad Staats of the University of North Carolina in Chapel Hill found that:

‘…people tend to move away from those who provide feedback that is more negative than their self-views. We tend to strengthen bonds only with people who see our positive qualities… Our natural reaction is to remove the threat — which can mean dissociating from the source of the information.’

This supports the notion that, even when confronted with vital, first-hand information, those at the top may choose to ignore voices lower down when making crucial decisions – to potentially disastrous effect.

Internal affairs aside, what does this transparency mean for the all-important customer? A recent surge of consumer activism is putting pressure on brands to open up about their business practices and principles and how they pertain to ethics, sustainability and even pricing. In the fashion industry, an increasing number of brands are opting to build their business models from the bottom up, creating a clear line of sight on how products are made and nurturing a strong moral identity:

‘Research has found that transparency increases customers’ perceptions of the value of a service, their satisfaction of it, and their willingness to pay, irrespective of its quality,’ says Gino. Other research has discovered that businesses that are the most transparent in the way they report results also achieve higher performance.

So, is it right for me?

The bottom line is that transparency garners trust in both consumers and employees, and it also helps rebuild trust when damaged or lost. For ORESA, this transparency from clients is vital to our consulting process. Seeing the full picture enables us to understand where the issues lie, and subsequently offer informed advice on how to strengthen leadership structures and work towards sustainable growth.

So what’s not to like? Well, simply put, some people don’t take kindly to their ideas or self-perception to be challenged, particularly by those operating outside a safe bubble of seniority. It’s certainly not for the faint hearted; in Bridgewater’s case, not a day goes by that your ideas are not picked apart by others. As Dalio says, “It is initially very difficult for most people to deal with uncomfortable realities”, but if you’re willing to encourage everyone to buy into this climate of objective criticism, both your company and your employees will likely benefit greatly.

For more information on how to create an open business culture with effective new hires, speak to us confidentially at +44 (0) 203 675 1459 or email Orlando Martins at orlando@oresa.co.uk.

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