Operating Transparently
Transparency is one of the Four Trust Principles for creating trust-based organizations. The other three are other-focus, collaboration, and a medium-to-long term perspective (aka relationships over transactions). Here’s the business case for transparency.
The article Is Transparency Always the Best Policy? first appeared a few years ago in Harvardbusiness.org. The article is about Paul Levy, President and CEO of Beth Israel Deaconess Medical Center, and the answer to the blog’s question, based on this sample of one, would appear to be a resounding ‘yes.’
In matters great and small, Levy has simply made it an operating practice to behave transparently. His great results may surprise many, but they make a great deal of common sense.
If you are transparent about your activities, you are saying you have nothing to hide. If you have nothing to hide, then people trust what you do.
If you are transparent about what you say, then you don’t risk saying one thing to one person and another to another. You don’t appear to be two-faced; you appear to have integrity—you say the same thing to all persons. (And, it’s a lot easier to remember what you said if there’s only one version).
If you are transparent about what you think, then people can observe your thinking, and see that you are not editing what you say. They feel you are available to them, that you are not segmenting them off.
If you are not transparent in your actions, your words, and your thoughts, then people wonder about your motives. Why are you doing what you’re doing?
What is it you really mean when you say something? And what are you really thinking when you’re thinking?
Suspicion about motives colors every aspect of trust—it affects your credibility, your perceived reliability, and the degree to which people confide in you. The antidote to a bad case of suspicion is transparency. It’s as true in the financial and regulatory world, in the world of negotiation, and in the world of accounting, as it is interpersonally.
So Why Aren’t We All Transparent?
With all the obvious advantages that transparency conveys—why aren’t we all more transparent more often?
There are a thousand answers, varying in particular, but with some common threads in general. At the root of it, I think, is fear.
Fear that others will take advantage of us. Fear that we will be misunderstood, or shamed. Fear that others will see the true inner “me” and thus steal the faux power we foolishly think we maintain by being opaque.
Transparency is both a result of lowered fear, and a cause of lowering fear. Sharing information with another encourages another to share with us. Disclosing information within a company—as Paul Levy did so frequently—begets teamwork and lowers suspicion.
The willingness to be transparent in negotiation helps the other party figure out what it is that you want—so the paradoxical result of taking a risk is that you increase the odds of getting what you want.
Transparency is an invitation to collaboration and connection. It lowers fear, it increases trust.
It feels like taking a risk, but it’s really risk-mitigation in disguise.
Operating transparently isn’t just a hospital procedure.
Good post, as always, Charlie. There are a couple counterpoints about transparency that I like to point out in my teaching. First, sometimes it is Illegal to be transparent. If you are in quiet talks with another firm about a potential merger and someone asks you if the company is going to change status, you can find yourself in jail if you confirm the rumor.
The second issue is one of common sense. Sometimes it is unkind or just dumb to be totally transparent. If your wife asks you if the dress she is wearing makes her look fat, think twice before blurting out “you betcha.” That would be unkind.
If you indicate to a potential client that you would be willing to do a job for $10,000, then it would not be wise to let on that you actually would be willing to settle for $6,000. That would be dumb.
Hi Bob,
Thanks for your comments, thoughtful as always.
I completely agree with your first two points; I realize I forgot to include in this post my standard two caveats – “Unless illegal or hurtful to others.” Very important, and thanks for pointing it out.
Re the pricing issue, I have to disagree. If you tell a client you’re willing to do a job for $10K, but you’re really willing to do it for less, then you’re signaling to this client, and to all other future clients by extension, that your word cannot be trusted when it comes to pricing.
It suggests that you’re ALWAYS willing to negotiate; because if you’re willing to negotiate here, but you’re not indicating the conditions under which you’re NOT willing to negotiate, then they have no way of knowing you’re not always operating under bazaar conditions.
The alternative: have a clearly articulated set of discount exceptions, and stick to them. Typical reasons include volume discounts, government/non-profit rates, or entry-to-market rates.
This works beautifully. Most price objections come from a perspective of assuming that you are in fact operating under bazaar conditions (always up for negotiation); once you show your pricing is principle-based, I find people are almost always accepting of it. (You don’t haggle with Macy’s, or a fine restaurant, over their prices).
When they’re not accepting of it, it’s then usually for sound financial reasons: they haven’t got the budget, they truly don’t see the value in it for themselves, or they’ve got a lower-priced quote. All three of those options are addressable:
a. if they haven’t got the budget, you can redesign the project to be cheaper, or you can revise your guidelines, or you can recognize this is why you set the guidelines in the first place and refer them on to a cheaper provider;
b. if they don’t see the value, again you can redesign the project, or recognize that your value may not be maximal to this client, or – if you want to soul-search – ask yourself whether your value is what you claim it to be (at least to this client);
c. if they have a cheaper bid, tell the client that all providers have very similar cost bases (true) and that if a competitor is pricing well below norm, they can expect the rates to go up on any follow-on – so they only question is whether they want to continue buying one-off services from the lowest bidder, or enjoy the benefits of an ongoing, value-incrementing (and full rate) relationship.
Either way, I would argue pricing is most definitely not an exception to the value of transparency.
