The Leadership Benefits of Transparency

What's up, everyone. This is Alex Lieberman, co-founder, and Executive Chairman of Morning Brew. Welcome back to Founder’s Journal, my personal audio diary, where I give you, the business builder, the tools you need to think better in order to build better, whether that's building a business, a team, or a new product. I have a very simple question: What is the right amount of transparency that should exist in a company today? I'm going to discuss it. Let's hop into the episode. 

What’s the right amount of transparency in a company? 

So the exact question I just asked, what's the right amount of transparency in a company. I asked that question on Twitter yesterday, and I got around 300 responses and here was the breakdown. 30% of people said that their company was not transparent at all. 39% said somewhat transparent, so just shy of 70% of people said either their company was somewhat transparent or not transparent at all. 20% of people said very transparent and 11% of people said completely transparent. And first of all, just my gut reaction to that is it's really interesting at a time where I think culture and transparency and flow of information is talked about so much that the number of people who felt like there wasn't transparency in their business was so incredibly high. But let me tell you why I actually decided to even ask this question on Twitter.

I've thought a lot about the topic of transparency since Morning Brew was acquired by insider in late 2020, and I've thought a lot about it because when the deal happened and in the months proceeding the deal, we got a lot of feedback from our employees around specifically the deal that we weren't being transparent enough as founders as we went through the acquisition and also that the company just got less transparent after the acquisition happened, and as we got bigger, and when I heard this feedback, I felt a lot of things. I felt guilty and I felt sad that people we cared a lot about in the business believe that Austin and I weren't being open enough. I felt frustrated that it was a no-win scenario because I felt like too much information to anyone wouldn't be helpful and because the deal wasn't definite until obviously when it was announced that it would create shell shock for people, if it didn't happen, but it felt like a no-win, because people wanted to know what was going on. So that was my first reaction. And then after the emotion subsided, it led me on this exploration of just answering the very simple question: What is the right amount of transparency in a company? And I think to answer that question, the first question that needs to be answered is: Why is transparency even important? And what is the goal of being transparent in a company? 

The two ends of the transparency spectrum: HubSpot and Apple

And I believe there's two answers. Transparency serves two purposes in a business. It is a means to an end, it is not the end. First, transparency creates trust, and second transparency, arms your employees with the information that they need to maximize the value that they create for customers. A business exists to serve its customers. An employee’s goal is to do their job as well as possible to maximize the value they create for customers. So then this begs the original question, which is, if transparency is important for trust and for employees doing their job, what is the right amount of transparency to be able to build trust effectively and to maximize the employees’ impact on customers? And so to answer that, I want to share two companies’ approaches to what they believe is the right amount of transparency. And these are two companies that have totally different views on how to be transparent within business. And then I want to talk through my thoughts on these different companies’ approaches. 

The first company is HubSpot.HubSpot if you're not aware of it is a publicly traded marketing software company. It was founded by Brian Halligan and Dharmesh Shah. And the company has published extensively about their culture and specifically how one of their goals is to be remarkably transparent by sharing almost everything with everyone in the business. And so let me break down their philosophy a little bit more. They believe that results matter most. And what Dharmesh has said is better data leads to better insights and better insights leads to a better understanding of your customers, which then leads to better results, which is the primary goal. And kind of to talk about this more, talk out loud about it, basically I would say their thought is that you're constantly making decisions in a business, and the odds of making a stupid decision in a business goes down when you have more information and when people are sharing their feedback based on decisions that are going to be made. The other reason that they share so much information is because basically as they've gone from starting the company to now 4,000 employees, how could they scale without adding so much hierarchy or process to the business or having their managers micromanage employees? How could they maintain flexibility and an innovative environment? And the only way to do that is by establishing autonomy and trust with employees. And the only way you establish autonomy and trust is through information. That's their point of view. And so just to give you some context, here are some things that HubSpot shares that other businesses may not share: They share financials, so what their forecasts are, their balance sheet, their P&L; they share their diversity goals and also where they're falling short with diversity; they share all of their board and management meeting decks. They also have ask-me-anythings with the founders of the business. And so what Dharmesh actually said is, in fact, the only things we don't share are things we are legally required to protect, which are things like notes on an acquisition where they've signed an NDA or other things they don't share are individual salary information, which they don't believe is completely theirs to share. By the way, I've heard of companies that do share salary information, which is a whole ‘nother discussion in itself. And HubSpot has taken this to such an extreme where they actually made every employee in the company a designated insider, which is a designation you have to create when you become a public company so that all the information they share, they can still share with employees, which normally a public company can't do. The one last caveat that I want to add to HubSpot's approach to transparency before hopping to a totally different example is they have created a clear delineation between democracy and transparency. They made it clear to HubSpot as well as everyone outside of HubSpot that because they are remarkably transparent with their information does not mean that HubSpot is a democracy. Their whole idea is it's about being open and accepting of all inputs, but it's not about making decisions by consensus. They always designate one person to make a decision, but their goal is that more information leads to more valuable feedback for the one decision maker to make their decision as strongly as possible. So that's HubSpot. I would put them at, let's call it a nine out of 10 on the transparency scale. 

