Transparency in Organizations
Executive Summary
Transparency implies accountability, communication, and openness. It entails an organization operating in such a way that everyone is able to see what is happening or the actions being performed. Scholars have over the years engaged one another in debates on whether managers ought to embrace total transparency with their employees. Some scholars argue for the practice while others are against citing the negative consequences linked with it. This creates an ethical dilemma for managers. Total transparency can be beneficial to a firm. However, there are times when sharing certain information with employees can impact negatively on productivity and the edge a firm enjoys in a market. It is essential for managers to consider ethical, legal, and competitive implications of the decision to ensure transparency before determining the way forward.
Introduction
Transparency has become important to the success of companies and organizations in the contemporary world. Basically, businesses are under pressure to ensure high levels of transparency not only to improve their performances but also win public trust. Transparency implies accountability, communication, and openness (Ferrell & Fraedrich, 2015). It entails an organization operating in such a way that everyone is able to see what is happening or the actions being performed. There has many debates around whether businesses should be transparent about revenue, salaries, and other information traditionally considered confidential. There are pros as well as cons linked with a company being completely transparent about such information making hard for managers to decide on whether or not to embrace transparency (Daft, 2011). This paper intends to examine the ethical dilemma and how managers can address. It will first analyze the issue to determine why it is an ethical dilemma before providing recommendations on how it can be addressed. Stakeholders affected by the dilemma will also be examined.
Problem
As mentioned in the introduction, managers have been under pressure to share information relating to salaries, financial health, among other information considered confidential with their employees. According to Bennis (2012), managers that share such information with their workers increases chances of a company realizing high levels of success. For instance, this encourages ownership and accountability among employees. One basic assumption is that if managers expect their people to act like owners of the organization, it is imperative that they share information on how a business doing regardless of whether it is bad or good. The management must assume that its employees will treat the information as confidential to avoid the issue of it getting in the wrong hands. This increases trust among employees towards the management, hence their willingness to do everything in their power to see their business thrive. In the same regard, Bibb (2012) argues that transparency increases competition among employees. This is common when information about salaries is shared with employees. Gaining access to such information enables employees to learn what needs to be done to increase their salaries.
As postulated by Crane and Matten (2010), salary transparency also foster gender equality. The management in an organization is forced to pay its people equally to avoid issues with employees who may feel they are underpaid. Generally, men and women in the same rank and executing the same tasks are given the same salary. Correspondingly, transparency can also result into companywide accountability. People develop the feeling that they are accountable for the performance of the firm. Increased accountability in turn leads to high performances and productivity. Sharing information on the financial health of a business can also encourage employees to work hard to improve on the same especially when a company is performing poorly. A more informed workforce makes informed decisions in regards to how their company should be positioned to ensure its continued survival (Daft, 2011).
There are also downsides to the issue of transparency that leaves managers in a dilemma on whether to embrace it. Total transparency can upset employees. Piotrowski (2010) debate that companies should try their level best to keep their financial information under lock and key. Employees, unlike business owners, may lack the knowledge and skills to understand a company financial information. For instance, there is always the risk that they will not view expenses and salaries from a wider perspective. As a consequence, they can end up analyzing and worrying about things that are under control. Salary transparency can also lead to resentment. It is important for employees, investors, and customers to have up to date information on how much revenue an organization is making. Nonetheless, sharing salary information is illogical. In general, sharing salary information only promotes competition and resent as opposed to encouraging teamwork or innovation (Ferrell & Fraedrich, 2015).
Piotrowski (2010) is of the view that total transparency can also result into information overload. Employees can be overwhelmed with the information to the extent that utilizing it becomes a problem. It may also be challenging for them to determine which information is more important and which one is less important. Sharing some information can also be distracting. Employees may be concerned with what they have recently learnt about the organization to the extent that this affects their performances. There is also always the risk that some employees can decide to share the same information with the competition. For instance, a disgruntled employee can share information on the financial health of a firm as a way of getting revenge (Bennis, 2012).
It is evident from the above discussion that there are pros and cons linked with total transparency in an organization. Managers may have the desire to ensure transparency. Nevertheless, the advantages of embracing such an ethical behavior can hinder them from achieving this goal. Fundamentally, they may be concerned with the negative effects sharing certain information may have on their company’s ability to maintain a clear position in the market. It is within managers’ mandate to ensure the success of their business (Crane & Matten, 2010). As such, they avoid actions or behaviors that are harmful to a company’s edge. However, lack of transparency can easily set in motion other activities that will impact negatively on the success of the firm in question. For instance, it can promote lack of accountability among other unethical issues such as discrimination and embezzlement (Bibb, 2012).
Proposal to Address the Problem
Indeed, the issue of transparency in an ethical dilemma that managers have to deal with almost on daily basis. Public companies are expected to share information relating to their financial health with the public. The same information is used by investors when making informed decisions on whether or not to invest with the firm in question. Such rules do not apply to private companies or small businesses. Generally, they are free to make the decision on whether to share such information not only with employees but also the public. Most of them engage in the act to ensure transparency (Ferrell & Fraedrich, 2015).
