Company transparency can seem like a scary thing for entrepreneurs, especially if they’re trying to get their startup off the ground and making a profit. What if investors get cold feet and pull out? Maybe employees will become worried that the money is running out and jump ship?
Divulging a company’s weaknesses might seem like it could hinder success, but the opposite is true. After all, if the people in your company are left in the dark, then they can’t very well contribute to their fullest extent in making the business run better, can they?
In today’s competitive startup market, it’s not just a good business practice for emerging (and established) companies to embrace transparency, but a critical one.
Social media has made people more transparent with their lives more now than ever, and at this point, it’s expected for businesses to follow that trend.
The benefits of being transparent far outweigh any worries about the negative.
Employees shouldn’t be kept in the dark
Matthew Bellows, founder and CEO of Yesware, Inc. made waves in a 2014 New York Times article titled A Leader Struggles To Sell Software Meant To Aid Sales. Bellows’ transparency and the conversations with his team later led to Yesware meeting 96 per cent of its revenue goal.
If your company’s leadership team handles every decision in a boardroom with the door closed and the blinds drawn, it’s a safe bet that your employees will be nervous. “The things people make up about what’s going on are always worse than what is actually going on,” Bellows said.
When people are kept abreast of how a startup is performing and the changes that are being considered, they’ll feel that they’re part of the team and have the motivation to keep working forward.
Buffer, a social media engagement company, lists “default to transparency” right at the top of its core values on the company’s website. Buffer’s co-founder Joel Gascoigne, said that embracing transparency has “increased the level of trust” with his employees.
Transparency fosters investor support
While a startup’s investors might not be rolling into the office each day to actively put the work in, they have put their money in and deserve to know what’s going on.
If a company gives its investors incomplete information, they’re shooting themselves in the foot when it comes to the chances of success.
Forward-thinking entrepreneurs don’t look at transparency as a bad thing that reveals a startup’s struggles to investors, but as a way to build a stronger business.
If you want your investors to get behind your decisions in a scalable way, then it’s imperative you provide them with all the available information.
A company culture of secrecy won’t bring in new investors and it certainly won’t help keep investors for the long-term. If a start-up can provide a detailed report of the challenges ahead and how it plans to overcome them, then it will be more likely to have continued support.
Build upon customer loyalty
Just as a company needs to have strong trust with its employees, the same goes for its customers. Keeping customers in the loop with multiple aspects of a startup’s operations from emerging industry trends to important issues that may affect goods or services helps to maintain loyalty and trust.
It also provides some peace of mind that customers are getting a good return on their money.
PPC Pro, an AdWords management firm, boasts that it provides a “100 per cent truly transparent” experience for its customers with a minute by minute log of how their employee’s time is spent on a particular project.
This practice unquestionably helps in establishing trust between the brand and its customer base and reassures them that adequate attention is being given to the task at hand.
Furthermore, businesses that embrace a model of transparency will find that customers are more likely to stick with them when they’re upfront with bad news.
After all, nobody likes handing over their money to a business when they have feelings of suspicion or anxiety.
Transparency in practice
As for putting a culture of transparency into practice with a startup, entrepreneurs should remember that it starts at the top. This means having leaders who are willing to be vulnerable and honest, not just about the wins, but the challenges.
One way of promoting company transparency is by disclosing company financials. This doesn’t mean sharing raw numbers and leaving employees, investors, and customers to decipher what numbers or data mean.
Leaders should provide context, as transparency without the right information could do more harm than good. It’s key that company leaders provide the background for any financial information — good or bad — and how it relates to the current state and future.
Other companies take an even more transparent approach and share employee salaries. While employee salaries may seem like sensitive information to share, it could also help eliminate such issues as a gender pay gap and even incentivise employees to work harder.
We live in a time where transparency is mainstream than ever before, and the startups that embrace it will have a greater chance at long-term success than those that stay in the dark.
This article was first published on e27, on Jun. 19, 2020