Now for a second company, little one called Apple. Apple has an entirely different philosophy about transparency. Apple is known for a culture of secrecy, and it was one that was established in the early days under Steve Jobs. And what that specifically looks like in practice are things like employees are expected not to speak publicly about Apple unless they've been specifically asked to do so. Employees at the company have badges, and those badges only open certain doors based on the projects in the company that they have access to. Employees have to sign project-specific NDAs and projects are coded with internal keywords like “ultra,” “black,” and “white,” depending on the level of secrecy, and for projects like the “ultra” projects, which are basically the most secret of Apple's projects, employees are tracked internally when they have access to prototype devices so Apple can track exactly where every prototype is within their company. And just as HubSpot's culture of high transparency served it in ways like building trust and autonomy and assisting with decision making, Apple's culture of low transparency or secrecy has served it in certain ways as well. So for example, Apple is known for being one of the greatest consumer electronics brands of all time. And it has done that through two things: incredible products combined with best-in-class product marketing and product announcements. And secrecy has been an incredibly effective tool in maximizing the impact of every company product launch.

The pros and cons of both approaches

So these are examples of two extremes, right? They sit on different sides of the transparency spectrum and most companies sit somewhere in between the two. And it's not to say that one is right or wrong or good or bad, but I think it's most important to acknowledge that there are clear trade-offs of every decision we make around what information or decision do we share versus withhold from our company, from the outside world and from employees. So in the HubSpot example, what are the trade-offs of sharing too much or being radically transparent? The first is confusion and distraction. Unless people have the full picture of a company, which no one other than the founders do, understanding how all of the information presented to you works together and then distilling what's important versus not important, it becomes incredibly difficult. And because it's so difficult, it can lead to employees spending time on the wrong things, or being distracted by things that aren’t within their job and information overload becomes a very real thing. The second drawback of HubSpot strategy is what I call the emotional rollercoaster. And it's similar to what I described with the Morning Brew and Insider acquisition and deciding not to share everything about the potential acquisition. Founders are really used to the emotional roller coaster of scaling a company. And what I found is I have become less sensitive to the swings of everyday business building because shit hitting the fan becomes daily occurrence, but for people not used to it, it can be nauseating and people can feel like their job is on the line. And so my comparison is either to the Morning Brew-Insider deal or to how government probably doesn't tell us about every possible UFO that has been spotted on Earth or an asteroid that's heading to earth or threats to the U.S. that haven't been discussed with the public, and my personal view is I think it's actually a good thing because I think it would make people really anxious and cause them to not be able to live life to its fullest. So that's how I connect it to just thinking about it in real life. Now let's take it to Apple, right? Which, super low on the transparency scale, very secretive. There are trade-offs on their end as well. The most obvious trade-off is trust. There are numerous examples that have been reported of Apple employees feeling like there's two groups within Apple, the haves and the have-nots. That people whose badge is open all the doors versus the people whose badges don't open all the doors, that people who have access to projects versus people who don't have access to projects. And this can create obviously some competition, some jealousy, some animosity within the business where it doesn't feel like everyone's working on the same team. The second big trade-off is decision-making. You have to wonder for yourself, is there optimal decision-making within Apple when information silos are created because the business is defined by secrecy and only certain people having access to information on certain projects? 

Alex’s take on transparency

So here's where I stand on the most fundamental question, which is what is the right amount of transparency within a business? I personally subscribe more to the HubSpot way versus the Apple way, because I do believe that knowledge is power and trust and decision-making are improved as you create more information flow. But here are a few things I wouldn't reveal, even though I believe in transparency in a business. First, I wouldn't reveal why people are fired. I don't believe it's a company's place to share and I think there's a moral price to pay. Second, I wouldn't share about big transactions, partnerships, or things like that before they happen. I think it creates this feeling of emotional whiplash that I referred to earlier. And third, I wouldn't share employee compensation. I just believe that human beings are naturally social comparers. And I think that openly sharing comp breeds a culture of competition and envy that you don't want in your business. Just remember: Transparency is a choice. It creates trust, and it helps your employees do their jobs better. Don't be transparent because it's in vogue or because we talk so much about culture and openness today. Do it because it is serving a clear purpose within your company. But at the same time, be thoughtful about the trade-offs to the transparency decisions you make, because it is either impossible or very painful to reverse when you choose to be more transparent with information or decisions. 

I want to hear from you

I would love to hear your thoughts on what you think is the appropriate amount of transparency within a business and whether you subscribe to the HubSpot side of the scale, the Apple side of the scale, or where you sit in the middle. Shoot me your thoughts to alex@morningbrew.com or DM me on Twitter @businessbarista. Also make sure to pound the subscribe button for Founder’s Journal. It is the number one way that we grow this show. And it's also how you can get our content whenever we come out with it. And also if you do subscribe already on Apple, Spotify, or the podcast player of your choice, make sure to also check out Founder’s Journal content on Morning Brew’s YouTube channel. Go to YouTube, search Morning Brew, and click on our channel. There, you'll see an entire playlist of Founder’s Journal videos, like how to deal with imposter syndrome and why Ethereum matters.

And finally, I got to give a big shout out to the team that makes this show possible. Our show is produced and engineered by Dan Bouza. Our associate producer is Bella Hutchins. Brian Henry is our executive producer. Alan Haburchak is Morning Brew’s director of audio. Holly Van Leuven is our fact checker. Noah Friedman is our video producer and editor. Damn, I have an amazing team. And I'm your host, Alex Lieberman. Thanks again for listening. And I'll catch you next episode.