A transparent business is more likely to foster loyalty and create a stronger connection with its stakeholders because people are naturally drawn to openness and honesty.
Close to nine years ago, I was walking home from a theater where I was doing a show and saw the sign. This wasn’t a religious sign, and I’m not speaking in metaphor; I literally saw the sign in the windows on the second floor of an office building that said ThoughtLab. Now, this wasn’t the first time I had seen this. I walked past this office almost every day on my way to get my morning coffee and paper. I always liked the name; the idea of an entire lab downtown dedicated to thought was uplifting to me. So, in the back of my mind, I imagined an office full of people thinking great things and doing things with those thoughts.
Then, one fateful evening, coming home from the theater, seething because the show was a struggle and I was NOT having any fun, I decided I needed a break. I needed to step away from the auditions, rehearsals, and productions that were causing me grief and just step away from the theater/film thing for a bit. I was clear-headed in my choice and knew it was time. The only question was, what do I do now? I immediately thought about ThoughtLab.
I went home, and with bourbon in hand, I googled ThoughtLab. Lo and behold, they were looking for a copywriter. Now, I had never done that kind of work, but I had been a writer for a long time, so I figured, why not give it a shot? I wrote the most unprofessional cover letter imaginable, sent a resume that was all acting, directing, and creative writing, and included a link to a video I had just shot. When I told my friend Heather, a writer, about it, she said, don’t get your hopes up; it takes a lot to get a job, and though you’re a writer, you’re not a copywriter and that’s a specific type of job. A day later, I got a call from Mike Harker, CEO, and he said to come in for an interview.
Up until that point, all my work was in my chosen field, and my “interviews” were auditions, so I really didn’t know what to expect. I presented myself as the same person who wrote the weird cover letter, and we talked for a long time. We stood at the end of what seemed like 2 hours; he shook my hand and said: “I think you have a lot to offer, but I don’t know what I’d do with you.” That seemed a more than fair assessment of my skills, and I walked out of the office feeling like I had just engaged in a good, wide-ranging conversation. I had no thoughts of landing the job. I mean, it was my first interview, and I was technically unqualified, and I did nothing to hide that or somehow make my life as an actor seem to fit ThoughtLab’s needs.
I was called and offered the job the next day. Mike pointed to my “transparency” as one reason he hired me. I didn’t know I was being transparent; I was just having a conversation. I didn’t tell him that one of my favorite Friday night, end-of-the-week activities to blow off some steam was to drink several Apple Jacks, a shot of Jack Daniels at the bottom of a pint glass, and then fill up with hard cider: a fat joint or a seriously packed bowl. Candles in my kitchen and The Talking Heads' live album Stop Making Sense in my ears as I drank, smoked, and performed the entire concert as David Byrne. I didn’t tell him that, and wouldn’t that make me completely transparent? Then again, why would he need to know that? I didn’t do this at work …
I have been thinking about this as I approach nine years. I have stopped drinking, haven’t done the concert in ages, and spent a lot of time reading about the fast-approaching elections. What does it mean to be transparent? Why is it important? How do I do it, and does it really matter? Seriously? Does it?
Transparency, like authentic and other business buzzwords, feels overused and underdefined. Is it that important? Are companies genuinely transparent? When the time comes to show, what does transparency mean? Since that’s what I’m thinking about, that’s what I’m writing about. So, today's blog is about transparency and all its creamy goodness.
Shall we?
The Power of Transparency in Business
As I’ve grown and reflected on transparency, it’s become clear to me that while it’s a simple concept on the surface, it can be surprisingly complex—especially in the context of business. But why is transparency important in the workplace or in business at all?
On a fundamental level, transparency builds trust. Trust is the foundation of any successful relationship, whether it's between two people, between a company and its employees, or between a brand and its customers. A transparent business is more likely to foster loyalty and create a stronger connection with its stakeholders because people are naturally drawn to openness and honesty.
When businesses are transparent, they create an environment where accountability can thrive. Take, for example, companies that are upfront about their mistakes. We’ve all seen a company fumble—whether it’s a public relations disaster, a product recall, or even a financial setback. But when companies openly address what went wrong and explain how they will fix it, they often gain more respect than they would by trying to cover things up or downplay the issue.
