2014-03-19 06:09:02
By Elizabeth MacBride
GM CEO Mary Barra has been unusually transparent with her handling of GM's 1.6
million vehicle recall due to faulty ignition switches. (Daniel Roland/AFP/
Getty Images)
Car giant General Motors is in the midst of a major recall after a faulty
ignition switch was linked to 12 deaths. The firm s embattled chief executive
officer, Mary Barra, who was not CEO when the vehicles were manufactured, has
been unusually transparent, taking the unorthodox step among industry
executives of issuing a public apology and going beyond her predecessors in
issuing recalls and launching internal reviews.
Some say her actions illustrate an increasingly popular model for company
leadership and corporate culture: transparency. To establish (or re-establish)
customer trust, companies are adopting as open and honest a stance as possible,
even about their biggest challenges. Consider Barclay's Antony Jenkins, who
recently made headlines by speaking frankly about his company's struggles to
lower its bankers' compensation.
The openness is in sharp contrast to companies such as energy giant, BP after
its handling of the 2010 oil spill in the Gulf of Mexico was widely criticised.
Clear advantage
Some technology companies have to build transparency into their business model.
In London, almost 500m has been lent on peer-to-peer web site Zopa. It matches
high-quality lenders and borrowers based on their reputations. Trust is
developed over time, enabling people on the site to bypass traditional banks
and save on fees (Zopa charges 1% to lenders annually and a fee to borrowers.)
It s still too early to say whether the change is more than skin-deep or
whether more transparency actually brings more honesty, but observers say
change is afoot.
"This is something that has bubbled up (in corporate culture)," said John Wood,
vice chairman of Heidrick & Struggles, an executive search firm with 53 offices
on six continents. Many are wearing their candour now as a badge of honour,"
he said.
Candour and transparency are becoming buzzwords for more than just crisis
management. Some companies are taking an any-question goes approach to their
town hall meetings with employees (the new CEO of Heidrick & Struggles, Tracy
Wolstencroft, held one), while California-based clothing company, Patagonia,
details all of its tricky supply chain decisions in its Footprint Chronicles.
Two significant, driving forces have likely driven the corporate emphasis on
more transparency, said Peter Stringham, the CEO of global advertising agency,
Young & Rubicam Group.
First, there s a loss of trust. Some of the world s biggest companies, from
banks to retailers, are struggling to regain customer faith after the 2008
credit crisis sent trust in big brands plummeting. Research by New York
City-based BAV Consulting found trust in the world's 3,500 brands dropped
pre-and-post-financial crisis to 25% from 50%, with only one company in five
among the top global brands deemed as trustworthy in 2013.
"The question of trust is connected to transparency," said Stringham, noting
that they are correlated in BAV's data. Only 7% of financial services brands
were found trustworthy by global consumers in 2012.
Second, technological advances have both enabled greater transparency and
enforced it. The ubiquity of business news and social media have pushed through
greater honesty since the instant feedback holds companies accountable.
"You really can't sweep something under the rug, said Wood. Maybe you're
going to act in a more principled way."
Too good to be true?
It's hard to tell if the shift toward greater transparency signals that the
business world is actually placing more value on honesty. But there are scraps
of evidence the big business mindset is changing.
"An increase in honesty is becoming apparent as a result of increasing
transparency in business," said Roger Steare, who runs an eponymous
London-based consultancy, is on faculty at London s Cass Business School and
goes by the moniker The Corporate Philosopher, by email.
More than 100,000 people from around the globe have taken Steare s assessment
of their values, including honesty. A total of 1,886 senior bankers who
answered this MoralDNA psychometric assessment in 2010 were 5% below the
average of all professions. Yet by 2013, the bankers as a group were scoring
25% more than the average in terms of their value of honesty.
Cultural change
Lasting cultural change comes when executives hire people who make decisions
that weigh short-term gain against the long-term, but hazier, value that comes
from being transparent and honest. Cases like the British Petroleum oil spill
offer evidence of the damage that comes when the public perceives a company
culture that isn't transparent and honest.
"It's the culture of individuals making good decisions day after day that
really manages the risk," said Neil Neveras, Deloitte Consulting LLP s global
practice leader for leadership development and succession. Neveras works with
financial services companies on balancing risk management and growth.
Psychologist Marisa Paterson, vice president of London-based Kaisen Consulting
US Inc, teaches leaders how to build a mental map of the traits they want to
bring to the workplace, such as broadmindedness and transparency.
"Then, through a series of exercises (we work on) getting leaders to apply the
expert schema to their own experience," said Paterson.
The strongest case for transparency may come from the success of new brands
that build transparency into much of their business dealings. Online shoe
retailer Zappos is one such company. The US based company makes all its
employees available to the media and holds quarterly free-for-all meetings
(customers can attend, too). BAV Consulting's data named Zappos among the 20
brands that built trust fastest in the past five years.