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(originally published by Booz & Company)


Peanut Butter on the Chin

Yet, despite the apparent value of transparency, few companies can be characterized as transparent. (Indeed, 63 percent of the Midwestern executives I recently surveyed described their companies’ cultures as opaque.) As Zimbardo demonstrates, transparency runs against the grain of human organizational interactions. In all groups, there is a powerful desire to belong. Everybody wants to be liked, to be part of the family. Hence, the pressure to conform in groups is almost irresistible. Nobody wants to be the one to tell the boss that he misused a big word during an impromptu speech or that he is hopelessly mistaken about a set of facts.

At the top of the hierarchy, leaders understandably try to hide their mistakes; they hope to prove that they are smarter than those below them and, hence, don’t need their underlings’ input. At the same time, information is the most precious currency in most organizations. Leaders horde it and share it only grudgingly; fast-trackers, golden boys, and members of A-teams view information as a perquisite of their positions. Thus, some in the organization are in the know and will always get heard, while others are left out, their ideas squelched to the detriment of the entire organization, including, paradoxically, the insiders themselves.

Corporate leaders who recognize the importance of transparency take practical steps to create cultures of candor. Some practice “open-book management,” as pioneered by SRC Holding’s CEO Jack Stack, who provides employees with full access to company financial and managerial data. Others, like Kent Thiry, CEO of health-care provider DaVita, systematically collect data and solicit candid feedback from employees, former employees, customers, and suppliers in order to, as Thiry puts it, keep from “messing up.” Still others use Weblogs to give voice to the expertise at the bottom of the organization; reward employees who offer up their honest assessments freely; use formal exercises to challenge the organization’s basic assumptions about its commercial environment and stakeholders; and diversify membership in the C-suite to gain the benefit of multiple perspectives. Above all, these leaders adopt the first rule of information: “When in doubt, let it out.”

Author Profile:

James O’Toole, the Bill Daniels Distinguished Professor of Business Ethics at the University of Denver’s Daniels College of Business, is coauthor (with Warren Bennis and Daniel Goleman) of Transparency: How Leaders Create a Culture of Candor (Jossey-Bass, 2008).
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  1. Warren Bennis, Daniel Goleman, and James O’Toole, Transparency: How Leaders Create a Culture of Candor (Jossey-Bass, 2008): Three leadership experts explore the lack of cultures of candor at companies and suggest ways to achieve a healthy openness.
  2. Robert R. Blake and Jane S. Mouton, “The Managerial Grid,” Thinkers (March 2002): Examines a behavioral leadership model that proposes five different organizational management styles and identifies which one is optimal in a particular corporate culture.
  3. Art Kleiner, “Jack Stack’s Story Is an Open Book,” s+b, Third Quarter, 2001: An exploration of the open-book management practiced by SRC Holdings Corporation Chief Executive Stack.
  4. Edward E. Lawler, Rewarding Excellence: Pay Strategies for the New Economy (Jossey-Bass, 2000): How to use money to motivate workers, and the value of posting salaries within an organization.
  5. Philip Zimbardo, The Lucifer Effect: Understanding How Good People Turn Evil (Random House, 2007): The book discussed in this article describes the Stanford Prison Experiment and applies its findings to historical examples of injustice and atrocities.
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