Success Secrets: The four rules of transparency

Success Secrets: The four rules of transparency
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First Published: Mon, Apr 23 2007. 03 08 AM IST
Updated: Mon, Apr 23 2007. 03 08 AM IST
In an environment that is both increasingly competitive and unforgiving toward secretive organizations, how do leaders identify the level of transparency that balances good public relations with strategic privacy?
—Nicolas Rodriguez, Lima, Peru
When it comes to transparency, leaders don’t need to pull off a balancing act as much as they need to stick to four rules.
Two of these rules are easy. One should be easy, but constantly gets screwed up. And the fourth is just plain hard. No picking and choosing, though. In today’s “unforgiving” environment, to use your apt term, you need to do them all.
The first rule: When it comes to communicating about financial information with the external world of investors, analysts and the media, public companies just can’t be transparent enough. Every piece of disclosed data increases the market’s insight, and, ultimately, builds trust. That dynamic is a no-brainer. Despite the overheated carping of shareholder activists, most companies get it right.
The second rule: When it comes to gaining marketplace advantage, you just can’t be secretive enough. There’s a breakthrough product in the works, for instance, or a bold acquisition under consideration. Managers should fight to keep such information confidential, otherwise there could be no strategic surprise. That’s one of the great, and perfectly legitimate, weapons of business “warfare”.
The third rule (where things too often go awry): Communicating with employees about “Oh- God-No!” kind of changes, such as plant closings or layoffs. Obviously, companies should never let employees be the last to know the details of such life-altering events. Indeed, they should be the first—that’s the rule.
But somehow, the typical scenario plays out like this: A company posts disappointing results and then, to mollify analysts, quickly announces job cuts with big, precise-sounding numbers. The news not only takes employees by surprise, it usually leaves them twisting in the wind for weeks (or even months) before managers figure out exactly what they’re going to do and to whom. That is just awful leadership.
The same thing happens with mergers, especially those that come with pronouncements about massive cost savings from the combination. While executives sit around pondering every conceivable option, Joe in San Jose, California, and Mary in Baltimore are dying inside. That condition is not exactly conducive to, say, innovation, teamwork, or customer service, not to mention rapid productivity gains.
The fourth rule is just plain hard so it gets broken all the time. The reason: It requires people to do something unnatural, which is to go very public at the time they most want to hide in a cave—during a crisis.
You’ve seen it. Bad news about your company hits the paper and suddenly grim executives are huddled in conference rooms, only to emerge with evasive statements that imply the problem is small and fully contained. What a pointless exercise!
Just about every business crisis involves more people, more money and more damage than appears at first, and there are no secrets in the world. That’s why the only meaningful strategy in a crisis is full-bore openness, with all energies focused on finding and fixing what went wrong.
Now, we don’t mean to over- simplify something that is an important business issue, but managers needn’t over-brain this one. Transparency has its time, and with just one exception, the answer is largely now.
Jack and Suzy are eager to hear about your career dilemmasandchallenges at work, and look forward to answering some of your questions in future columns. Jack and Suzy Welch are the authors of the international best-seller, ‘Winning’. Campaign readers can email them questions at winning@livemint.com. Please include your name, occupation and city.
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First Published: Mon, Apr 23 2007. 03 08 AM IST
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