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Can Radical Transparency Work for Your Business?

Posted by Nadia Goodman | November 28, 2012
URL: http://www.entrepreneur.com/blog/225080

When a startup is just getting off the ground, there are only a few employees, and they know everything about the business. They have to. As the company grows, that dynamic tends to shift until only those at the top are fully informed.

Recently, more leaders are resisting that shift. They're adopting policies of radical transparency, meaning that typically private information -- such as salaries, email content, or performance metrics -- is available to everyone at the company.

Transparency may be especially helpful in today's uncertain environment. We experience uncertainty as a threat, which inhibits perception, cognition, creativity, and collaboration -- all the skills we need to do our jobs well. Working at a transparent office creates a sense of certainty, allowing employees to flourish. 

"When everything is transparent, a new hire can look around, see who is successful, and mirror themselves to that individual," says Ryan Smith, CEO of Qualtrics, a Provo, Utah-based cloud survey business that makes individual performance metrics, goals, and tasks visible to everyone, as well as all meeting notes and paid time off. "They execute at a higher level." 

Related: 3 Ways to Think Outside the Box

SumAll, a New York City-based data analytics company, takes transparency even further. Salary information, performance reviews, and stock shares are visible to everyone at the company. "It's a giant living experiment," says CEO Dane Atkinson.

The primary benefit, according to both CEOs, is that employees stop focusing on internal politics and spend their energy making the company better. "Transparency has created a much more collaborative environment," Atkinson says. "Internal competition is pretty much eliminated."

As you think about whether a radically transparent model would work for your business, consider these tips.

1. Start when you're small. While your company is still small and dynamic, that's the time to make it radically transparent. "Having this conversation with the CEO of Amex would get pretty difficult," Smith says. "It's like trying to turn a cruise ship." By starting early, you weave that culture into your company's DNA and attract only employees who are motivated by full accountability.

2. Take issues one at a time. When creating a radically transparent business, Smith recommends incremental exposure. "Thinking about it all as a whole is very difficult and very daunting," he says. Instead, each time you would typically hide information, ask yourself, "Why can't I share this with everyone?" Unless someone comes up with a strong argument against it, always opt for openness.

3. Make time to explain your logic. As a radically transparent leader, you must be honest and fair. Employees need to understand how you came to your decisions and why. "You do need to spend a huge amount of time with your team explaining everything," Atkinson says. The extra time will pay off--ultimately, your effort will inspire trust and loyalty.

4. Clearly outline the steps for advancement. Transparent companies need clear measures for bonuses and promotions. You might set specific performance goals or create a rubric that combines skills and outcomes. An objective approach reinforces fairness and prevents you from promoting anyone beyond his abilities. Smith sums it up, saying, "We're interested in the competent being promoted, rather than the confident."

5. Question your own discomfort. Making traditionally private information available naturally stirs up discomfort. "A lot of times it's uncomfortable because it's never been done before," Smith says. Whenever Smith hesitates, he asks himself if sharing that information would help or empower his employees. If it would, he does it. Once it's out in the open, discomfort quickly fades.

Related: 4 Ways to Build a Culture of Innovation at Your Startup