A Blog by Jonathan Low


Oct 15, 2012

Radical Transparency is Good Business

Belief systems are more powerful than information systems.

Humans - perhaps especially those in positions of authority in business - will resist data if it does not conform to their previously formed assumptions.

Which is why returns to transparency exceed returns to secrecy in the global economy. We all use one of two platforms, on which most of the significant content or applications are available. Our visual, psychological and intellectual approach to information has been framed.

What's left is interpretation and execution.

But the traditional corporate response to the very notion of transparency was to recoil in horror. What about secrets? What about competitive advantage? Yes, what about them?

It is not that difficult to figure out what competitors are doing, to say nothing of when or where. How, on the other hand, remains an interesting question. Businesses tend to try to protect 'the how' because they are under the impression that it provides them with some sort of benefit. But research suggests that the notion of sustainable competitive advantage has gone the way of well, the flip phone.

As the following article explains, transparency gives customers greater assurance about the assumptions you bring to solving their problems. And it gives suppliers better information about how they can optimally serve you. It gives investors a stronger sense of where your enterprise is going and whether they think the journey is worth financing. It saves time and builds confidence.

The traditional legal fears, which continue to be fanned by in-house counsel and their outside retainers, represent an outmoded view of how commerce now works. The risk is not so much that someone will steal your secret as that they are already working on something similar and will beat you to market because they won the buy-in of those who are its logical purchasers. JL

Ryan Smith and Golnaz Tabibnia report in Harvard Business Review:
Imagine you got to work on Monday and you knew exactly how you had performed the previous week, compared to everyone else, and could look up, in a moment, how everyone else was doing. Or a manager could go online, any time of the day or night, and see how his team was performing, who deserved a bonus, who was lagging, even if those people were customer service staff, or engineers. It would make everyone crazy, right?

Perhaps not.
Radical transparency, the idea of everyone knowing everything, could actually be a major driver of increased organizational performance. Private research software firm Qualtrics believes that the biggest reason companies fail is because people lose focus and get off track. It's particularly true of young, fast-growing companies driving to meet stretch revenue goals and keep their investors happy. Qualtrics didn't want to fall into that trap so the company made the bold decision to make all employees' performance data available to everyone in the company. By doing so, Qualtrics removes the distractions, fears, and negativity that sap concentration. The entire workforce has access to a host of information about the performance and practice of each employee that includes:

•quarterly objectives and results in detail including revenue and satisfaction targets;
•weekly snippets of each individual's goals for the week;
•up to the minute performance reviews, ratings, and bonus structures;
•noted successes and failures, with notes for everyone to learn from;
•career history at Qualtrics
Insights from neuroscience underscore that our brains work best when we no longer feel the need to hide, cover up our mistakes, or dwell on errors. We do better when we aren't mentally bogged down in "threat response" worrying about which of our colleagues is the boss' "flavor of the month," getting a hasty promotion, or badmouthing our work.

The principles of radical transparency improve business performance in terms of focus, engagement, and growing and recruiting talent. Here's a preview of how they work:

1. Focus: At the beginning of each quarter, every Qualtrics employee sets measurable and visible objectives and key results (aka OKRs). Each individual's progress and priorities are clear. This helps reduce the noise and clutter that can overload our prefrontal cortex with a sense of being "overwhelmed" about what our goals are.

2. Engagement: Radical transparency increases commitment and motivation to the corporate mission because employee data are explicitly linked to performance, ensuring high levels of fairness. A sense of real fairness turns out to be deeply rewarding to the brain, especially compared to a sense of unfairness that pervades many employees' darker thoughts, which activates a strong threat response. Everyone is benchmarked, all data are available for inspection and analysis, and all employees are treated accordingly. The reward response leads to increased engagement, from the strong sense of autonomy the approach brings about, defined as a sense of control over one's destiny.

3. Growing Talent: By making the successes of top performers accessible and easy to compare against the department or company as a whole, newer employees at Qualtrics are motivated to excel through mirroring the best practices of high-performing employees. This mirroring is extremely powerful in encouraging positive work performance. Another a big plus is that the right people get the promotions, meaning the people who are really consistently performing are rewarded, not the people just good at getting others to think they perform well.

Qualtrics knows that the transparency process creates winners and losers, and that environment can be tough for someone who is not an "A" player. As Marc Effron of the Talent Strategy Group reports from his global consulting work, there's a pervasive, irrational fear of transparency in corporations worldwide when it comes to talent issues. Many leaders seem concerned that engagement will crater when everyone is told the truth about their potential to advance. While there may be some rough moments, Effron tells clients, here's the fundamental question: How long do you feel it's appropriate to lie to your employees about their future?

Effron holds that many executives are far more ready for stronger transparency measures than their HR colleagues suspect. If that's true, they should check out radical transparency.


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