Why greater transparency of company performance isn’t what we need yet

The world is demanding more transparency from organisational leaders — to see the truth about how organisations are performing. A 2016 Transparency International report found that three quarters of a global sample of multinational corporations scored less that 5 out of 10 on their transparency index. As they attest, organisational transparency has an important role in freeing society of corruption. But throwing a light on the measures of company performance also has a dark side.

Judging too quickly, on too little evidence

We all have a natural tendency to judge a situation or person based on very little evidence. When an organisation’s performance is on display, we do the same thing. We look at short term results, at just a few pieces of evidence to conclude whether or not the leaders are doing a good enough job.

When scrutiny and judgement is what follows greater transparency of organisational performance, it’s no surprise that many leaders lay awake at night, panicked by what it might reveal and how they might be held to account. They know how harshly they can be judged – by regulators, government, investors, the media, the public – on short term and isolated results. And this scrutiny and judgement distracts them from fundamentally improving organisational performance.

The dark side of making performance transparent

Professor Sir Mike Richards, Chief Inspector of Hospitals with the Care Quality Commission in the UK, says “There can be no improvement without real transparency on performance combined with the desire to understand and learn from the resulting information.” But, as reported by Gwyn Bevan, Professor of Policy Analysis with the London School of Economics and Political Science, when hospitals are judged on patient mortality rates, it has caused some to refuse to accept patients with more complex health issues, or to send patients home too early, to keep the mortality rates lower. It takes time to fundamentally elevate organisational performance, but if the focus is on short-term targets, transparency can drive problems underground.

Performance must be transparent to be improved

In a world that’s quick to judge and quick to hold leaders to account, measuring performance is a double-edged sword. Performance measures are both a tool in our hand and a rod for our back. But we cannot have informed decision making without transparency. This puts organisational leaders in a very challenging position. Authors Jeffrey Pfeffer and Robert Sutton say it this way:

“The implication is that leaders need to make a fundamental decision: do they want to be told they are always right, or do they want to lead organizations that actually perform well?”

The courage to measure what matters

In truth, most of us would like it both ways: to always be right and to have an organisation that is performing well. But we need to decide what’s more important. Our world needs more courageous leaders who take the second decision, like Rand Fishkin of SEOmoz, who publicly posts his own performance review: “…it’s performance review season here at SEOmoz, and since transparency is a core value for us, I’d like to share my personal performance review…” Our world needs more leaders who, despite the criticism and judgement of others, do the right thing to lead high-performance organisations.

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Written by: Stacey Barr, one of the world’s leading specialists in business performance measurement and KPIs.