Fundamentals of Transparency in Business

Transparency can improve the credibility of a business and bring manifold benefits while also guaranteeing long-term sustainability. 

Credibility and reputation of a business is a prime determinant of its success.

Why would a customer buy your product? Why should a candidate join your company? Why would an investor agree to invest in your new venture?

These stakeholders choose your business over the competitors only for the credibility of your business, and transparency is the key element behind building business credibility.

What does transparency mean in the business context?

Transparency is the quality of being honest. In business settings, transparency refers to the straightforward conduct of a company about its various operations. A transparent company shares all information about its business and doesn't hide the setbacks, if any.

The attitude and trust of the stakeholders towards a business has a positive correlation to its level of transparency. When a business follows a policy of transparency, it is open in sharing information about its operations and maintains good communication with the stakeholders. This improves the brand value, internal collaboration, and team performance.

The information that is shared to maintain transparency differs from company to company. However, some common elements that companies share with the stakeholders include data related to growth and performance, pricing, revenue, and hiring.

Every stakeholder must know about internal business decisions. When managers take decisions without being transparent, it affects the organization’s integrity and could lead to business loss. Information should flow freely and be available to all stakeholders. Consequently, we need policies in place to ensure transparency across all levels of an organization. 

Why should businesses encourage transparency?

Transparency inevitably leads to trust and brings several benefits to any business, regardless of its size. It supports the greater good by improving the business relationships and ensuring the sustainable growth of the company.

Let's examine the key benefits a business gains from being transparent.

• Encourages equality and justice - When a business is open and shares its internal data with the stakeholders, it eliminates all possibilities of unfairness. Salaries and other compensations are determined based on strict formulas and never in an ad hoc manner. Stakeholders are aware of the pricing, revenue, and other related policies of the company. It eliminates all types of favoritism within the organization.
• Increases trust - An open culture builds trust and helps to achieve faster consensus in decision-making. Stakeholders are aware of all the happenings within the organization and understand the reasoning behind important organizational decisions. High levels of trust form the foundation for great teams, committed employees, and a loyal customer base.
• Promotes innovation - As a company grows, it needs the employees to make autonomous decisions and implement new ideas. This is possible only if there is a transparent culture where each employee has access to all information. The employee confidence in the organization increases and they would be ready to go the extra mile for achieving their goals. In a transparent culture, employees are also more willing to voice their opinion and suggest innovative ideas.
• Provides more feedback - Transparency helps an organization to gather more feedback from the stakeholders. Feedback is essential to know the impact of the company’s policies and actions and to make improvements if required.  

How to increase the transparency of your business?

Establishing a transparent company culture is a long-term effort and requires solid commitment from the part of the top leadership. The following guidelines would be helpful to improve the transparency levels in a business.

• Share information with the stakeholders - Information must never be hidden during business dealings. Ensure that stakeholders have access to any information about the business and its conduct. This will help in better decision-making and also improve the levels of trust within the organization. Disseminate important information through newsletters, meetings, or social media updates.
• Avoid inconsistencies in information - The information you provide to the stakeholders must be updated and should not have any inconsistencies. The website and social media pages must carry accurate information about prices and other policies. Organizations must also update any policy changes or major events on time to gain the trust of the stakeholders. 
• Be transparent about prices - Many businesses hesitate to reveal their pricing policy. They hide or manipulate the prices in an effort to outsmart the competitors. However, the best course of action is to be transparent about the prices. Rather than hiding higher prices, you can always explain the reason behind the high price. This will avoid confusions and boost your organization’s credibility.
• Maintain candid communications - Share information without beating around the bush. There could be a diverse set of information to be shared on a daily basis including financial information, pricing policies, HR policies, new product launch, etc. Such information has to be shared with the stakeholders on time without any hesitation.

Final thoughts

Transparency brings several benefits such as increased employee engagement, higher trust, and customer loyalty. But it is not without risks. An organization cannot afford to disclose everything to the public. This could bring risks such as increased competition, unwanted scrutiny, and reduced focus on the core business. Sensitive information and business secrets can be shared only with authorized persons. Consequently, it is important to remain transparent but within limits. For example, sharing information about the secret behind a successful product could very well jeopardize a business.  

Hence, while encouraging transparency, also take the necessary precautions to safeguard the critical business secrets.