Transparency is defined as the availability of group specific information to those outside of the group (Bushman, Piotroski, and Smith, 2003). Organizational transparency is when the organizations information is produced, gathered, validated, or disseminated to outside participants (Bushman, Piotroski, and Smith, 2003). Transparency can allow for businesses and individuals to get speedier feedback on products and services (Bennis, 2013). Stakeholders have a right to information concerning the company, brand, and potentially stocks. Transparent organizations allow for stakeholders to gain proper insight into the workings and issues that are relevant (Dubbink, Graafland, & Liedekerke, 2008). Transparency is beneficial for companies in that it helps them to distinguish themselves from similar companies by enhancing innovation (Dubbink, Graafland, & Liedekerke, 2008). Being transparent and informing consumers and partners of important business aspects can be seen as an ethical approach (Dubbink, Graafland, & Liedekerke, 2008). For a leader, being transparent creates trust, honesty, accountability, and responsibility (Dubbink, Graafland, & Liedekerke, 2008). Morally, transparency is important considering it can affect personal integrity, attitude, and organizational commitment (Dubbink, Graafland, & Liedekerke, 2008).
An example of a transparent organization is the travel agency, which moved from traditional travel agencies to online digital offerings. As an online organization, prices, reservations, itineraries, suppliers, and competitive disadvantages became transparent and disrupted traditional sales and business (Granados, & Gupta, 2013). With technology and the internet, business transparency is crucial and business leaders need to understand the power in which transparency enables loyal followers (Bennis, 2013; Dubbink, Graafland, & Liedekerke, 2008). Using digital networks as a transparent company generates sales for new and potential consumers who desire unbiased information and offerings from all vendors (Granados, & Gupta, 2013).
Complete transparency, however, has its setbacks. Companies could lose freedom, secrets, and privacy because of this. Being transparent could conflict with leaders’ moral principles (Dubbink, Graafland, & Liedekerke, 2008). If companies are transparent, consumers can gain knowledge and shared information about products that are available (Dubbink, Graafland, & Liedekerke, 2008). Digital transparency also effects competition as businesses can view, compare, and match competitor prices to their advantage (Granados, & Gupta, 2013). Full transparency may distract consumers and stakeholders from focusing on more important items and information (Dubbink, Graafland, & Liedekerke, 2008). If a company desires to become transparent, it should respect the freedom of both stakeholders and individuals (Dubbink, Graafland, & Liedekerke, 2008).
Bennis, W. (2013). Leadership in a digital world: embracing transparency and adaptive capacity. MIS Quarterly, 37(2), 635-636. Retrieved from http://misq.org
Bushman, Robert M. and Piotroski, Joseph D. and Smith, Abbie J., What Determines Corporate Transparency? (April 2003). Available at SSRN: http://ssrn.com/abstract=428601 or http://dx.doi.org/10.2139/ssrn.428601
Dubbink, W., Graafland, J., & Liedekerke, L. (2008). CSR, Transparency and the Role of Intermediate Organisations. Journal Of Business Ethics, 82(2), 391-406. doi:10.1007/s10551-008-9893-y
Granados, N., & Gupta, A. (2013). Transparency strategy: competing with information in a digital world. MIS Quarterly, 37(2), 637-641. Retrieved from http://misq.org
Dr. Elijah Clark (February 10, 2015). Transparency in Organizations [Web log post]. Retrieved from http://elijahclark.com/transparency-organizations/