Leading With Purpose and the Need for Board Transparency
Board transparency was already a red-hot issue when the pandemic swept across the globe, opening up newer concerns about transparency. On the one hand, transparency is a good thing as it inspires trust and credibility. On the other hand, it could put confidentiality at risk.
Today’s mission driven organizations have more good reasons than ever to be transparent. With several embezzlement cases, cyber hacking, political divisions and misinformation proliferating, the public is more cynical than ever about a groups motivations To gain credibility as a purpose led organization, your actions — not your words — are what really matter. That is why transparency is at the core of leading with purpose.
We can credit much of the creativity of how today’s businesses share their information to the millennial generation. Millennials, who grew up during the 2008 economic crisis, come from diverse backgrounds, are highly educated, and have taken on large amounts of student loan debt. Their station in life causes them to be innovative thinkers, more so than past generations. Economic times have not changed the type of information that organizations now share. What has changed is the quantity of information entities are sharing and the types of media they are using to share it.
The U.S. Bureau of Labor Statistics indicates millennials outnumber other generations in the workforce, and the numbers are growing. Why are the millennials so important? The following statistics show the importance of transparency to today’s workforce:
- 80% of millennials believe they could improve their work-life balance if their employer were more transparent.
- 74% of millennials wanted the company they worked for to be more transparent.
- 75% would leave a company to work for a more transparent company.
Here’s a look at the essential indicators of transparency and the innovative approaches some companies take toward transparency.
Why Do Boards Need to Be More Transparent Than in the Past?
For-profit and nonprofit boards have much more to gain than to lose in taking a close look at their organization’s transparency. Transparency creates an environment for both types of entities to become more in tune with their stakeholders, which increases overall effectiveness.
One of the biggest challenges for nonprofit entities is competing for financial support from grants and donors. Increased transparency can set them ahead of the competition for financial support.
All organizations benefit from gaining the trust of the public. Transparency leads to private and public trust and contributes to a positive reputational standing. Transparency is a good practice that positions organizations ahead of future regulatory compliance rules.
Most importantly, transparency helps all entities avoid litigious concerns.
The Basics of Board Transparency
For boards looking to increase transparency within their organizations, it helps to look at what peer organizations are doing beyond the scope of industry regulations. Here are the top five things you can do to increase the transparency of your board:
- Reviewing and sharing financials and other data- Most likely, your organization is already doing this to some extent. Are you prepared to provide the three most recently filed annual tax returns if one of your stakeholders requests them? Does your treasurer have easy access to copies of your tax-exemption documents and any correspondence if a nonprofit stakeholder requests it? Many of today’s companies are adding a direct link to their financial statements right on their websites.
- Performing annual evaluations-Boards need to have a committee responsible for annually evaluating the CEO or executive director. In addition, they should make it a part of their annual duties to perform self-evaluations on each director and the whole board.
- Training board members in their roles and responsibilities- The board should be transparent in letting their stakeholders know that board members receive an orientation and get ongoing training in their responsibilities. Training should include learning about current and developing industry regulations.
- Having a reputation for addressing issues head-on– A prime example of the importance of this was the Equifax data breach. In July 2017, Equifax one of the largest credit companies in the US discovered that their systems had been breached by hackers and the personal information of millions of Americans. However, they would not inform the public of that breach for nearly 2 months. Company would later be forced to pay $425 million to those impacted by the breach.
- Policies are a board’s best friend when it comes to transparency. Profit and nonprofit organizations should have written policies for the following:
- Conflicts of interest
- Sexual harassment
- Board-approved compensation for an executive director or CEO
Beyond these essential duties, stakeholders are interested in learning how you collect data, what you’re doing with it, and whether you’re using it to improve performance. Today’s stakeholders don’t just want any data, so don’t overwhelm them with meaningless data. They’re most interested in meaningful metrics and the standards you measure them against.
