Doing Business | Management

July 12, 2013

What Are the Limits of Transparency?

Modern business theorists hail the open organization, but secrets between employers and employees are sometimes a good thing. What's the proper balance between transparency and opaqueness? asks Professor Jim Heskett.

Transparency has become a popular concept in management circles in recent years, no matter how little enthusiasm you may have for the word itself. Now the topic has been thrust into our everyday lives with disclosures, or leaks, of alleged US secret intelligence information by Edward Snowdon. Increasingly, we are asking ourselves "How much transparency is the right amount?"

Transparency is given credit for fostering trust among members of an organization, building loyalty among employees, and generally creating better places to work. For many years we observed need-to-know policies (that may have had their origins in the military) among managers of leading organizations. This slowly evolved in some organizations into policies that gave employees much more information about the activities of the enterprise and more voice in determining what they felt they needed to know.

Vineet Nayar, vice chairman and joint managing director of HCL Technologies, an India-based information technology services company, has been one of the most outspoken advocates of increased transparency. He says all HCL's financial information is on the company's internal Web. "We are completely open," he had been quoted as saying. "We put all the dirty linen on the table, and we answer everyone's questions. We inverted the pyramid of the organization and made reverse accountability a reality."

That's not all. Nayar makes his own 360-degree feedback open to 50,000 employees, and 3,800 managers participate in an open 360-degree process. "We started having people make their presentations and record them for our internal Website. We open that for review to a 360-degree workshop.… What happened? … You cannot lie … You are going to put your best work into it …."

This policy may not be appropriate for all organizations. It has to be aligned with a number of other policies and practices. For one thing, it may repel capable managers who would prefer not to work in a high-transparency environment. Transparency makes some people uncomfortable, although this appears to be more a generational issue. Surveys have shown that younger people have little or no interest in the Snowden affair. They assume that much of what they do will become public knowledge regardless of any efforts to keep it secret.

The late Harlan Cleveland predicted much of this more than 30 years ago when he noted that information is different than material things in that it can be shared, can't be hoarded, and leaks prolifically and naturally. As he put it then: "The information resource … is different in kind from other resources. So it has to be a mistake to carry over uncritically to the management of information those concepts that have proven so useful during the centuries when things were the dominant resources and prime objects of commerce, politics, and prestige."

So as leaders and managers, how much do we share? How do we avoid sharing competitively sensitive (comparable to the government's "top secret") information too widely? If we operate on a need-to-know policy, who decides what employees need to know? What are the limits of transparency? What do you think?

 

Text by Harvard Business School Publishing
 

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