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Transparency Is the Bedrock of Ethics

By Jolene Lampton, CPA, CGMA, CFE
September 1, 2019
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Transparency can be challenging for leaders when their company faces adversity, but it’s essential for fostering an ethical culture.

 

Transparency is an attribute of corporate culture that’s revealed through the behaviors of an organization’s leaders, employees, and stakeholders. It’s how values are embodied and demonstrated on a day-to-day basis. It shows in the degree of openness of meetings, events, and interactions within the organization. Transparent workplaces facilitate healthy relationships among people. Building strong relationships involves open communication, honesty, regular feedback, respect, admitting mistakes and wrongdoing, and offering praise. When we talk about transparency, most people immediately think about disclosing salaries and the company’s expenditures and financial results.

 

That may be part of the conversation, but transparency is more holistic and encompasses why the organization’s leaders make the decisions they make. The broad nature of transparency at ethical organizations stands in stark contrast to the fraud problems at the Boeing Company, Wells Fargo, and Volkswagen, among others.

 

Transparency is essential to an ethical climate in organizations and should be evident in communications, practices, policies, meetings, and other interactions. Making cultural changes requires conscious effort and deliberate actions to overcome the previous opaque culture.

 

IMPROVING TRUST

 

Twenty-five percent of respondents to the 2019 Edelman Trust Barometer said they don’t trust their employer. Organizations need to strive for more effective communications characterized by increased transparency to combat employees’ lack of trust.

 

To build cultures that are more transparent, employees should form better, more trusting professional relationships. Healthy two-way communication between leaders and employees is more likely to occur when transparency is an established value. Companies that facilitate a culture of openness consistently outperform their peers and competitors.

 

The stakeholder model urges leaders to consider all possible alternatives when making decisions. As a leader, you should conduct focus groups or surveys of customers, constituents, and partners to solidify relationships with different stakeholders. To achieve a greater degree of transparency, focus on cultivating your listening skills as you elicit feedback from employees to ensure solid relationships with them in addition to providing qualitative feedback.

 

BOOSTING ENGAGEMENT

 

Do employees understand their role within your organization’s strategic plan? In a culture of transparency, employees understand the company’s vision and how their efforts help achieve the organization’s goals. This is about how each individual fits into the big picture of your organization, but it’s also about the small stuff. Don’t force employees to wonder why they’re doing what they’re doing. Explain the reasons for new policies to ensure employee understanding. Work to achieve employees’ support and buy-in so they’ll be likely to articulate reasons for the change when talking with others.

 

Transparency isn’t just “nice to have”—it’s a best practice that companies must attain. According to the Great Place to Work Institute, companies with a high-trust culture experience increased levels of innovation, stock market returns two to three times greater than the market average, and turnover rates approximately 50% lower than industry competitors.

 

BUILDING A CULTURE

 

The first step to building a transparent culture is making the commitment. This requires time. Create a plan, and invest in tools that facilitate transparent communications. Assign champions to drive the effort, make recommendations to leadership, and ensure that all employees follow through on the commitment.

 

Second, be open about the rationale behind the decisions that you and other company leaders make. Strive to have everybody in the company understand why you made significant decisions. Share details about finances, growth trajectory, hiring, strategic priorities, and tactical plans.

 

If you ever don’t know how to navigate a particular situation or circumstance, or you’re waiting for data that’s forthcoming, say so. It isn’t advisable to be silent, thinking that employees will forget about the situation or circumstance. They’d appreciate a status update and any insight on the rationale behind decisions that leaders make. This transparency in conveying information shows respect for employees and an understanding of their need for information to feel invested in the company’s mission.

 

Third, give and seek honest feedback. Encourage openness and honesty in all communications. Send anonymous surveys aimed at measuring employees’ level of engagement, leadership skills, alignment with the company’s mission, and professional development. Share the results of those surveys throughout your organization.

 

Have regular formal reviews and informal check-ins or one-on-one meetings with employees to discuss goals and performance. Don’t be afraid to have tough conversations. When leaders avoid giving direct feedback on performance, it will likely result in the loss of employees’ and stakeholders’ confidence and create frustration, confusion, and insecurity.

 

Strive to make employees and others aware of how the company’s strategic performance will improve the organization and affect them. Some leaders may hesitate to share client acceptance criteria, the logic behind pricing structures, or why certain people are promoted and others aren’t. But when companies’ leadership holds back on giving people basic information about the implications of decisions and plans that affect them, communications are deficient and unacceptable.

 

Building a culture of transparency takes time and significant effort, but your reward will be better relationships between highly engaged employees, which will foster an excellent ethical foundation on which to operate. If you don’t have good information, then be honest and explain why. Employees will appreciate your candid feedback.

 

IMA ETHICS HELPLINE

 

For clarification of how the IMA Statement of Ethical Professional Practice applies to your ethical dilemma, contact the IMA Ethics Helpline.

 

In the U.S. or Canada, dial (800) 245-1383. In other countries, dial the AT&T USA Direct Access Number from www.usa.att.com/traveler/index.jsp, then the above number.

 

The IMA Helpline is designed to provide clarification of ­provisions in the IMA Statement of Ethical Professional Practice, which contains suggestions on how to resolve ethical conflicts. The helpline cannot be considered a hotline to report specific suspected ethical violations.

 

Jolene Lampton, CPA, CGMA, CFE, is associate professor of management accounting with Park University, serves on IMA’s Committee on Ethics, and is a member of IMA’s Austin Chapter. You can reach her at jolene.lampton@park.edu.
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