Lack of transparency

From CEOpedia | Management online

Transparency is understood as open communication and explicit decision-making processes in the organization. Transparency is very important aspect in management. It brings many benefits for the employee, for the management and for the whole organization. Furthermore, it is one of the most important things in organizing teamwork. It has an influence on cooperation, efficiency and results of the company (Schwarcz D., 2013).

Lack of transparency is major ethical problem in management and leadership in complex organizations. It often leads to large consequences - not only for the employee but also for the management. Negative effects of lack of transparency include:

  • communication barriers, miscommunication, false information - for example: employees don't know how to perform the task / staff doesn't provide precise and clear information. Poor communication leads to gossip, quarrels, blaming others and, at worst, to long delays,
  • lack of trust between parties involved in negotiations or cooperation,
  • lack of loyalty between team members,
  • permanent damage to company brand and perceived value of product or services,
  • financial or production scandals (i.e. Volksvagen's dieselgate),
  • stricter government regulation and controls over untrusted industry,
  • decreased level of motivation, productivity and effectiveness,
  • alienation, lack of identification with the company,
  • etc.

Lack of transparency examples

Lack of transparency is a major issue in many countries, as it can inhibit the free flow of information and lead to corruption, oppression, and mismanagement of resources. It can lead to a lack of trust between citizens and the government, as well as a lack of accountability and poor governance. Transparency is essential for a functioning democracy and the maintenance of human rights. Examples of where lack of transparency can be a problem include:

  • In government processes, lack of transparency can lead to citizens not having access to information about how decisions are being made and how resources are being allocated. It can lead to cronyism and corruption, as well as a lack of public oversight and accountability.
  • In business and industry, lack of transparency can lead to monopolies and unfair labor practices. Companies can use their financial power to manipulate the political system, leading to laws and regulations that favor their interests over the interests of the public.
  • In the media, lack of transparency can lead to censorship and a lack of freedom of expression. Journalists can be pressured to not report on certain topics or to report only what suits the interest of powerful individuals or organizations.

Examples of lack of transparency in business

  • Hiding financial information: A company may not disclose financial information such as earnings, expenses, or debts, which can make it difficult for investors and shareholders to evaluate the company's performance and make informed decisions.
  • Concealing business practices: A company may not disclose information about their business practices, such as how they source their materials or how they treat their employees. This can make it difficult for consumers and other stakeholders to evaluate the company's ethics and values.
  • Not disclosing conflicts of interest: A company may not disclose conflicts of interest, such as when a company leader has a financial stake in a business decision.
  • Lack of transparency in mergers and acquisitions: Companies may not disclose enough information about the terms and conditions of a merger or acquisition, which can make it difficult for shareholders to understand the impact of the transaction on their investments.
  • Lack of information about political lobbying: Some companies may not disclose the amount they spend on lobbying or the specific issues they lobby for, which can make it difficult for the public to understand the company's political influence.
  • Not providing enough information in the supply chain: Companies may not disclose enough information about their suppliers, the conditions of their factories, or the environmental impact of their products, which can make it difficult for customers and investors to understand the company's impact on society and the environment.

Lack of transparency in business

Lack of transparency in business can have several negative effects, including:

  • Lack of trust: When a business is not transparent, it can be difficult for stakeholders to trust the company and its decisions. This can lead to a loss of customers, investors, and partners.
  • Miscommunication: Lack of transparency can lead to miscommunication and misunderstandings between different departments, employees, and stakeholders.
  • Lack of accountability: When a business is not transparent, it can be difficult to hold leaders and employees accountable for their actions, which can lead to poor performance and inefficiency.
  • Legal and regulatory issues: Lack of transparency can lead to legal and regulatory issues, as companies may not be in compliance with laws and regulations that require transparency.
  • Reputation damage: Lack of transparency can damage a company's reputation, as it can be seen as hiding something or being untrustworthy.
  • Inefficient decision-making: Lack of transparency can also make it difficult for business leaders to make informed decisions. Without access to accurate and complete information, leaders may make decisions that are not in the best interest of the company or its stakeholders.

Advantages of transparency

Each company and organization should be transparent. There are many economic and moral arguments why transparency is important in business, for example:

  • Clear atmosphere - at work, we spend an average of 8 hours per day. It's important to feel comfortable and have good communication with colleagues and management. Encountered difficulties and stress are better tolerated.
  • Higher quality - employee who knows exactly how to do his job has a chance to do it as well as possible. If the employee knows the scope of the work and the final goal, he can affect not only the performance of the current task, but also the work of colleagues or the action plan. With each subsequent task, he can do the work faster and better.
  • Motivation - transparency in company can increase integration. Employees are more willing to take part in projects. They try to do them the most accurately to achieve the set goals. They want to improve their results.
  • Involvement - organizations more often informing their employees about the basics and stages of project creation. They try to involve people as much as possible in all aspects of planning and decisions. Thanks to this increases responsibility and commitment, retains your best employees.
  • More loyalty - effective communication build a sense of identification between employee and leadership. Team who identifies with the company's values is hard-working and loyal (Dubbink W.,Graafland J.,van Liedekerke L., 2008).
  • Greater profitability - a lot of polls indicate at least two-thirds of consumers would spend more if it meant buying from a transparent company. Transparency means that the company is better perceived and attracts to contractors.
  • Control - when you encourage to be honest and the sharing of information on every level of your company, you build the way for understanding of company goals.
  • Enjoying the results - awareness of the work progress allows you to enjoy the achieved goals. One success is the desire to implement the next major projects.
  • Company image - employee who does his job well and respects the prevailing rules in the company is her best representative. Additionally, the company is better perceived by the environment. Thereupon it raises credibility and willingness to cooperate. Satisfied team = satisfied customer.
  • etc.

Disadvantages of tranparency

Transparency can have several disadvantages, including:

  • Privacy concerns: Transparency can lead to a loss of privacy for individuals and organizations, as sensitive information may be made publicly available.
  • Increased scrutiny: When information is transparent, it is more likely to be closely examined and criticized, which can be stressful for organizations and individuals.
  • Vulnerability to hacking: When information is made available online, it can be vulnerable to hacking and cyber attacks, which can lead to data breaches and loss of sensitive information.
  • Lack of nuance: Transparency can lead to a lack of nuance and context in the information that is made available, which can make it difficult for people to fully understand the information.
  • Misinterpretation: Transparent information can be misinterpreted or taken out of context, which can lead to confusion and misinformation.
  • Ineffective for some decision making: In some cases, transparency can lead to a lack of privacy, security, and efficiency in decision making, which can lead to the wrong decision being taken.

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Author: Ewa Wójcik