What’s Needed Next? Transparency & Trust

We need a better way to evaluate our business leaders, assert James O’Toole and Warren Bennis in a recent Harvard Business Review article (“A Culture of Candor,” June 2009). It’s no longer prudent to judge American corporate leaders’ performance solely on the extent to which they create wealth for investors.

Moving forward, a new metric is proposed: the extent to which executives create organizations that are economically, ethically and socially sustainable.

The short-term thinking that Wall Street typically rewards no longer seems wise. Are these new ideals too much to strive for? Will they be forgotten once profits return?

Unless corporations extend their thinking and strategies beyond short-term profits, they will miss crucial opportunities and find themselves unable to survive a rapidly changing environment.

Wise leaders must recognize that increased transparency is a fundamental first step to accomplishing the tasks required for economic, ethic and social sustainability, Bennis and O’Toole conclude.

The standard business definition of transparency usually means full disclosure of financial information to investors. But such a narrow interpretation produces an unhealthy focus on legal compliance, which usually means over concern with “the letter of the law” to the exclusion of others’ needs.

Inside and Out

Broadly defined, transparency should mean the degree to which information flows freely within an organization, among managers and employees, and outward to stakeholders.

A company cannot be transparent to its shareholders without first being transparent to its workforce.

A January 2009 Harvard Business Review survey revealed that, over the last year, readers reported having 76% less trust in U.S. companies’ senior management and 51% less trust in non-U.S. companies. (Of the 1,000+ respondents, 60% were based outside the United States.)
That’s a significant drop in confidence levels.

Roughly half of all managers don’t trust their leaders. Exact figures and study results vary, but no data compiled over the last 7 years have shown more than 50% trust for company leaders.

Companies that foster a culture of transparency and trust clearly have a competitive advantage for sustainable success.

Companies cannot innovate or rapidly respond to new challenges unless all employees have access to relevant, timely and valid information.

Easier Said Than Done

The obvious question remains: Why wouldn’t companies promote openness and a free flow of information?

Several issues seem to arise:

• Can people communicate upward and do so honestly?
• Are teams capable of challenging their own assumptions?
• Can boards of directors communicate important messages to company leadership?

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The complete 2,000 word article includes these important concepts:

Inside and Out
Easier Said Than Done
Knowledge Is Power
7 Steps to Transparency
1. Tell the Truth
2. Encourage People to Speak Truth to Power
3. Reward Contrarians
4. Practice Having Unpleasant Conversations
5. Diversify Information Sources
6. Admit Mistakes
7. Build Organizational Support for Transparency
Board Vigilance
Trust
Transparent Communications

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