The See-Through Organization

Posted on May 3, 2012 | 2 Comments

Here’s this month’s piece from neuroeconomist Paul Zak. For those who might dismiss some of our thinking as the “soft side” of management, Paul puts “hard science” behind it.

I read a fascinating interview recently with Rich Barton, the co-founder of several companies that endeavor to make information as widely available as possible: Zillow (on real estate), Expedia (on travel) and Glassdoor (on salaries). Not surprisingly, Barton, who also sits on the board of the lawyer- and doctor-review website Avvo, is a big fan of transparency.

“What I tell people is, if it can be . . . known it will be known,” Barton says.

But Barton’s efforts have been directly largely at the external marketplace. How about internally? How transparent should companies be with their own employees?

My research shows that there are several levels of transparency to consider. The most basic is being clear on the organization’s goals, as well as the goals of each business unit. Greater transparency occurs when the reasons behind these goals are made clear—for example, how they contribute to an organization’s financial health or core purpose.

As Peter Drucker wrote: An “organization has to be transparent. People have to know and have to understand the organization structure they are supposed to work in. This sounds obvious— but it is far too often violated in most institutions (even in the military).”

Radical transparency goes even further; it opens up the financials—everything from profit-and-loss statements to people’s salaries—for everyone, including employees and outsiders, to see.

Few companies have reached the radical transparency level, but those that have swear by it. Whole Foods Market is one. It even pays employees to take a basic accounting course so they can understand the quarterly P&L they receive. Another is the Brazilian machinery maker Semco. The company has few job titles, and everyone sets his or her own salary and knows the salaries of others. Managers are chosen by a vote of the managed, and the role of manager is rotated regularly.

Yet how much transparency should your organization have? Neuroscience can provide a guide. My laboratory experiments show that when intentions are clear and someone is shown trust, the recipient’s brain releases a molecule called oxytocin. And when oxytocin is high, so is the desire to pitch in to help the team.

Distrust, on the other hand, causes the brain to mount a defensive attack—especially in men—that manifests as spiteful and sometimes destructive actions.

These findings indicate that a minimum level of transparency is needed to remove distrust for most employees. From there, you can experiment with going deeper, trusting employees with information once held in private and then gauging their reactions. Think of this as crowd-sourcing your decisions—or just treating your employees as the sentient human beings they are.

Paul Zak is the director of the Center for Neuroeconomics Studies at Claremont Graduate University and the author of  The Moral Molecule.

2 Comments

  1. Democracy at Work | The Drucker Exchange
    July 5, 2012

    [...] As I’ve noted, revealing financials and organizational plans is an excellent trust-building approach that successful companies such as Trader Joe’s have used to engage employees in the process of making the organization successful. [...]

    Reply
  2. Restoring Sustainability’s Good Name | The Drucker Exchange | Daily Blog by The Drucker Institute
    February 6, 2013

    [...] transparency is a potent way to build trust among both employees and customers. As my research has shown, by being candid with all its stakeholders, ING may well be inducing the [...]

    Reply

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