Tap Into the Power of Digital Transformation
Enable transparency by sharing data in flexible digital formats that other parties can use and share easily. Digital processes allow for better engagement and transparency. For nonprofits, technology offers many avenues for storytelling, which effectively further nonprofit missions. Technology enables interconnectivity that allows ratings agencies and apps to draw data from multiple sources, consolidate it, and condense it before presenting it to stakeholders. Digital transformation positions nonprofits to have some control over the data about their organizations that are publicly available.
It’s not enough to have policies in writing. Stakeholders will be watching to see if the board handles such matters with authenticity if they should arise. Stakeholders are often aware of the board’s commitment to diversity and inclusion. Board members must be conscious that they are answerable and responsible for the board’s successes and failures.
Boards also need to develop internal controls that hold them accountable for expenditures. Nonprofit organizations need to be clear if they expect all board members to donate. The nonprofit sector also needs to be truthful about how donations are being put to use.
A good way for boards to prove transparency is to conduct annual surveys, consult stakeholders about their views on issues, strategy, and direction, and take their input into account when making decisions.
Which Companies Take the Lead in Transparency?
From making company information public to using social media in creative ways, today’s organizations are thinking outside the box when transparently sharing information with stakeholders. The following companies demonstrate that there’s no standard approach to transparency. The only correct approach is the one that works for them. Take a look at what these innovative companies have done.
Valve is a game developer corporation that started in 1996, making such electronic games as Alien Swarm and Left 4 Dead. The company decided that they didn’t want or need a hierarchy, so they don’t have one. That’s right! No bosses. Everyone’s equal. Valve has more than 300 employees, and its net worth is between $2 billion and $4 billion.
The managers at Unbounce wanted to create a content culture where employees could learn about the company’s journey through its ups and downs, so they created Inside Unbounce. This employee-based social media forum lets employees interact about work and other subjects.
Percolate, now a part of the Seismic platform, is a large branding consultancy with big clients like American Express and General Electric. They keep in touch with their employees with weekly meetings to share challenges and successes. Standard lingo is the preferred method of communication — no techie jargon is allowed in Percolate meetings.
Red Hat is a business strategy company with clients like Sprint, Adobe, and Casio. The company offers an internal “memo-list” platform where employees can chat about everything from business strategy to jokes. It gives employees an equal opportunity for management to hear their thoughts, ideas, and opinions. Management gets to vet the ideas and let the excitement build on the best ones.
Buffer thought it would be good to be transparent with all finances, including company salaries. They believe that openly publishing everyone’s salaries increases trust with employees and customers. It’s a novel idea that seems to be working for them.
Whole Foods is a health food store that came under fire for selling genetically modified foods (GMOs). The company took this criticism seriously and has a major project underway for labeling all of its products with labels stating whether or not they are GMO-certified.
Consumers not only want to know what they eat, but they also want to know what they are wearing. Patagonia takes a proactive approach to market its clothing as being environmentally friendly. They offer stories and videos where customers can trace the footprint of the garments to be assured that there is no harm done in the making of their products.
It’s long been taboo for vendors to access suppliers’ factories and distribution centers. Zappos changed all that by inviting vendors and customers to take tours of their operations. Zappos is so committed to transparency that they wrote it into their company values statement.
The management at Asana publishes detailed notes about what they discuss in board meetings and upper management meetings rather than keeping it hidden. The result is employees get firsthand information about the company’s direction and goals which motivates them to be part of the process.
Front welcomes employees into work with a weekly email from their CEO, which details the company’s goals for the week. The CEO also shares a broader update on the company’s progress toward its goals that includes input from several departments.
Wrapping Up on Board Transparency
Certain components that make for board transparency need to remain staples of every corporation, like sharing financials and policies. The standout leaders will also be accountable and encourage input from their stakeholders. Beyond these fundamental basics, the millennial generation is a work in progress, experimenting with innovative ways to share information inside and outside their companies. If we’re in luck, these sparks of creativity could be the tip of the iceberg for what the future holds in board transparency.