Radical transparency sounds great until you consider the research

Being more transparent is not always better, writes Ben Waber.
Being more transparent is not always better, writes Ben Waber.
Image: REUTERS/Victor Fraile
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Radical transparency is an old management approach with new branding. Previously called micromanagement or snooping, this approach supposedly creates higher performance and trust by letting everyone know what’s on the table.

The practice goes beyond sharing feedback across hierarchical levels, financial results, or long term strategy. At its core, it’s about sharing intimate thoughts and personal information.

Take, for example, the“baseball cards” at the hedge fund Bridgewater Associates. The cards, which essentially publish pulse survey results about all employees publicly, show how people have rated you across a variety of metrics, including trustworthiness.

But research about human judgement suggests that relying on such data is a mistake. People are terrible at assessing trustworthiness and most skills. Assessments are driven not by real actions, but by appearance and personal situation. On top of these potential inaccuracies, labeling someone as untrustworthy or poor in certain skills has a corrosive effect on collaboration and morale, perhaps one of the reasons why Bridgewater has in the past had very low retention rates that costed the company tens of millions of dollars a year.

Another often-discussed topic in the push for  radical transparency is the practice of publishing employee salaries. The social media company Buffer, for instance, puts its employees’ compensation information in a non-anonymous spreadsheet online. There are some benefits to this, namely that traditionally underpaid groups such as women and minorities can ensure they’re getting their fair share. The company could, of course, do this by publishing pay scales instead of individual numbers.

Publishing individual salaries has negative consequences. While companies should never prevent people from sharing their compensation (and in many states it’s illegal to do so), publishing these numbers for all to see psychologically harms people who are not at the top of the pay scale. Research shows that this directly reduces productivity by over 50% and increases absenteeism among lower paid employees by 13.5%, even when their pay is based exclusively on output.

Management fads such as radical transparency often take root because successful companies and individuals think their success is a result of all the decisions they made being correct. This is a variant of the fundamental attribution error: people forget the importance of luck. While personal experiences offer interesting cases, it’s difficult to generalize the success of a firm like Bridgewater when n=1 (some companies might say that their sample size is actually the number of their employees, but this is methodologically flawed, since you can only quantitatively measure success at the organizational level).

Data about how people behave at work is important, but there are ways to get it without asking coworkers to comment openly on each other’s characters or publishing their salaries online. In the long term, EU style regulation is desirable to protect employees from radical transparency and micro-management. In the near term, companies need to be aware that jumping on a fad without considering the research is a recipe for failure.

Ben Waber is the president and CEO of Humanyze.