Transparency is also a key driver of employee engagement. Employees want to feel like they’re in the loop, not left in the dark about important decisions or changes within the company. When leadership is open about their goals, challenges, and processes, employees are more likely to feel valued, heard, and motivated to contribute. This fosters a culture of trust and collaboration, where everyone feels empowered to share their ideas and concerns. A lack of transparency, on the other hand, can lead to disillusionment, frustration, and eventually disengagement.
Why is Transparency Good for Business?
There’s an undeniable link between transparency and success, especially when you look at how it impacts internal culture and customer loyalty.
Building Stronger Customer Relationships: In today’s digital age, consumers have more access to information than ever before. Social media, online reviews, and news outlets make it almost impossible for companies to hide their authentic practices or intentions. If a business isn’t being transparent, someone is likely to find out. And when customers feel misled or deceived, the fallout can be swift and brutal.
However, companies that practice transparency from the start by being open about their values, pricing, sourcing, or business practices foster deeper relationships with their customers. When customers know they can trust a brand, they’re more likely to return, even when something goes wrong. They appreciate honesty and are often forgiving when a business admits a mistake and corrects it with integrity. A clear example of this is when a company recalls a product for safety reasons. If the business quickly communicates the issue and takes proactive steps to fix it, customers are more inclined to maintain their loyalty.
Enhancing Employee Morale and Productivity: A transparent company culture promotes openness and encourages employees to be honest about their concerns, suggestions, or even failures. This culture reduces fear, particularly the fear of punishment for mistakes. When employees know that management is transparent and open, they feel safer to experiment, take risks, and be innovative. That psychological safety drives productivity and creativity.
For example, Google is known for promoting transparency through its management style. It famously allows employees access to much of the company’s internal data, which creates a sense of shared purpose. Employees understand what’s happening in the company, what’s expected of them, and how their contributions fit into the bigger picture.
Attracting Investors and Partners: Transparency also plays a major role in securing funding and building partnerships. Investors and business partners want to work with companies open about their financial health, risks, and growth strategies. When companies provide clear, honest information about their operations and future plans, they are more likely to attract long-term investors and trustworthy partners who share their vision and values. Being transparent about challenges or areas of improvement can actually build credibility because it shows that the business has nothing to hide and is prepared to address its weaknesses.
How Can Businesses Be Transparent?
Being transparent is more than just a buzzword; it requires deliberate actions and consistent behavior. Here are some ways businesses can embrace transparency:
Communicate Openly: This seems simple, but it’s often overlooked. Open communication should be a key tenet of any transparent organization. This means providing clear and regular updates to employees, customers, and other stakeholders. It could be in the form of newsletters, press releases, or even internal meetings where leadership shares the company’s performance, future goals, and any obstacles they’re facing.
Employees, in particular, should never feel blindsided by major changes or announcements. For example, if a company is planning layoffs or mergers, being upfront about the reasons behind these decisions can help manage expectations and reduce panic. Transparency can help employees prepare and find stability even in uncertain times.
Be Honest About Failures: Mistakes are inevitable. The key is how businesses handle them. When a company owns its failures and takes steps to correct them, it can actually strengthen its reputation. Pretending a problem doesn’t exist or trying to sweep it under the rug will eventually come back to haunt the company.
A notable example of transparency in the face of failure is Netflix. When the company raised its prices and split its DVD and streaming services into two separate entities back in 2011, it faced immense backlash from its customers. CEO Reed Hastings publicly apologized, admitting that the company made a mistake in how it communicated the changes and tried to rectify the situation. This open admission didn’t immediately fix the damage, but it demonstrated to customers that the company valued their feedback and was willing to learn from its errors.
Share Financial Information: Transparency in financial matters is critical for businesses that want to maintain trust with investors, employees, and the public. While some companies prefer to keep their financials private, sharing critical data like revenue, profit margins, or investment strategies can build confidence and show that the company is serious about its accountability.
Showcase Company Culture: Transparency is also about showing people what your company stands for. Many businesses now use their websites and social media channels to give the public an inside look at their culture. By highlighting the company’s values, work environment, and employee stories, companies can show they’re committed to being authentic. Patagonia, for example, is known for being transparent about its environmental impact and efforts to improve sustainability. They’ve built an entire brand around their commitment to ethical practices, which resonates strongly with customers.
