The importance of corporate transparency

In the early days of our company, we hammered out a set of principles. Not only corporate principles, but in particular those that our system should embody. One of those was transparency, which has turned out to be a bit of a thorny issue.

What I’m thinking about more and more these days is simply the importance of transparency.

— Esther Dyson

In this post we’ll first talk about corporate transparency: why it can be a good thing, and why some people don’t like it, at least in some situations. In a following post, we’ll illustrate this with an example from our performance management system, PerformanceHub, where we’ve had to address transparency.

There are two main types of corporate transparency: external and internal.

External transparency

External transparency is a measure of how open a company is with its customers, partners, shareholders, and the general public. More and more companies are realising this is important, and the dangers of not being transparent.

Investors should steer clear of companies that lack transparency in their business operations, financial statements or strategies.

There can even be financial reasons to be transparent:

Mounting evidence suggests that the market gives a higher value to firms that are upfront with investors and analysts.

Angela McClellan describes the link between lack of transparency and corporate corruption:

In addition, as the recent banking scandals have demonstrated, lack of access to information also means a lack of accountability, which creates an enabling environment for, as Transparency International (TI) puts it, “the misuse of publicly entrusted power for private gain”. In other words: corruption.

There are plenty of examples now of companies trying to hide problems from their customers, only to be embarrassed very publicly by customers banding together against them. An early example of this was Intel’s poor handling of a bug in the Pentium chip [Emery].

Internal transparency

Internal transparency is a measure of how open a company is with its employees. Until recently most companies treated employees paternalistically, and only shared what they wanted to with employees. This is changing, for a number of reasons.

The Facebook generation (aka “Generation Y”) are used to being open about all aspects of their lives, and expect that to apply to all facets, including work. And they have no compunction about moving on from a company which has the ‘wrong’ ethos:

As Gary Hamel gingerly pointed out in his speech this morning, the best and the brightest Gen Y employees require a high level of transparency, and companies that don’t deliver on that will risk losing their most talented future managers.

[…] for the Gen Y members of our workforce transparency is a given. They post their life stories in public domains; they expect nothing less in their workplaces.

Vineet Nayar, the CEO of HCL Technologies, recognised that transparency helps a company be more effective and binds the organisation more strongly together:

transparency helps to ensure that every stakeholder has a deep, personal commitment to the aims of the organization.

Nayar drove a transformation of HCL’s culture over a number of years, with transparency as a central pillar. The transformation is described his book “Employees First, Customers Second” [Nayar]. He notes that many people feel uneasy at the prospect of transparency, for a variety of reasons; for example, middle managers might worry that they’ll lose their power. Transparency does flush out many things which often lurk in the shadows:

A transparent house [has] a dramatic effect on the culture inside […]
if you can see the dirt, you will be much more likely to get rid of it.

Being transparent holds a company to a higher standard: you can’t be lazy. But everyone gets held to that higher standard:

We’ve always known that radical transparency is only advisable where an operation is orderly. But still, isn’t it ironic that the most disciplined companies are the ones that are letting it all hang out?

This is one of the reasons I believe many people are wary of transparency — they’re worried they’ll be caught out winging it. But if you are winging it, your employees are certainly aware of that, and will think better of you for admitting it. Those same employees will be more forgiving of screw-ups if you have been open:

Those who follow the [transparency rule] get a chance to survive, even possibly thrive. Those who do not, suffer, and perhaps die.

External and internal transparency are really two sides of the same coin:

Because no organization can be honest with the public if it’s not honest with itself, we define transparency broadly, as the degree to which information flows freely within an organization, among managers and employees, and outward to stakeholders.

A company is fooling itself if it thinks they can achieve one without the other.

References

[Emery]

Vince Emery, “The Pentium Chip story: a learning experience“.

[Kirby]

Julia Kirby “Is your company buttoned-down enough to be see-through?“, Harvard Business Review Blog Network, 6th October 2008.

[McClure]

Ben McClure, “The Importance Of Corporate Transparency“. Investopedia article, 24th October 2010.

[McLellan]

Angela McLellan, “Lack of transparency is the path to corporate corruption“, article on Consumers International Blog, 23rd August 2012.

[Morgan]

Nick Morgan, “Is Corporate Transparency always a good thing?“. Harvard Business Review Blog Network, 17th October 2008.

[Murphy]

Jacqueline Murphy, “Transparency and Employee Engagement at Unstructure 2010“, Harvard Business Review Blog Network, 12th April 2010.

[Nayar]

Vineet Nayar, “Employees First, Customers Second“, 2010.

[O’Toole&Bennis]

James O’Toole & Warren Bennis, “What’s Needed Next: A Culture of Candor“, Harvard Business Review, June 2009.

A fine balancing act….

Today we released an update to PerformanceHub’s appraisal balancing function, making it even more powerful and flexible.

Many companies want to ensure that appraisal ratings are applied by managers fairly. Some companies also want to ensure a fixed distribution of ratings across the company. This is something that PerformanceHub has supported for a while now, but today we updated the function to make it more flexible.

Some of our users want to balance ratings across the company or even on a department level, but they also love PerformanceHub’s operational benefits – helping plan and get things done. If reviewing work-to-date is held-up waiting for an annual balancing exercise, people won’t review what they have done whilst it is still fresh in their minds, meaning work is stored up for that dreaded ‘big bang’ review at the end of the year. We hate that big-bang review, it’s one of the main reasons people dislike performance management processes.

