8 Ways To Practice Transparency

Last Wednesday, we had conference call with about eight CEOs on the topic of transparency – both internally and externally. Here’s a summary of some of the highlights.

1) More transparency is better with investors and the board. OK, this isn’t new news for many readers here, but it can be a valuable reminder for many, and especially for first-time CEOs.  For example, transparency is vital to building the trust necessary to both raise money from investors and to maintain their support after they’ve invested.
– There should be direct board-to-executive team interaction.  Individual executives should regularly prepare and present to the board, rather than have all information flow through the CEO.

2) More transparency (perhaps than you’re comfortable with) is better with employees. For example, sharing/presenting your board presentations to the company is a great way to regularly update the company on what’s going on.
Frank Addante, founder of Rubicon Project and a leading serial entrepreneur in LA, recently put this up on his blog: “I like to hold monthly board meetings. They serve two purposes. First, regular communication with the board. Second, regular communication with the entire team because we share the -exact- same board of directors meeting presentation with the entire team (yes, really – exactly the same.) This is much easier said than done. It forces a certain discipline. For example, I cannot tell the board something that the team is not already aware of (e.g. problem areas in the company or concerns) because I know we’ll be sharing those same exact slides with the entire team. Vice-versa, I can’t tell the board something that the entire team wouldn’t agree with because they are living this business everyday. If the team saw something in the board slides that they didn’t agree with, I wouldn’t be able to stand up and present it to them with a straight face. It forces complete alignment with everyone in the company all the way through to the board.”

3) “NO SURPRISES” – I personally love this rallying cry as an operating and management principle! No one – the CEO, employees, customers, investors…anyone, likes surprises.

4) Transparency with employees builds trust, increases retention and improves decision making. Employees also feel more connected to the business (I would suggest this is true of being transparent with clients as well).

5) Comp idea: standardize the executive team. One idea that generated “that’s cool” comments from the group was the practice of having the whole executive team on the same comp plan (decided as a group, of course).

6) Publishing compensation: this is tricky if it’s not done from the beginning, and if the comp system itself isn’t fair.
– People often focus on inequalities/negatives more than positives.
– To publish comp information, it must be done in the right environment, carefully, and the comp system must already be fair before publishing.  If the comp were made public, could the CEO stand up and justify the system and each person’s comp?
– Publishing an “unfair” system that can’t be reasonably justified will cause pure chaos.
-It could be published piecemeal, just within certain functions or teams.  For example, I openly published comp results across my sales team at salesforce.com every month.
Chris Kenton, CEO of SocialRep, found this article “Why Do You Keep Your Salary Secret?”.  An interesting excerpt: “it’s really a fairly narrow band of Americans who have secrecy with respect to their pay. Obviously, at the very top of organizations, pay is public. If you look at public-sector organizations—it’s public. If you look at unionized situations—it’s public. If you look at most people who are nonexempt employees—it’s public. It’s really that middle ground in private-sector organizations where secrecy is seen as the right way to manage.”

7) Publishing financials/P&L: Regularly publishing financial information, down to the lowest employees, can be hugely beneficial to a business.
– Mike Rosenthal has a helpful personal example from his days at www.sitelerwash.com (a carwashing business): they published the P&L to the actual carwashers weekly, even though the carwashers had to have translators and help in understanding them. They saw a productivity increase within two weeks, because carwashers began to see more clearly how they fit in financially and how they could contribute.  They also felt more connected to the business.  Productivity ultimately grew by 30-40%!
– Ian Shea (starting MaestroMarket, an online platform and marketplace connecting professionals who have specialized talent with customers in need of that talent) shared how his daily “flash” of business metrics connects people with a daily progress drumbeat.
Semco (see prior blog post) has totally open books to its employees, and has regular training classes for anyone (including janitors) who wants to learn how to understand the finances. They also take pains to present the financials in simplified ways that are meaningful to employees.

8)Transparency of cashflow issues: It’s scary to run low on cash, making it hard to feel comfortable letting the whole company know about it.
– On the one hand, for keeping it close to the vest: if a team feels confident about raising the money, why unnecessarily spook your people?
– On the other hand, for sharing openly: if you were an employee at a company running low on cash, wouldn’t you want to know?  And people will probably know about it anway – word gets around.
Aaron’s take: if you let the whole company know about issues as serious even as a cash crisis, you then have an opportunity to rally the entire company to help navigate the crisis.  You might lose some people, but the people left behind will be the strong core.

Two more topics to consider

We didn’t get to this on the call, but here are two more areas for discussion that are important:

  • More transparency with customers. What has worked for you in sharing more information with customers, whether openly on your website or in more targeted ways?  Product or integration roadmaps, code/APIs, customer lists, uptime information, problems, internal operations, etc.
    Example: trust.salesforce.com
    (by the way, it was a BIG deal for salesforce.com to publish this!  Can you imagine, for competitive/sales reasons, how secretive salesforce.com was about its uptime before downtime issues, and lack of customer trust, forced their hand?)
  • Transparent selling. Are sales organizations and people ready for a “transparent sales process”?  I have one, and will do a blog post in the future on it (but feel free to ping me now for the template).
    Example: Leads360, a software-as-a-service company in Los Angeles, put up a version of it here for anyone coming to their site to review: www.leads360.com/process

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