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  • Writer's pictureCharles Edge

The Value Of Transparency

Updated: Oct 29, 2020

Transparency doesn’t come naturally in a startup. We start a company thinking we need to shield employees from all the things that steal their attention from their job. Most countries consider it taboo to talk about finances (like salaries) amongst employees. We think the people we worked hard to recruit will be flight risks if they know how things are going. We don’t think to post certain aspects about how the company is doing because we have so much going on.

Transparency takes work. But having an organization where people understand the inner workings of the business is worth it. How?

  • Transparency makes our teams work harder. We spend a lot of time at work. Many will spend half of their waking hours at the office, or working remotely. People want to take pride in what they fill that time with. That means pride in what they personally bring to the company - but also pride in the company. Sharing how the company is doing justifies that pride. Or makes people try harder to close a sale, get profitable, write better code, or however they impact the bottom line.

  • Taking the blinders off gives everyone the agency to innovate in their position. We often tell people who are new to a role to stop talking about the way they did things at their old company. We just want them to do things how we want them done. Turns out that when we hire people for their expertise we then want them to leave what they know at the door - and that’s often because they don’t understand how what they do impacts the rest of the organization. Showing how the whole organism works provides that understanding and enables bigger, bolder ways of thinking. If we prove our thesis by building a successful company, our business model can be copied. But those small innovations will be impossible to replicate.

  • Sometimes we get it wrong. If founders got everything right there would be no risk and everyone would be a founder. The bigger an organization gets, the more collective brain power we have. We need to take criticism and questions about the choices and assumptions we bring as a way to solicit more criticism. The response can be to accept good ideas or to have a dialog about the best approach to something. We may refine and perfect our way of discussing and thinking about a topic, or we may end up infusing the organization with new ideas and embolden our teams to not only be more autonomous but also to make the company better overall.

  • Transparency keeps us honest with ourselves. The fear that we lose employees if they know how things are going is real. But if we can’t inspire them then we might need to ask ourselves if the endeavor is worth pursuing. Founders need perseverance. But we also need to be mindful of the Gambler’s Fallacy when the market is telling us something just isn’t right.

  • Transparency shows we trust our teams. Yes, they could leave and take our ideas to the next place. Yes, they could tell others how we’re doing when we might want to posture as a larger entity to close bigger deals. But we will do better when we trust our teams and encouraging a culture of honesty allows us to inspire integrity in everything we do.

  • Transparency frees us. Founders who internalize all the challenges of running the organization take on an unnecessary burden. We don’t want to break down crying in every staff meeting sharing our performance gets the bad off our chests while making the good seem so much sweeter - and lets everyone in the origination share in the wins and the losses.

We want to be open with our teams. But again, that takes time and effort. It’s obviously worth the effort though. But how to start? There are a number of ways we can stay vigilant about being transparent:

  • Share goals. We push ourselves to do better by making goals. Our goals are milestones in the development of the startup. The more accurate we get with planning and attaining stretch goals, the more we are able to control our own destinies. Everyone should know the goals for the organization, the goals for themselves, and how their personal goals connect back up to the most important strategies. Set annual and quarterly goals and review them with everyone at meetings that everyone in the company attends.

  • Show how we did at attaining our goals. Here, we want to break our quarterly and annual goals up into chunks, preferably every other week or monthly. If we did better than expected or missed any goals then we want to solicit feedback on why. This not only makes us better at setting goals but also solicits fresh, new ideas that make us better.

  • Provide a direct line between the goals, the level of attainment, and how that impacts the individuals on each team. This is simple in a two or three person company but gets a little more challenging as the organization scales. What features led to important sales? How did those sales impact the general ledger? How are we doing with customer service and how does that impact renewals (or better, land-and-expand opportunities)? How does that impact potential share prices or profit sharing? Together, these stimulate and galvanize.

  • Provide monthly financial reviews. This can be as simple as the burn rate against cash flow but will likely expand to include sales, renewals, etc. When we all understand all the hidden costs to operating a business we’re less likely to judge others harshly - and maybe a little less entitled.

  • Give the board deck to the employees at the last staff meeting before a board meeting. As founders who have empaneled a board of directors we have likely diluted the equity of the organization in exchange for growing faster. The shareholders are then the boss of the boss. And our teams should see how we portray the performance of the organization to our bosses. As the organization scales, this is increasingly critical, although we will necessarily leave out any slides pertaining to an IPO or covering mergers and acquisitions.

  • Make all data available to everyone. This might include globally accessible calendars, documents, financials, spreadsheets, sales performance, wikis, etc. Don’t put any barriers that aren’t absolutely necessary. The exceptions being information pertaining to customer privacy, internal Human Resources systems, and banking codes, where a small slip-up can mean big consequences.

We don’t want to overdo meetings. We don’t want to crush our teams with too much information. We don’t want to provide information that could be harmful to careers or debilitating to the organization. But we do want to provide everyone the opportunity to know as much about the organization as they choose to.

Developing this kind of integrity in the company scales. Trust and honesty inspire hard work. Transparency isn’t a buzz wordy way to develop a company culture. It’s real. Its vulnerable. It’s practical. It’s simple (although again, does require effort). But most importantly, transparency gives everyone in our orbit the agency to make a conscious decision to join us in our mission. And they'll respect us for giving them the choice.


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