PRDV008: Preparing and Delivering Presentations

Transparency in organizations is the extent to which its actions are observable by outsiders.

Learning Objectives

Define transparency and identify how it is determined by organizations' communication strategies and practices

Key Takeaways

Key Points

• Being transparent means operating in such a way that an organization 's actions are visible to outsiders.
• An organization's communication norms and practices determine its degree of transparency.
• Transparency has three primary dimensions: information disclosure, clarity, and accuracy.

Key Terms

• transparency: Figuratively, openness and accessibility.

Transparency in organizations is the extent to which its actions are observable by outsiders. It is a consequence of regulation, social expectations, and explicit policies that establish the degree of openness to employees, shareholders, other stakeholders, and the general public. Transparency is an essential part of accountability since it allows for judgments about whether an organization is achieving its objectives and living up to its obligations and espoused values. Because transparency is the perceived quality of intentionally shared information, an organization's communication practices and norms play an important role in shaping the visibility of its actions.

Transparency has three primary dimensions: information disclosure, clarity, and accuracy.

Information Disclosure

Information disclosure includes choices about what types of information is shared and with whom, the content of what is communicated, and the timing of the release of information. For example, managers who voluntarily share with environmental activists information related to the firm's ecological impact are practicing disclosure. Information can be a source of power, so people may hoard it to increase their influence over others; this tactic reduces the amount of transparency. Some information is private, such as personnel matters, or commercially sensitive, like strategic business plans. Norms and policies about disclosure focus on criteria such as relevance and appropriateness to determine who should have access to what information.

Clarity

Clarity refers to how easily comprehended the information or communication is. Managers who limit the use of technical terminology, fine print, or complicated mathematical notations in their correspondence with suppliers and customers are employing clarity. Communication practices that value quality of expression, attention to the needs of different audiences, and sensitivity to cultural and other differences can help make an organization more transparent.

Accuracy

Accuracy means that available information has integrity, is truthful, and faithfully represents organizational decisions, policies, and practices. Where there is transparency, managers do not bias, embellish, or otherwise distort facts with the aim of misleading or misrepresenting reality. Organizations that value honesty, trust, and ethical practices encourage accuracy and thereby increase their transparency.

Examples of Corporate Transparency

Examples of decisions to increase corporate transparency include when a firm voluntarily shares information about their ecological impact with environmental activists; actively limiting the use of technical terminology, fine print, or complicated mathematical notations in the firm's correspondence with suppliers and customers; and avoiding bias, embellishment, or other distortions of known facts in the firm's communications with investors.

Wage disclosure is one particular area in which companies can practice corporate transparency. For example, in the UK, employees outside the boardroom are currently granted anonymity regarding pay levels. In 2009, UK city minister Lord Myners proposed that the pay and identity of up to 20 of the highest-paid employees at British companies be disclosed; he also called for employees' salary ranges to be disclosed. Following these guidelines would increase transparency: the public would have access to compensation information now kept from public view. Similar proposals have become increasingly common as high executive pay levels have come under increasing scrutiny. In this case, it is unlikely that disclosure will be made a legal requirement in the UK; the hope is that companies would voluntarily accept this higher level of transparency.