We need a better way to evaluate our business leaders, assert James O’Toole and Warren Bennis in a recent Harvard Business Review article “A Culture of Candor,” (June 2009). It’s no longer prudent to judge American corporate leaders’ performance solely on the extent to which they create wealth for investors.

Moving forward, a new metric is proposed: the extent to which executives create organisations that are economically, ethically and socially sustainable.

The new metric is trust. Building a culture of transparency is a fundamental first step to achieving trust. Broadly defined, transparency refers to the degree to which information flows freely within an organisation, among managers and employees, and outward to stakeholders.

Trust in our leaders is alarmingly low. While exact figures and study results vary, no data compiled over the last 7 years has shown more than 50% trust for company leaders.

Easier Said Than Done

If transparency is such a vital component of trust, why wouldn’t companies promote openness and a free flow of information?

Several issues can stand in the way:

•     People may be unable or unwilling to communicate upward and with honestly
•     Teams may not yet have the capability of challenging their own assumptions
•     Boards of Directors may be unable to clearly communicate important messages to company leadership

Further, the failure to promote transparency may stem from a leader who won’t listen to followers; as well as followers who won’t speak up.

Poor transparency also occurs when team members are ensconced in “groupthink,” usually without awareness. In this scenario, people on the same team don’t challenge each other. Sometimes, they like each other too much. Other times, they simply don’t know how to disagree with one another.

Knowledge Is Power

In all groups, leaders try to hoard and control information because they use it as a source of power and control. But the ability of a few powerful people to keep information secret is now vanishing, in part due to the Internet, as well as the facility of rapid communications.

Transitioning from a hoarding tendency to a transparency culture starts at the top when leaders:

•     Share more information.
•     Welcome challenge and counterarguments.
•     Admit their own errors.
•     Behave as they want others to behave

7 Steps to Transparency

Bennis and O’Toole offer seven steps for developing a culture of transparency:

1.  Tell the Truth

Each of us has the impulse to tell others what they want to hear. Instead, keep it simple, and be honest. Candid leaders tell everyone the same thing, and they have no need to revise their stories.

2. Encourage People to Speak Truth to Power

It’s never easy for us to be honest with our bosses. It takes courage to speak up.

But encouraging people to share their honest opinions is crucial if leaders want to build trust and open communication.  Of course, this sometimes means executives will hear unpleasant information.

3. Reward Contrarians

If you make it acceptable, are willing to listen to opposing points of view and promise to consider the merits of others’ arguments, you pave the way for a culture of transparency.

Find colleagues who tend to be oppositional, listen to them intently, and create conditions for thinking differently.

4. Practice Having Unpleasant Conversations

Few people excel at delivering negative feedback during performance appraisals. Offering negative feedback upward, to one’s boss, is even more challenging.

The best leaders learn how to deliver bad news kindly so people don’t get unnecessarily hurt. It’s certainly not easy, unless practice opportunities are provided.

5. Diversify Information Sources

Communicate regularly with different groups of colleagues, workers, customers and even competitors to gain a nuanced and multifaceted understanding of others’ perceptions.

6. Admit Mistakes

Candour is contagious. When you admit your shortcomings or errors, it paves the way for others to do the same. Simple admissions can disarm critics and encourage others to be transparent, as well.

7. Build Organisational Support for Transparency

Protect whistle-blowers—but don’t stop there. Other norms and sanctions should encourage truth-telling, including open-door policies, ethics training and internal blogs that give a voice to people lower down in the hierarchy.

Board Vigilance

Changing a system that encourages information-hoarding is the board of directors’ responsibility. Truly independent boards should provide a much-needed check on executives’ egos and truth-telling. If they fail to assess transparency at the uppermost levels, they’re not functioning appropriately.

“Boards are the last line of defence against ruinous self-deception and the suppression of vital truths,” write Bennis and O’Toole. “If they’re not vigilant in the pursuit of honesty, the organisations they serve are unlikely to have a free internal or external flow of information.”

Trust

As a species, we are hardwired to trust others, especially those who appear similar to ourselves and who have similar interests. But as recent financial scandals reveal, we sometimes trust too easily and trust the wrong people.

To trust wisely means starting with small acts that foster reciprocity. By communicating your willingness to trust, you give others the go-ahead to do the same. However, Jonar Nadar points out in How to Lose Friends and Infuriate People (2006), that communicating your willingness to trust employees is more than a simple statement or delegation of responsibility.  Deeply trusted leaders go the extra mile by removing obstructions to an employee’s capacity to communicate views and explore possibilities (Worrall, D., A Climate for Change, 2009).

Transparent Communications

Open and honest communications support the decision to trust. Lack of communication and transparency creates suspicion.

To increase the transparency of your communications:

•     Increase the frequency and candour of your communications.
•     Build a relationship beyond the constraints of your official role.
•     Use the word “we” more often than “I.”
•     Emphasise common values and goals.
•     Be clear whose goals and interests you are promoting.
•     Be sure your actions support your words.
•     Demonstrate a clear concern for others.
•     Under-promise and over-deliver.
•     Ask more questions.
•     Really listen to the answers.

D.Worrall (2010)