How far is too far with an open company culture

KEY TAKEAWAYS

Transparent cultures allow better informed people to make better decisions, but too much openness can be counterproductive as people perform rather than produce.

• Demand for greater corporate transparency is growing.
• More transparency tends to have a positive effect, but is not a quick fix.
• Transparency must be an underlying but flexible culture and value system.
• Openness may create conditions where employees feel their autonomy and uniqueness are challenged.
• Transparent cultures can lead to better decision making.

Business as usual is over. Demand for greater corporate transparency is growing and most companies are responding. This is part of a wider, more complex trend for businesses to become more human and authentic: witness similarly the drives for diversity, for empathy with regards to mental health, and the primacy of purpose.

For this generation of employees and consumers, it is vital that companies are open about their policies and actions. According to a recent study by Sprout Social, more than 86% of people in the United States believe that transparency of businesses is more important than ever before. Governments are enshrining business transparency in law, with the General Data Protection Regulation (GDPR) in the European Union just the latest example.

A culture of candour is good business sense. In a transparent culture, leaders make better informed decisions. A perfect illustration of how this works is a relatively unknown experiment by NASA with cockpit crews. They placed a pilot, co-pilot and navigator in a flight simulator and watched their responses to a potential accident.

Typical take-charge pilots made far more mistakes than more open and inclusive pilots who asked their crew for input before making a decision. Crew members who regularly worked with decisive pilots were unwilling to intervene, even if they had information that might save the plane: “Crashes are invariably errors of teamwork and communication,” explains Malcolm Gladwell in his book Outliers: the story of success.

A commitment to transparency can be truly beneficial. But are there pitfalls for the well-meaning but unwary? And how far should open company culture go when it comes to recruiting and retaining candidates?

TOO MUCH INFORMATION

Management books sing the praises of corporate cultures where information flows freely among managers and employees, and outward to customers, candidates and other stakeholders. However, studies show a culture of complete openness and inclusion can backfire.

“Too much transparency may create conditions in which employees feel their autonomy and uniqueness are being challenged,” explains David De Cremer, professor of management studies at the University of Cambridge. The question is how CEOs can create an open company culture while avoiding the transparency trap.

BALANCING ACT

Finding the right balance starts with the way candidates are recruited. A transparent recruitment process is extremely important if employers don’t want to lose the best people.

“The way you handle potential job candidates has a high impact on your reputation as a company,” says Stephan Surber, Senior Partner and Head of Global Financial Services Practice, Page Executive in Switzerland. “They want to know exactly what to expect. Especially in senior and executive roles, people want immediate feedback. How many other candidates are there? What is the next step? One of the biggest frustrations for candidates at any level is that the process is unclear.”

The way you handle potential candidates has a high impact on your reputation as a company. One of the biggest frustrations for candidates at any level is that the process is unclear.

CONTROVERSIAL ISSUE

After rumours last summer that Google was launching a censored search-engine app in China, hundreds of employees called for more transparency about the new product. In an open letter, they demanded that at least one employee supervised the project. The year before, more than a thousand Google employees decided to publish their salaries and bonuses to create more openness around income.

The Google employees aiming to create salary transparency touched on one part of the recruitment process that is controversial. There is no doubt that more openness about salaries is good for candidates – for one, it could help close the gender pay gap.

But a completely open salary policy can also create tension between employees: “As a hiring manager you would like to have the possibility to offer more if you think someone is the perfect candidate for a position. It can be demotivating for the existing team if they know what you offer a new joiner,” explains Surber.

Hiring managers want the possibility to offer more for the perfect candidate, but this can be demotivating for the existing team if they know what you offer a new joiner.

There is, in other words, no one-size-fits-all solution. Countries like Sweden, Norway and Finland, where all salaries are public, show that full transparency can work. There are also some companies, like Whole Foods Market, that provide fully transparent salary information, at least to their own employees.

THE SENSE OF BEING ON STAGE

The other important topic to consider, at least from an HR perspective, is how a transparent company culture affects retention of the best team members. One challenge is that completely open structures increase the sense of being on stage – on show, on display and under constant scrutiny. A transparent culture usually includes open offce spaces, social media platforms and smart devices, so that information sharing can occur anywhere and at any time.

According to a study by the Harvard Business School, this kind of radical transparency can have the opposite effect: “We spend more time acting (...) and avoiding embarrassment,” explains Ethan Bernstein, Associate Professor of Leadership and Organisational Behaviour. “We cater to our audience, doing what´s expected.”

Too much transparency can make employees feel uncomfortable and eventually they may leave. Companies that know how to retain employees strike the right balance between transparency and privacy. The most famous is the 20% of time that Google engineers can devote to projects that interest them personally. This untracked ‘playtime’ has been credited with the incubation of many Google products including Gmail, Google News, and last but not least, The Google Transparency Report.

BEING HUMAN

The lesson is that, although more transparency tends to have a positive effect, it is not a quick or easy fix. Greater openness does not necessarily lead to a healthy company culture, improved trust and better performance.

Seeking to be more open, honest and clear are all necessary traits in an era where human values must be protected and cherished. Companies must also rely on that most human of characteristics: common sense.

Transparency must be an underlying but flexible culture and value system rather than a rigid, binary process. The top employers on Glassdoor are all transparent companies, to a degree. They are open when they can be and closed when they need to be.

In truth, transparency is really about communication: making sure employees, customers and stakeholders know a company’s purpose and strategy, as well as their role in it.

KEY TAKEAWAYS

Transparent cultures allow better informed people to make better decisions, but too much openness can be counterproductive as people perform rather than produce.

• Demand for greater corporate transparency is growing.
• More transparency tends to have a positive effect, but is not a quick fix.
• Transparency must be an underlying but flexible culture and value system.
• Openness may create conditions where employees feel their autonomy and uniqueness are challenged.
• Transparent cultures can lead to better decision making.

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