PerformanceHub’s new balancing mode gives you the option to collaboratively review objectives as they’re completed, but still provides all the functionality you need to ensure fair and balanced ratings.

One other thing, you may have noticed the new Organisation Chart layout. We have updated the chart so that it’s a little more compact and for the Team Org Chart, people can see how Matrix Reports fit into the organisation.

Re-Plan for Success

You plan it, you execute to the plan and you’re done. Simple. Only it’s not. You should never really finish a plan, but keep it open and constantly review it. Never lose sight of your high level goals. Keep your hand on the tiller and make constant small course corrections rather than getting stuck or lurching sideways. 

When you finally start a project and get going with your plan, things inevitably come up. More work items are required and some planned ones aren’t required anymore. The temptation is to slip changes into the original plan as you go, but too much of this and you’ll find yourself constantly churning in the weeds, hitting delays, butting up against avoidable obstacles and missing opportunities. Staying in the weeds is a really easy way to lose direction and add delays.

We find it a good practice to take time and take a step back and review plans at a high level. Check direction, re-prioritise, review the goals and ensure our course is correct. In fact, we do this every Monday morning to keep us straight for the week. Our experience is that low level management of work items as they come up starts you on a path of exponential growth of problems. Avoid it by taking a step back.

Keeping plans fresh like this will help you achieve your goals faster. This doesn’t have to be confined to project delivery as the same is true for personal development or any kind of objectives setting. Do you work in an organisation that sets annual employee objectives? If so, I’m sure that when you come to do your annual performance review many of the objectives are stale. Keep them fresh by increasing the review frequency, if you don’t, both you and your company are missing opportunities.

Rob Wheatley
Cogendo

Partnership Not Parenting

In the early days of Cogendo we created a list of principles to help guide us as an organisation and also to form part our product’s DNA. We’ll work through all of our principles in coming blogs, but today I’m going to focus on “Partnership Not Parenting” (PNP).

A recent HBR blog post by Amy Gallo, “Making Sure Your Employees Succeed”, lists her guiding principles (for helping ensure that employees are successful), and we noticed one which is similar to one of ours, but with some (subtle?) differences.

In summary, Amy’s article flushed out 6 principles:

Do:

  • Connect individuals’ goals to broader organisation objectives
  • Show employees that you are a partner in achieving their goals
  • Learn about and incorporate employees’ personal interests into their professional goals

Don’t:

  • Allow employees to set goals alone
  • Take a hands-off approach to high performers — they need input and feedback to meet their goals as well
  • Ignore failures — be sure people have the opportunity to learn when they don’t achieve goals

It was the Partnership line that caught my eye. We think that it’s more than just showing an employee that you are a partner in them achieving their goals, it’s actually being a partner. Our PNP principle also factors in the “Don’t allow employees to set goals alone” principle of Amy’s.

So what does ‘Partnership Not Parenting’ mean to us? Traditionally objectives have been a very top-down affair: the manager tells their direct report (DR) what to do, and the DR gets on with it. This approach works fine for the armed forces, but employees are less likely to mentally sign up for an objective that they’ve had no part in. They may even believe it’s not a very good objective, but figure it’s their manager who’ll take any flack, so they’ll just keep their head down.

PNP starts with definition of objectives. This should be triggered by the CEO publishing the organisation’s top-level objectives. In our experience this will trigger a combination of top-down, bottom-up, and middle-out creation of objectives that relate to the overarching objectives. The manager may have some ideas for the DR’s objectives, and the DR may also have some ideas. At this point they should work on the definition of objectives together, refining, expanding, as they go. The bouncing back-and-forth often results in a better objective than either could do alone: the manager providing a broader corporate view, and the DR often having more in-depth knowledge or expertise. As a result both will feel ownership, and the DR will feel like (s)he had an equal voice in the process, increasing engagement and likelihood not only of success, but also of quality and productivity.

Wherever possible, the DR’s objective should be related to one of the manager’s (or their group’s) objectives, and the manager should be able to make clear how his objective relates to one or more organisational objectives. Thus the DR gets to feel that (s)he owns a part of a larger objective, and the manager sees that success on his objective requires success on the DR’s.

The manager and DR should sit down regularly (e.g. a weekly one-to-one), and review progress, with the manager passing on any updates relating to the broader objective, and the DR updating on progress on their part. Both should be thinking in terms of whether the two sides are still aligned, and whether they need something from the other to stay on track.

When the objective has been completed, they should sit down together to review it: and record data from both parties.

Goal setting and defining the stepping stones to achieve them should be a collaborative effort between a manager and their direct report. The same with reviewing performance – although I hate to use the word review as it suggests I mean a sit-down ‘so how did we do?’ meeting that inevitably gives rise to little surprises. In a true partnership there would be no surprises, the review would be to simply document the important stuff you both already know. Only then will you achieve the levels of employee engagement that lead to peak performance. Collaboration is the essence of the partnership, contrary to the ‘old school’ parental mandate.

You still need a framework to build this partnership on and an understanding of how to apply it. The framework could be your employee appraisal process (assuming you tie in all the way down to 121s) or of course PerformanceHub. The understanding for me came from experience, but could so easily be taught. However, in all the hours I’ve spent on management courses (sent on by my past corporate employers) I don’t think I’ve ever been explicitly taught this. A shame really, as it would have been a great accelerator in my early management days.

Rob Wheatley

Cogendo