Thanks Charlie. I agree about the pricing for services rendered. I have a discount schedule (published) for work that I do for non-profit, student groups, government, etc. Still there are times when I agree to speak pro-bono, even though I have a standard speaking fee. But I do not advertise the fact that I am willing to speak for nothing. I’ll bet there are circumstances in which you are willing to waive your fees, and I ‘ll bet that not all of these are written down in advance.
The other pricing issue is if you are selling a tangible asset, like a home. I presume you would not list your house at the exact dollar figure that is your walk away price. Part of negotiating give and take has to do with a psychological issue where you put time and effort in to find an acceptable price point where the deal is a win-win for both parties.
Bob, good dialogue, thank you.
Most of what I write about is centered on professional services, and it doesn’t always extend. Your real estate example is a good one; like everyone, I indulge in the same games around bidding, though I do make an attempt to indicate seriousness.
Even outside professional services, though, there are some trends favoring transparency. Look at the success of car-price apps, and dealers offering no-haggle pricing. Or look at what’s happened to realtor commissions since the advent of online listing services. (I suspect the bid/ask gap has also narrowed in recent years, for the same reason).
Technology is forcing more transparency, revealing the fact that what often masquerades as a psychological win-win is in truth just sellers abusing their market power.
Thanks Charlie. I agree about the pricing for services rendered. I have a discount schedule (published) for work that I do for non-profit, student groups, government, etc. Still there are times when I agree to speak pro-bono, even though I have a standard speaking fee. But I do not advertise the fact that I am willing to speak for nothing. I’ll bet there are circumstances in which you are willing to waive your fees, and I ‘ll bet that not all of these are written down in advance.
The other pricing issue is if you are selling a tangible asset, like a home. I presume you would not list your house at the exact dollar figure that is your walk away price. Part of negotiating give and take has to do with a psychological issue where you put time and effort in to find an acceptable price point where the deal is a win-win for both parties.
Bob, good dialogue, thank you.
Most of what I write about is centered on professional services, and it doesn’t always extend. Your real estate example is a good one; like everyone, I indulge in the same games around bidding, though I do make an attempt to indicate seriousness.
Even outside professional services, though, there are some trends favoring transparency. Look at the success of car-price apps, and dealers offering no-haggle pricing. Or look at what’s happened to realtor commissions since the advent of online listing services. (I suspect the bid/ask gap has also narrowed in recent years, for the same reason).
Technology is forcing more transparency, revealing the fact that what often masquerades as a psychological win-win is in truth just sellers abusing their market power.
Good post, as always, Charlie. There are a couple counterpoints about transparency that I like to point out in my teaching. First, sometimes it is Illegal to be transparent. If you are in quiet talks with another firm about a potential merger and someone asks you if the company is going to change status, you can find yourself in jail if you confirm the rumor.
The second issue is one of common sense. Sometimes it is unkind or just dumb to be totally transparent. If your wife asks you if the dress she is wearing makes her look fat, think twice before blurting out “you betcha.” That would be unkind.
If you indicate to a potential client that you would be willing to do a job for $10,000, then it would not be wise to let on that you actually would be willing to settle for $6,000. That would be dumb.
Hi Bob,
Thanks for your comments, thoughtful as always.
I completely agree with your first two points; I realize I forgot to include in this post my standard two caveats – “Unless illegal or hurtful to others.” Very important, and thanks for pointing it out.
Re the pricing issue, I have to disagree. If you tell a client you’re willing to do a job for $10K, but you’re really willing to do it for less, then you’re signaling to this client, and to all other future clients by extension, that your word cannot be trusted when it comes to pricing.
It suggests that you’re ALWAYS willing to negotiate; because if you’re willing to negotiate here, but you’re not indicating the conditions under which you’re NOT willing to negotiate, then they have no way of knowing you’re not always operating under bazaar conditions.
The alternative: have a clearly articulated set of discount exceptions, and stick to them. Typical reasons include volume discounts, government/non-profit rates, or entry-to-market rates.
This works beautifully. Most price objections come from a perspective of assuming that you are in fact operating under bazaar conditions (always up for negotiation); once you show your pricing is principle-based, I find people are almost always accepting of it. (You don’t haggle with Macy’s, or a fine restaurant, over their prices).
When they’re not accepting of it, it’s then usually for sound financial reasons: they haven’t got the budget, they truly don’t see the value in it for themselves, or they’ve got a lower-priced quote. All three of those options are addressable:
a. if they haven’t got the budget, you can redesign the project to be cheaper, or you can revise your guidelines, or you can recognize this is why you set the guidelines in the first place and refer them on to a cheaper provider;
b. if they don’t see the value, again you can redesign the project, or recognize that your value may not be maximal to this client, or – if you want to soul-search – ask yourself whether your value is what you claim it to be (at least to this client);
c. if they have a cheaper bid, tell the client that all providers have very similar cost bases (true) and that if a competitor is pricing well below norm, they can expect the rates to go up on any follow-on – so they only question is whether they want to continue buying one-off services from the lowest bidder, or enjoy the benefits of an ongoing, value-incrementing (and full rate) relationship.
Either way, I would argue pricing is most definitely not an exception to the value of transparency.