What Happens When You Pretend to Be Transparent?
Transparency is a double-edged sword. When companies claim to be transparent but are later exposed for hiding information or outright lying, the consequences can be devastating. In the age of social media and constant connectivity, even the smallest falsehoods can blow up into major scandals.
Loss of Trust: Once trust is broken, it’s incredibly difficult to regain. Customers who feel misled by a company are likely to take their business elsewhere. Worse, they might publicly call out the company, leading to a snowball effect where other customers lose trust as well. Volkswagen’s emissions scandal is a prime example of this. For years, the company advertised its cars as environmentally friendly, only for it to be revealed that they had installed software to cheat emissions tests. The backlash was immediate and severe, with billions in fines, legal actions, and long-term damage to the brand’s reputation.
Damage to Employee Morale: Pretending to be transparent internally can be just as damaging. If employees believe their leadership is open and honest, only to discover they’ve been misled, it can create a toxic work environment. The sense of betrayal leads to disengagement, low morale, and high turnover. Companies that value transparency should live by it in every aspect, from how they treat employees to how they handle crises.
Legal and Financial Consequences: Being caught in a lie or hiding critical information can also lead to legal repercussions. Regulatory bodies expect companies to provide accurate information, and failing to do so can result in fines, lawsuits, and other financial penalties. The costs of such consequences often far outweigh any short-term gains a company might achieve by hiding the truth.
Practical Steps to Achieve Transparency in Business
Businesses can often struggle with the "how" of transparency. Being transparent doesn’t just mean throwing open the books for all to see. It requires a thoughtful, consistent approach to communication, culture, and values. Here are some concrete ways companies can implement transparency:
Set Clear Expectations and Communicate Openly: Transparency begins with clarity. For businesses, this means setting clear expectations for both employees and customers. Whether it's delivering bad news, such as project delays, or addressing company challenges, communicating clearly and consistently builds trust. Leaders who engage openly with their teams and the public on key decisions and strategies show that they value openness as a core practice.
For example, companies like Buffer, a social media management platform, have made transparency a cornerstone of their business. They openly share employee salaries, revenue data, and even details about their decision-making process with the public. This level of openness fosters trust not only among employees but also with customers who appreciate the company’s commitment to its values.
Promote Transparent Leadership: Transparency starts at the top. Leadership needs to model the behavior they expect from their teams. When leaders are transparent about their decisions, failures, and successes, it trickles down into the culture of the organization. This kind of leadership creates an environment where people feel safe to voice their ideas and concerns without fear of repercussion.
Leaders should also be willing to listen and be accountable. When management is transparent, employees can see that they are being led by individuals who are honest about the challenges the company faces and are willing to work through them together.
Be Honest in Marketing and Advertising: Many companies fall into the trap of exaggerating their product’s benefits or glossing over flaws in their marketing. While this may generate short-term gains, it often leads to customer disappointment, bad reviews, and long-term damage to the brand’s reputation.
Honest marketing is essential for transparency. Consumers are increasingly savvy and are quick to call out companies that overpromise and underdeliver. Patagonia is a great example of a brand that practices honest marketing. They are transparent about the environmental impact of their products and are upfront about the fact that they are not perfect but are constantly working to improve their sustainability practices. Customers appreciate this kind of honesty, which in turn builds loyalty.
Transparency in Hiring and Employee Development: A transparent hiring process can help attract top talent. Many companies are now offering insights into their hiring process, such as sharing interview questions in advance or giving applicants feedback on their performance, even if they’re not selected. This level of openness shows potential employees that the company values fairness and honesty.
Additionally, being transparent about career development opportunities within the company can foster a culture of growth and retention. Employees want to know where they stand in the company, what their potential for growth looks like, and what steps they can take to advance their careers. Being open about these processes can create an environment of motivation and trust.
Provide Access to Information: Internally, transparency means that employees have access to the information they need to do their jobs effectively. This includes everything from the company’s overall strategy to specific departmental goals. By providing access to this information, employees are better equipped to make informed decisions and align their work with the company’s mission.
