There are countless reasons a business should be transparent with its customers, employees and stakeholders. People increasingly expect companies to be clear and honest in their decision-making, especially when those decisions could affect the public. Transparency starts with the CEO and works its way down to influence the entire company's culture. Here are the main reasons business transparency is so crucial.
Boosting customer satisfaction and loyalty
Customer loyalty is more important than ever. People have easy access to company information online, and consumers can make snap decisions about where to spend their money. Why should they choose one they know nothing about?
In one survey, 18% of US respondents said they had boycotted a company over practices they saw as unethical, 33% would drop a brand that sold faulty products, while 40% said they would cut ties with a business participating in fraud or corruption.
Providing clear information about products, services, prices and business policies builds customer trust and satisfaction. Additionally, companies should be honest about their mistakes, apologising swiftly and thoroughly to rebuild brand reputation. Admitting fault and being sincerely apologetic is better than stubbornly pretending the company is perfect.
Retaining and engaging employees
Employees want business leaders to keep them informed about company growth, future directions and any current issues the workplace is facing. Including staff in these crucial discussions can make them feel more secure about the company's future. It also leads to feelings of inclusion and being taken seriously, as opposed to being treated like they aren't important enough to participate.
For example, letting everyone know the company is struggling financially could generate some alarm, on the one hand. But it also explains why people aren't getting a pay rise, instead of creating speculation about whether people are performing well enough at work. Besides, employees will probably notice if the company is losing money on their own, so it's best if a manager proactively addresses the issue.
When workers have access to important information, they're more likely to understand the company's direction, feel like valuable team members and stay loyal to the company. Having engaged, happy employees leads to better retention rates and helps ensure top performers stick around. It can also boost higher motivation and productivity.
Driving innovation and collaboration
Imagine you have a great idea for how to improve performance in the workplace. Who would you rather share it with - your manager who consistently asks for feedback about the company, or the one who believes change should only come from the top?
Business transparency creates a workplace culture of openness and sharing. Under this model, leaders are honest about the company's shortcomings and will regularly brainstorm ways to improve things. It fosters a culture of innovation and continuous improvement.
Additionally, employees will feel more comfortable pitching their ideas and collaborating with staff members at every level. Customers and stakeholders are more willing to provide valuable insights about the company's products and services. Getting feedback can sting a little, but it leads to necessary improvements in the long run.
Improving risk management
Business transparency means managers openly discuss risks and current challenges facing the company as well as how to manage them. This proactive approach helps the business manage and minimise issues.
For example, letting employees know about a recent data breach - and that hackers can breach 93% of company networks - can make workers more cautious with company IT and data. Workers might start locking their computers when they leave their desks and changing their passwords more frequently, which could help prevent future cyberattacks.
In a company without a transparent business model, managers might worry that disclosing a data breach will create mistrust in the company. Employees would be left in the dark as to why they suddenly needed more cybersecurity training, leading to speculation and rumours about a possible cyberattack. A lack of transparency can create more mistrust than being direct and honest.
A model of business transparency can attract more investors. Venture capitalists and angel investors usually look for companies that provide clear, reliable information about their spending habits, including where they invest and what their profit margins look like.
Clear and honest financial reports, performance metrics and business plans give investors something to go on. That can translate to better funding or partnerships for up-and-coming businesses.
Making better decisions
Transparency gives stakeholders the information they need to make informed decisions. Managers can use transparent data and insights to make more accurate, strategic choices, leading to better company performance.
For example, when a CEO reveals that hiring rates haven't changed in years despite the company's growth slowing, managers might downsize certain departments, so the business doesn't lose money. Managers can start to plan this downsizing months or years before it becomes necessary.
This gives managers the opportunity to utilise natural wastage when people retire or change jobs and putting a halt on any new recruitment, rather than over hiring - and subsequently firing - replacement staff. Knowing where the company stands makes it easier for everyone involved and prevents uncomfortable situations.
Improving business transparency
Customers, employees and investors alike want to know what they're signing up for. Business transparency encourages clear communication, builds credibility and helps companies navigate challenges.
Transparency starts with a business owner committed to ethical behaviour and accountability, but it doesn't stop there — it influences the company culture at every level. As people increasingly hold businesses accountable for their actions, this willingness to be open will become one of the most important qualities a company can have.
Copyright 2023. Featured post made possible by Eleanor Hecks, founder and managing editor of Designerly Magazine. She's also a web design consultant with a focus on customer experience and user interface.