Do your employees really know what’s going on with your company? And don’t be worried that they can’t handle the truth. Here are some convincing reasons to create a culture of transparency—starting now.

The economy may be improving—inching upward degree by painful degree—but employee moods aren’t following the trend. (And with bleak news bombarding the airwaves daily, it’s no wonder.) Perhaps you’ve noticed that people seem anxious and distracted, either hiding out in their offices or aggressively vying for credit in an attempt to shore up their positions in the organization. It’s obvious everyone is worried: Are layoffs imminent? Will I have a job next week? In fact, will the company even survive the year?

If you’re like most executive-level leaders, you have a pretty clear picture of the state of your industry, the context you operate in (a.k.a. the external environment), and the financial health of your company. And you’ve likely wondered: How much should I tell them about what’s really going on behind the scenes?

The answer is simple: the more the better. (And there really shouldn’t be a “behind the scenes”!)

Leaders have talked about transparency for a long time, but it’s never been more important than it is now. Remember, we share information with employees for a couple of reasons: one, it’s the right thing to do, and two, it’s good for business. And most companies can use every possible edge these days.

If your company doesn’t have a culture of openness and free-flowing information, now is the time to move in that direction. Here are 10 reasons why you should embrace transparency:

  1. People assume the worst when they don’t hear from leaders. Silence from the executive suite causes a lot of fear and resentment, which certainly doesn’t contribute to a productive culture.

    Maybe the news is bad, but maybe it’s not as bad as they are imagining. And even if it is, once they know the truth, they can plan and act accordingly.

  2. Transparency helps employees connect to the why. When employees are working in a vacuum, they can’t see the financial “big picture,” and decisions leaders make may seem ill-advised or unfair, or simply inexplicable. Transparency connects them to the why—and that understanding propels them to act.

    You can ask people to change their work habits and established processes all day long. But if they don’t know why they’re being asked to change, they won’t change—at least not for long.

  3. Employees may not understand how the external environment affects the company. Senior leaders are aware of new laws affecting their industry, innovations reshaping the marketplace, financial pressures facing their customers, and so forth. It’s their job to know. But mid-level managers don’t necessarily see the same picture—and frontline employees almost certainly don’t.

    Creating a transparent company helps everyone stay mindful of the forces affecting the bottom line. And I think most leaders will agree that those forces have never been more volatile.

  4. Transparency allows for consistent messaging across the organization. When you commit to transparency, people don’t have to get their (speculative, distorted) news through the company grapevine. They hear what’s really going on, in a controlled and consistent way, from their managers. By the way, it’s a good idea to train managers in “key words” they can use to ensure all employees in all departments are hearing the same messages positioned in the same way.

    (In other words, you’ll greatly reduce the chances of a manager getting frustrated and blurting out things like, “Don’t you know we’re in financial trouble?!?!”)

  5. This, in turn, creates organizational consistency. When everyone is hearing the same messages from their leaders, everyone is motivated to respond in similar ways. Employees in Department A get the same kind of leadership and direction as employees in Department B. Everyone knows the rules. And this consistency trickles down to the customers, who get the same basic experience regardless of who they’re dealing with.

    Consistent companies tend to be healthy, stable companies. And transparency and consistency are two sides of the same coin.

  6. Transparency leads to faster, more efficient execution. When times are tough, execution is everything. And the ticket to good execution is good alignment: All sectors of an organization must understand exactly what’s required so they act in a coordinated and collaborative fashion. Transparency is what facilitates that kind of alignment. It’s all about a shared sense of urgency.

    Makes sense, right? When employees know customer spending in the widget industry is down 30 percent and that a new competitor is eating into your market share, well, they tend to get focused fast. And helping them understand the reality that downsizing might occur if sales don’t increase can change their behavior overnight.

  7. It heals we/they divisiveness. I often warn clients about the we/they phenomenon—the perception that there are separate groups inside a company that work at cross-purposes. It might manifest as staff vs. management, or this branch vs. that branch, or corporate vs. everyone else. (One example: When senior leaders understand the external environment better than managers and supervisors, they may get frustrated and wonder why these groups aren’t moving with a sense of urgency: “We are here working hard to save the organization…so why don’t they see it?”)

    In transparent organizations that share common agendas, it’s hard for we/they to flourish.

  8. Transparency keeps good people from leaving. High performers don’t thrive in an atmosphere of secrecy and uncertainty. They want to work for a company that treats them with respect and values their problem-solving skills. Hold critical information too close to the vest and they may assume the company isn’t healthy—and because they often have options in even the worst economy, they may leave for greener pastures.

    Obviously, your hardworking innovators are the very people you want to hold onto in times like these. Make sure your culture nurtures them.

  9. It eliminates Park Ranger Leadership. If you were lost in the woods a few times and a park ranger always showed up and led you to safety, you wouldn’t develop any survival skills. You wouldn’t have to. The same is true of employees who wait for their heroic park rangers (senior leaders, that’s you!) to lead the organization out of the economic wilderness. This mindset breeds a risky complacency. Far better for employees to pursue their own salvation than to wait passively for rescue…and that means they need to know exactly what threats they face.

    When people know what the problems are, they’re more likely to come up with creative solutions. They become park rangers themselves. And an organization with 500 park rangers is more likely to make it out of the woods than one with eight or 10.

  10. It facilitates the best possible solutions. In transparent cultures, leaders encourage employees to solve problems themselves. And because those employees are the people closest to a problem, and because they must live with the outcome, they almost always design the most effective, efficient solution.

    That’s what employee ownership really means. When people are allowed to solve their own problems, they’ll do a much better job than if they have to work with a solution imposed from above or outside. And of course, they’ll also have instant buy-in.

One more thing: Don’t think of transparency as a “crisis control” program. It’s a long-term commitment. When the good times roll around again, the strategy will serve you just as well.

Transparency is a way of life, not a stop-gap measure. It shapes your organizational culture and drives results in any economic environment. As recovery gets underway, as long as you maintain your commitment to openness and constant communication, your organization will only get stronger.

Quint Studer is chief executive officer of Studer Group®, an outcomes firm that implements evidence-based leadership systems that help clients attain and sustain outstanding results. He was named one of the “Top 100 Most Powerful People in Healthcare” by Modern Healthcare magazine for his work on institutional healthcare improvement and is the author of numerous bestsellers. For more information, visit www.studergroup.com.