Transparency has become a top priority in organizations around the world. Not just because the open and candid sharing of information between managers and employees to create openness and accountability is the right thing to do, but because seeing things more clearly has been shown to boost employee engagement and performance.
Studies have found that management transparency is the most significant predictor of employee happiness, and that leaders who practice transparency and positivity are seen as more trustworthy and more effective. But why is transparency such a powerful driver of employee experience?
If you want to understand what motivates and engages employees, the first thing you need to know is that human beings are inherently social. Our brains are highly attuned to social information, and we’re sensitive to five categories of social threat and reward in particular. These five domains are captured in the NeuroLeadership Institute’s SCARF® Model: Status, Certainty, Autonomy, Relatedness, and Fairness.
Research shows that when the brain registers a social threat in one of these five domains, it responds just as it does to physical pain, triggering changes in the prefrontal cortex that undermine our ability to collaborate with others and forge trusting relationships. When the brain perceives a social reward in one of these domains, on the other hand, we not only find it incredibly motivating, but our ability to engage in problem-solving, collaboration, and creative thinking is enhanced.
Two of the five SCARF® domains are particularly relevant to management transparency: Certainty and Fairness.
Transparency and Certainty
Certainty, the C in SCARF®, refers to our need to understand what’s going on and to predict what will happen in the future. The open and transparent sharing of information, in turn, is crucial for creating certainty.
When employees feel out of the loop, studies show, they trust managers and colleagues less, feel less company loyalty, and they are less motivated to perform. In one study, feeling out-of-the-loop correlated with a 58 percent drop in perceived group standing — an employee’s perception of where they rank compared to others.
That’s because for most people, the brain perceives ambiguity as inherently threatening, and employees tend to interpret a lack of information as social rejection — even when it happens inadvertently. As we say at the NeuroLeadership Institute: “If you’re not actively including, chances are you’re inadvertently excluding.” So when leaders don’t keep their teams informed, employees feel anxious and demotivated.
The solution is to create certainty by keeping employees in the loop. That doesn’t mean every employee needs to be invited to every meeting or copied on every email — overinclusion is just as much a risk as exclusion. To create certainty, leaders should proactively share information and make a point of explaining their thought processes — connecting the why to the what.
Transparency and Fairness
The other reason transparency is so motivating is that it creates a sense of fairness — the F in SCARF®. We all have an innate desire for equitable treatment, and a lack of transparency can threaten that need — a particular risk when it comes to performance management. Employees can feel that the performance evaluation process is unfair, for instance, when they don’t understand how a decision about a promotion was made, the factors that contributed to it, and how they were assessed against their performance objectives.
The good news is that leaders and managers can demonstrate fairness in a performance evaluation by articulating the reasoning behind their decisions so employees have the full picture. Signaling transparency and openness in this way creates that sense of fairness — a state that’s deeply rewarding for the brain and highly motivating for employees.
Related to management transparency is radical transparency, which means not just keeping employees in the loop, but making all decisions in public and sharing as much information as possible.
Radical transparency can increase engagement and help recruit talent, and research shows that firms that are transparent in how they report earnings do perform better. And when companies publish their employees’ salaries, it certainly helps ensure that underpaid groups like women and people of color are compensated fairly.
But unlike management transparency, pay transparency can make employees feel like they’re being treated less fairly because they see that others are making more money — especially since illusory superiority bias ensures that we all overrate our own abilities. In fact, a 2015 study found that pay transparency reduces productivity and increases absenteeism among the lowest-earning employees.
Transparency and Creativity
New research suggests that management transparency may even make employees more creative. A 2017 study published in The Journal of Leadership and Organizational Studies found that “transparent leadership” — when leaders share information, reveal the reasons behind their decisions, and express their true feelings and vulnerabilities — it boosts employee creativity by instilling a sense of psychological safety.
Human beings are most creative when they feel safe to take risks without fear of being penalized for making a mistake or challenging the status quo. When leaders are open and honest about their own mistakes, challenges, and emotions, it encourages employees to do the same, creating a safe climate for employees to test and experiment, knowing that whatever the outcome, trying something new always yields valuable insights.
The research is clear: When employees trust leaders and feel they’re being dealt with honestly and that management trusts them with critical information, they’re happier, more productive, and more creative. Best of all, being transparent costs leaders nothing — making transparency one of the most cost-effective ways to invigorate a workforce.