There are a number of strategies that the management in an organization can employ to deal with the ethical dilemma. For one, it is essential for them to examine what the law provides in relation to transparency (Daft, 2011). Specifically, the management needs to consider what it is obligated under the law to share with its people. Failure to comply with laws can lead to a business facing lawsuits. Closely related to adhering to laws is the fact that managers can also rely on contract ethical theory to make informed decisions on the issue. According to the theory, individuals’ decisions should be dictated by agreements between people. Companies come into agreements with their people when join them. For example, managers develop contracts that determine the terms and conditions of employment. In essence, the management should share information according to what the contract provides (Leigh, 2013).
The management in an organization also needs to consider the effects a certain level of transparency will have on the overall success of their firm. Managers are expected to act in a way that ensures the continued survival of their firm. This means that they should avoid actions that can compromise a business’s edge (Crane & Matten, 2010). It is clear that sharing information on the financial health of a firm can lead to unnecessary panic or unrest among employees even when what worries them is totally under control (Bibb, 2012). Unless a company is obligated by the law to share such information, it is best to avoid sharing it as long as misinterpretation remains a challenge. Alternatively, the management can decide to share the information and help employees understand it. Employee training is of the essence (Crane & Matten, 2010).
Similarly, the management in an organization can also handle the problem by examining the consequences. The utilitarianism theory can come in handy in determining the way forward. The theory states that an action is only considered ethical if it brings happiness to the greatest number of people. Actions that make only a few people happy are considered unethical. Essentially, managers should not be self-seeking. There are individuals who have a tendency to avoid certain actions provided they do not serve their interests. This is unethical (Leigh, 2013). In regards to transparency, if sharing certain information will harm many people, the management should the same. On the contrary, if the decision will only harm a few people but benefit the vast majority, it is worth the risk. For example, if sharing salary information will only upset a few people but benefit the entire organization, the decision is worth taking. The management should also examine the impact of information leakage (Bibb, 2012).
The main steps involved in address the problem is first examining the benefits of whichever decision the management comes up with. This is then followed by the analysis of the potential costs or disadvantages (Daft, 2011). The best decision is on which the benefits of actions outweigh the costs or disadvantages. However, legal and ethical implications must also be considered. Companies have no choice but to adhere to the rules and regulations. In terms of ethics, a decision that yields the best results is considered (Gilliland, Steiner, & Skarlicki, 2011).
Stakeholder and Diversity Considerations of Proposed Plan
Various stakeholders are affected by the decision on whether or not a company should embrace total transparency. Top on the list are managers. It is the managers who make the decision on whether their company should remain ethical. Some managers choose to embrace unethical behaviors while others favor ethical behaviors such as transparency. Employees are also affected. The information required to ensure transparency is shared with employees. They can decide to utilize it as expected or misuse it (Leigh, 2013). The decision they favor depends on how they stand to benefit from the same. Some may choose to use the same to the benefit of the organization while others can behave unethically and harm their business in the process. The management and employees must work as a team when deciding the way forward. For instance, the management should reach out to its people to determine their information needs. On the other hand, employees should be share such information to enable the management make informed decisions (Crane & Matten, 2010).
Conclusion
The issue of organizational transparency has raised debates among scholars. There are those who are in favor of managers sharing financial, revenue, and other information considered confidential with their people citing the benefits associated with the same. On the contrary, some scholar argue against this considering the negative consequences a company is likely to suffer as a result. The decision on whether to remain transparency must consider legal and ethical implications. Managers must share with their people information that is considered mandatory by the law. Ethical theories and models can also come in handy in deciding the best course of action. The management should favor decisions that bring happiness to the greatest number of people. The management and employees should work with one another when deciding which information to share.
References
Bennis, W. (2012). Transparency: How Leaders Create a Culture of Candor. Sydney: ReadHowYouWant.com.
Bibb, S. (2012). The Right Thing : an Everyday Guide to Ethics in Business. Chichester : John Wiley & Sons.
Crane, A., & Matten, D. (2010). Business ethics : managing corporate citizenship and sustainability in the age of globalization. Oxford : Oxford University Press.
Daft, R. L. (2011). Understanding management. Mason, OH : South-Western Cengage Learning.
Ferrell, O. C., & Fraedrich, J. (2015). Business Ethics: Ethical Decision Making & Cases. Mason, OH: Cengage Learning.
Gilliland, S., Steiner, D., & Skarlicki, D. (2011). Managing social and ethical issues in organizations. Greenwich, CT : Information Age Pub. Inc.
Leigh, A. (2013). Ethical leadership : creating and sustaining an ethical business culture. London: Kogan Page.
Piotrowski, S. J. (2010). Transparency and secrecy : a reader linking literature and contemporary debate. Lanham, MD : Lexington Books.
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