Transparency doesn’t mean sharing every single detail about the company’s operations, but it does mean sharing relevant information openly so that employees feel included in the company’s journey.
Case Study: When Transparency Goes Wrong – The Volkswagen Emissions Scandal
While transparency can be a powerful tool, pretending to be transparent—or worse, lying about key issues—can have disastrous consequences. A clear example of this is the Volkswagen emissions scandal.
Volkswagen, one of the world’s largest automakers, had built its reputation around environmental responsibility, touting its cars as some of the most eco-friendly on the market. However, in 2015, it was revealed that the company had deliberately installed software in millions of diesel vehicles to cheat emissions tests, making the cars appear far more environmentally friendly than they actually were.
This scandal rocked the automotive industry and shattered consumer trust. The fallout was immense. Not only did Volkswagen face billions of dollars in fines and recalls, but its reputation was severely damaged. The company had spent years promoting itself as a leader in green technology, only for customers to discover that it had been deceiving them all along.
The lesson here is clear: pretending to be transparent is far worse than not being transparent at all. Customers, employees, and investors alike value honesty, and once that trust is broken, it can be almost impossible to rebuild.
The Long-Term Impact of Transparent vs. Non-Transparent Practices
The consequences of transparency (or lack thereof) are long-lasting. Businesses that practice transparency tend to build stronger, more resilient relationships with their customers, employees, and partners. Conversely, businesses that rely on deception or misrepresentation often face severe backlash that can take years to recover from—if they recover at all.
Transparent Practices Build Customer Loyalty
When companies are transparent, customers feel respected. They know what to expect and aren’t surprised by hidden fees, changes in policies, or sudden shifts in product quality. This kind of honesty breeds loyalty, and loyal customers are invaluable. They’re not only more likely to return, but they’re also more likely to recommend the company to others.
Transparency can also turn around potentially negative situations. A company that handles a crisis transparently by quickly admitting fault and taking steps to make things right can actually come out stronger on the other side. Customers appreciate businesses that own their mistakes and take responsibility for fixing them.
The Perils of Being Caught in a Lie
On the other hand, when businesses are caught lying or concealing the truth, the damage can be irreversible. The public is often unforgiving when it comes to corporate dishonesty, especially if it involves something as critical as safety, the environment, or finances.
Take the infamous case of Enron, a company that once stood as a giant in the energy industry. Enron’s executives engaged in massive fraud, concealing debts and inflating profits to keep their stock prices high. When the truth came out, the company collapsed in one of the largest corporate scandals in history, taking down investors, employees, and pensions with it. The Enron scandal didn’t just destroy a company—it shook public trust in corporations and led to sweeping reforms in corporate governance and transparency requirements.
The Role of Transparency in the Future of Business
As we move forward into an increasingly connected and aware world, transparency will continue to play a crucial role in business. In the age of social media and instant information sharing, it’s more complicated than ever for companies to hide behind closed doors. Businesses that embrace transparency as part of their core values will likely find themselves at an advantage.
This doesn’t mean that transparency will always be easy. There are times when being open about failures, financial struggles, or other internal issues can be uncomfortable. However, in the long run, the companies that are honest with their stakeholders will be the ones that build lasting relationships and reputations.
Summing Up: Why Transparency Matters More Than Ever
In an era when businesses are more closely scrutinized than ever, transparency is not just a moral choice—it’s a business imperative. Customers expect it, employees demand it, and investors rely on it. Being transparent helps businesses build trust, foster loyalty, and create a positive reputation that can withstand the inevitable challenges that arise.
But transparency must be genuine. Pretending to be open and honest, only to be caught hiding the truth, can lead to catastrophic consequences. Whether you’re a small startup or a global corporation, embracing transparency is a powerful way to ensure long-term success. It’s not about being perfect; it’s about being honest about your imperfections and committing to doing better.
So, as you think about your own business, ask yourself: How can we be more transparent? How can we build trust with our employees and customers through openness and honesty? And are we prepared to own up to our mistakes when they happen?
ThoughtLab believes, in the end, transparency is not just about showing the world who you are—it’s about showing the world who you strive to be.
Shall we continue this conversation?
