In this times, transparency is expected to fix a lot of ill behaviour which led to crisis. Better transparency brings the hope to have trustworthy financial information and to improve market efficiency. Better transparency helps direct democracy and makes easier social and politics. However, a lot of our business is based on information asymmetry which is transparency contrary.
Accessing information is often matter of power. Less people know about your intentions, less they have control on you. Indeed, if you release all your strategic plans to the Market, it is easier to your competitors to counter you. On the other hand, if you say nothing about your plans, your intentions, how will you find people to follow you ? Finally transparency may be the right balance between information you need to keep for being able to succeed in your business and the one you should release to gather enough trust from your stakeholders to succeed.
For example, companies often inform the Market about their strategic vision with enough details to be credible for achieving it, but they keep secret the tactical moves they intend to do. Then, if you fail to manage unattended events which threat your strategic path and which lead you to miss partially your targets, you lose credibility too. Transparency does not only address the choice of retaining or releasing information, but also its quality : accuracy, consistency, completeness. Finding the right balance is not obvious.
It is the same within companies : will you announce to HR Department that your final goal is outsourcing HR activities ? How will you prepare such a move keeping it secret ? In this case, you often appoint a new HR Executive who will take responsibility of outsourcing preparation. He will carefully manage balance between information he release and the one he retains along the preparation steps.
Then, information is not always worth to be widely published. In some circumstances, for example a merger, people understand that secret should be kept while the deal is concluding. In theory, each stakeholders should have the information he needs to be able to assume fully his role no more no less. This is the case for shareholders and regulatory bodies for who information has been standardized. For internal managers, on the contrary, no standard exists, and companies have to establish a policy for granting access to information.
Another thing regarding transparency is accuracy. Lack of accuracy leads to false information and false information is no information. Lets take the sample of the costs. For starting, we say that a cost system, even accurate, gives only a point of view of reality. It has some bias. For example an ABC system favours establishing products against new products. But it is not our concern. Our bias is sunk costs.
Let’s take an IT Department which has a services catalogue. Services are priced, but a lot of things remain to be done by end users at their premises, for example backups. Then, CIO proposes to centralise some operations, like backups, willing to make scale economy. It results the opposite of expectations. IT Division invest in a device more expensive than distributed devices, because far more complex. It increases recurrent costs and staff costs. The budget of IT department exploded which embarrassed the CIO.
Business units were not committed on savings. It was just a matter of responsibility streamlining. They were not in position to reallocate the freed staff. Finally companies pay twice, one time for the centralised organisation, one time for the staff freed.
The centralisation was not enough analysed, because of sunk costs. Backups were never considered as a part of the work of end users, and their costs not recorded.
In summary, transparency is a useful tool which gives opportunity to manage internal and external stakeholders relationships as following :
- Managers frame relationships with transparency goals.
- Each relationship partner has to fulfil his commitment.
For example, in the case of sunk costs, business unit managers should commit themselves to register sunk costs when IT Department should clarify its added value for backups.
Succeeding in transparency improvement is a good indicator of management level and of good governance practices.
On the contrary, failing in improving transparency indicates poor management capacity. It is not clearly a factor of success in the case of transformation project.
Transparency is often not a well understood concept by managers who are afraid of consequences. I hope they will review their judgement and pull all benefits of it.