In theory, complete transparency in the workplace sounds like a great idea. If everything is out in the open, there are no ambiguities, no unfair surprises, and no skeletons in the closet. However, transparency can be a double-edged sword. Taken to an extreme, it can make people fearful, mistrustful, and less productive – ironically, all the things it is meant to eliminate.

There are definitely some avid supporters of “radical transparency”. Take research software firm Qualtrics, where all employees’ performance data is freely accessible, including goals, results, ratings, bonus structure, successes, failures, and career history. The firm believes this removes unnecessary distractions and negativity, and keeps people focused on work. On the other hand, many researchers have found that excessive openness can backfire, not only failing to work but also causing new problems.

So, this week, my message focuses on the pros and cons of transparency, as well as the steps you can take to get it right.

Transparency offers several compelling benefits: 

1. Fairness and focus

People at the workplace spend an incredible amount of time worrying about how they’re doing in relation to their colleagues, which can cause confusion, stress, and a perception of unfairness. This is largely because information around performance and rewards tends to be closely guarded and inaccessible to most. A more transparent approach could help mitigate the negativity and refocus attention on work.

Free access to data also keeps leaders on their toes: Are your reviews and assessments fair? Are you rewarding the right people, or just those you happen to like most? When the facts come to light, will they support or contradict your decisions?

2. Engagement and motivation

Following on from the previous point, transparency helps people clearly see the company’s reasons for choices. This belief puts the individual in control and offers much deeper understanding – instead of feeling like they’re having to follow a bunch of things they don’t understand. The result? A huge boost in motivation and commitment.

Last year, for example, when we rolled out The Godrej Way, our refreshed purpose and values, our senior team travelled across our businesses to share our perspectives and ask for people’s thoughts. We shared stories about individuals and team members who have been great examples of living The Godrej Way. It was great to see how this resonated. Our HR team also started conducting small-group workshops to enable more deeper reflection and discussion. This enabled us to have some very transparent and authentic discussions around our values and what we really need to do to truly live them every day. It also helped greatly in getting our teams to rally around a common purpose and recommit to these values.

3. Buy-in and collaboration

In 2002, Paul Levy took over as CEO of Beth Israel Deaconess Medical Center, an academic hospital being given one last chance to fix its dismal finances – failing which it would be sold to a for-profit company. In a bold move, Levy emailed the entire staff on his first day, outlining the dire situation and the fact that he was going to need their help. Thanks to the support of the workforce, the turnaround was a huge success – and transparency became a core component of the hospital’s ethos.

A few years later, faced with a big operating loss, Levy informed his staff that lay-offs were being considered and asked for suggestions to help minimise the damage. He received 3,600 specific cost-cutting ideas, those with higher salaries volunteered to sacrifice more to protect those at a lower pay level, and doctors donated thousands of dollars to offset staffing costs. This is an excellent example of how genuine openness can motivate people to go the extra mile and generate collaborative solutions.

Over the last couple of weeks, Nisa and I have started catching up with 4-5 different people every week from across our teams and geographies (outside of regular interactions and meetings) one-on-one, to ask for their suggestions around our business and priorities. These initial conversations have been very interesting. We are getting some great insights and rather frank feedback too, which we are committed to building on.

We are also trying to build much more sharing and idea gathering online through Workplace, where we share regular business updates, encourage teams across countries to share and gather ideas, talk about what works and doesn’t, celebrate and learn more.

4. Learning and better decisions

Ray Dalio, founder of the largest hedge fund in the world, Bridgewater Associates, is a firm believer of his own version of radical transparency – a culture wherein employees can challenge one another without creating bad blood. In an interview with Business Insider, Dalio explained that individual perceptions tend to get distorted and lead to poor decisions – a view backed by science.

The solution could be to look at things together, break down each other’s biases, and focus on improvement rather than being right – all in a non-threatening environment. With this mindset, mistakes are viewed as learning opportunities, rather than something to be hidden away.

5. Trust and loyalty

Be it people within the organisation or those on the outside, transparency goes a long way towards building trust. When companies are forthcoming and address their mistakes in a timely, appropriate way, they earn themselves a reputation for ethical behaviour – which builds loyalty among both customers and employees.

Still, too much transparency has its drawbacks. For example, in his Harvard Business Review article, The Transparency Trap, Ethan Bernstein explains that being observed can actually cause people to hide their good ideas:

In my research, I found that individuals and groups routinely wasted significant resources in an effort to conceal beneficial activities, because they believed that bosses, peers, and external observers who might see them would have “no idea” how to “properly understand” them. Even when everyone involved had only the best of intentions, being observed distorted behaviour instead of improving it.

Which is why it’s important to get transparency right. Here are some great tips to keep in mind as you build an open, accountable work culture:

1. Explain the “why”

Being transparent for its own sake isn’t good enough – that can seem vague or, worse, invasive. If you’re rolling out measures for greater openness, be sure to communicate the rationale behind them, be it specific team goals or broader business objectives. This is especially important in case for example, you’re starting to collect and use data on how employees spend their time, which can feel alarmingly like surveillance if no explanations are given.

2. Bring clarity

Remember, it isn’t enough to simply make facts and figures available to everyone across the organisation – leaders must also make sure that they are communicated in such a way that people understand the key implications. Transparency without clarity is meaningless.

3. Manage expectations

As you begin making knowledge more accessible, also make the time to set the correct expectations. For example, what is expected to change? If yes, will you provide updates, and how frequently?

4. Prioritise learning

To prevent a blame-game culture, make it clear that the goal of unearthing mistakes isn’t to punish them, but to use them as opportunities to grow and learn. Remember, eliminating errors entirely is impossible – if you aim for that, you’ll simply end up forcing them underground. Plus, it isn’t even desirable; after all, a healthy amount of failure and mistake-making are essential to innovation and progress. As a leader, you can walk the talk by sharing your own mistakes with the team and working together to come up with lessons learned.

5. Create privacy around teams

In the article mentioned above, Bernstein explains that being under scrutiny makes us act differently:

We spend more time acting, trying to control others’ impressions and avoid embarrassment-particularly at work. We cater to our audience, doing what’s expected.

Hence, a balance between transparency and privacy is crucial for success. One way to achieve this is to set certain boundaries around teams, while simultaneously encouraging them to be internally transparent. By keeping the “audience” small, you can reduce the anxiety and pressure caused by observation. Bernstein gives the example of Google, which doesn’t track how engineers spend their time on passion projects – but does mandate openness and accountability within the self-organised teams that work on these initiatives.

6. Make space for creativity

One of the biggest dangers of excessive transparency is becoming too comfortable and, ultimately, getting stuck in a rut. In the presence of other people, we do well on rehearsed tasks, but are wary of trying anything new that could potentially fail. That’s why it’s imperative for leaders to protect the freedom to experiment. One way to strike a balance is to have defined time slots for experimentation. For instance, Google engineers can spend 20% of their time on whatever they like – in fact, it’s during this “free time” that some of the company’s most successful products were devised, including Gmail, AdSense, and Google Transit.

7. Lead with transparency

At a time when transparency is increasing globally, leaders too are realising the value of letting themselves be known. In her article, Transparency is the New Leadership Imperative, published in the Harvard Business Review, Dorie Clark explains this idea:

Whether it’s in person (through speeches, meetings, or one-on-one interactions) or leveraging social media, it’s more essential than ever for leaders to embrace transparency. Employees, customers, and shareholders need to understand your vision, your values, and your approach. That doesn’t mean putting on an aura of mystique, because if it’s not coming naturally, people can see through it. Instead, the new leadership imperative is to make yourself known.

As always, I look forward to your thoughts.