The ROI of Transparency

If you’ve ever worked at a larger company — either public or private — chances are you’ve attended an “all-hands meeting.” The common intent of such a gathering is for senior leaders to engage staff by giving them information and insights into the business, both its current condition and its future prospects. At their best, these meetings can be motivating and energizing. At their worst, they can further distance employees from emotional investment in the business. One quality of a meeting’s success is the degree to which leaders exercise transparency.

Since every reader of this article has been — and is still likely to be — an employee, it will come as no surprise to hear that when employees lack fundamental information on the business, such as its revenue, profitability, mission, vision, values, and strategies, they are disinclined to buy-in to goals for either the entity or for themselves. When employees work “in the dark,” they tend to disengage.

According to Onpoint Consulting, “organizations that operate under a veil of secrecy and keep employees on a strict ‘need to know’ basis tend to struggle with low engagement and retention rates.” In a recent Fast Company article, Mathilde Collin, the CEO of Front, reports that transparency helps her organization be more efficient and keeps employees invested because they are constantly informed, making them feel valued and enabling their trust in the company. In turn, transparency results in higher productivity and increased performance in employees. The benefits flow both ways. A post by StrategyBlocks claims that “transparency isn’t just a one-way interaction – making your processes visible to your organization can also help facilitate and encourage feedback from your employees, allowing you to gain valuable insight into potential areas for strategic improvement.”

Employees aren’t the only stakeholders that value transparency, customers do, too. As reported in a Forbes article titled “Transparency is the New Normal: Top Takeaways from the 2018 Innovation Series,” panelist Paavana Kumar suggests that “demand for supply chain transparency will continue to push technology forward, as consumers want to see where their products are made and who made them. Walmart is already piloting blockchain technology that tracks produce from farm to shelf.” Another panelist, Buxton Midyette, VP of marketing and promotions at American cotton company Supima, added that “transparency and brand integrity go hand in hand.”

Clothier Everlane adheres to a radical transparency model, about which it says: “We believe our customers have a right to know how much their clothes cost to make. We reveal the true costs behind all of our products — from materials to labor to transportation.”

Another company putting transparency into action is Fitbit. It demonstrates transparency by being open with customers about the data collected from their fitness devices and how that data is used. The company also regularly updates and clearly communicates its privacy policies.

An article in the Harvard Business Review reports, “When customers are cordoned off from a company’s operation, they are less likely to fully understand and appreciate the value being created. As a result, they are less satisfied, less willing to pay, less trusting, and less loyal to the company over time.” Label Insight’s 2018 Product Labeling Transparency reports that “brand transparency is stated as having a direct impact on building consumer trust and boosting loyalty.” According to the report, about half of shoppers are willing to pay more for a product that offers more in-depth product information beyond what is on the physical label; more than seven in 10 shoppers claimed they would switch from their usual brand.

There is a third constituency that values transparency: investors. According to Franklin Square Investments, demand for greater levels of transparency has continued to increase to the point that it is now considered the most important investment consideration.

Transparency is much more than a growing trend. It’s fast emerging as a new standard in business — one that engages employees, attracts customers, and rewards investors. In the Journal of Management Development, in the paper titled, “Organizational transparency drives company performance,” authors Berggren and Bernshteyn hypothesize: “Transparency within an organization reduces inefficiencies in strategy execution, and is a key factor in attracting and retaining high performers in the labor market,” and that “Though there is no universal model that can be applied to every organization, there are fundamental conditions that need to be in place to foster organizational transparency and, therefore, drive company performance.”

At Oliver Russell, we have an open-books policy that gives all employees visibility to our revenue, our expenses, and our profitability. Our positioning as a “social impact branding agency,” and our commitment to elevating the impact of businesses striving to do good is proudly proclaimed to clients in meetings, on our website, and in our work. As a certified B Corporation and Public Benefit Corporation, we are as committed to serving people and the planet, as much as we are to pursuing profit.

For those companies that demonstrate transparency across all aspects of their operations, the benefits are not only significant, they’re also far-reaching. Making our final point one that writes itself: if your business isn’t acting with transparency, you’re clearly missing out.