Speaking Clearly

Openness can build credibility with the public—and your own employees.

by Kate Pavao, November 2008
“American corporations are showing a lot more interest in the issues of candor, integrity, ethics, legal compliance, and full disclosure,” says James O’Toole, the Daniels Distinguished Professor of Business Ethics at the University of Denver’s Daniels College of Business.


That’s why O’Toole joined with leadership experts Warren Bennis and Daniel Goleman to write Transparency, a series of three interconnected essays shedding light on these touchy topics. Profit spoke to O’Toole to get advice for executives looking to bring more openness and honesty into their organizations.

Profit: Why is transparency so important right now?

O’Toole: At first, I was pretty skeptical about the term because it sounded like just another buzzword. But it’s become clear to me over the last few years that it really is a very useful word. This is thanks to Enron and WorldCom and everything that led to Sarbanes-Oxley, and the increased use of the internet, particularly the growth in blogging. It’s become very clear not only that companies should not keep secrets but that they can’t.

Profit: You write that creating a culture of candor is about more than open door policies, an ombudsman, and whistle-blower protection. What are some of the other things that executives should do?

O’Toole: Those things all help. But what we have found is that the people at the top of the organization have to set the tone. Day in and day out, executives must demonstrate to their employees that they are open to bad news, that they are listening to people who have important news, and that people are not going to be punished when they bring ideas or criticism—or even bad news—forward. It takes a tremendous amount of trust before people are really willing to speak up.

In the book, we talk about Kent Thiry, the CEO at DaVita, a kidney dialysis company. Basically, he manages by going out to his people, to his customers, his employees, his suppliers, and even ex-employees and saying, ‘Give us any information that you can, give us candid feedback, because that’s the only way we know for sure that we’re getting the truth.’

Profit: If executives can change only one aspect of their management style, what should it be?

O’Toole: It starts with what Jack Stack, the CEO at SRC Holdings, calls “open book management.” What this means is that leaders have to understand there are very few secrets that need to be or should be kept in an organization. The only legitimate secrets are those having to do with individual privacy, or the development of a new product or strategy. When people understand what’s going on and why it’s going on, trust tends to be greatly increased.

Also, if all the financial and managerial information is available to everyone in the organization at all times, people at the top cannot cheat. If everybody has access to the company’s numbers, all those Sarbanes-Oxley internal auditing requirements go away. Companies actually could save the millions of dollars it costs to do an internal audit just by making the numbers available.

Profit: In the book, you draw from government and history—even from legends—to demonstrate why transparency matters. Why go beyond businesses to make your point?

O’Toole: What we want to communicate is that a lack of transparency isn’t a product of capitalism or American corporations or businesspeople who are bad. It is part of a long-standing problem having to do with human nature and particularly the nature of humans in groups, of people at the top trying to hoard information or not listening to the people who have the information they need. We have 2,500 years of Western history in which there is example after example of this. What we have to do is go after the problem and explore ways to create transparency and create a culture of candor. If a conscious effort is not made, it will not happen.


Kate Pavao is a freelance writer based in Northern California and a frequent contributor to Profit.
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