FROM SOCIAL MEDIA TO INVESTOR RELATIONS, HOW TRANSPARENT COMMUNICATION IS INFLUENCING 21ST CENTURY BUSINESS
During the first decade of the 2000’s, “transparency” has been getting a lot of attention, both for its potential to make businesses smarter and more accountable, and for its potential to create problems within a company. On one hand, a transparent business is likely to improve its financial performance, customer satisfaction, and communication with employees. On the other hand, transparency can attract negative attention or prompt non-customers to demand even more openness. To get a feel for how Texas businesses are dealing with transparency, corporate executives met in a roundtable in Austin. The participants included Randy Cohen, Chief Energizing Officer, Ticket City; Henrik Johansson, President & COO, Boundless Network; Jim Clishem, President & CEO, Active Power; Kenneth Jennings, CEO, Mr. ReKey Locksmith Services; Anurag Kumar, CEO, ITexico; Mark McClain, CEO & Founder, SailPoint; Allen Gilmer, CEO/Chairman, DrillingInfo; Stacy Armijo, General Manager/Austin, Pierpont Communications. Texas CEO Magazine’s Editor At Large, Jason Myers, moderated the session.
Participants agreed that transparency is, overall, a good thing. Randy Cohen of Ticket City said employees are empowered when an organization is open about its affairs.
“I call it an ‘open book’ philosophy,” he said. “If you walked into our office, you’d know everything about everything that’s going on.” His employees might not know payroll, but they do know about sales figures. “With no secrets, people feel comfortable,” he added.
Furthermore, transparency enhances teamwork, said Ken Jennings of Mr. ReKey. “When people feel a part of the team and they know what’s going on, they will get involved and they can see their impact,” he remarked.
But for business owners, transparency can be uncomfortable, because everything is out in the open. Jennings said that can make you better at what you do.
“It forces you, as the owner, to make sure all your t’s are crossed and your i’s are dotted,” he said. “Transparency is a protection for you and forces you to go further. When you’re transparent, it makes you better.”
But it can also make a company’s affairs more visible. Jennings noted that the “cloud” – the storing of data online – makes transparency easy because different people on different platforms can see what’s happening.
“Things are not getting less transparent, they’re getting more transparent,” he said.
Allen Gilmer of DrillingInfo said his business was founded on transparency. In the oil and gas business, some people knew what was going on and some didn’t. But while a lot of information is shared internally, it’s important to limit the amount of information that goes out. “In our company everyone has to sign a confidentially agreement,” Gilmer said. “We don’t share our future outside the company – we’re very open within the company because they have to be involved, but we do create a wall to the outside and manage our communication.”
“It’s key to differentiate between internal transparency and external transparency,” said Anurag Kumar of ITexico. “As an employee you are entitled to information relevant to you and the company. But your customers and vendors may not be entitled to all that information. Also, when you share sensitive information about strategy, product directions, customers, policies with your employees, it does not give them the right to share that information outside the company and you do have to draw that line.”
Henrik Johansson of Boundless Network offered another viewpoint. “Transparency is easy when everything is going well and you’ve had a good quarter, it’s more challenging when it’s not going as well,” he said. “Many of us were running companies during the bust. I was running a company where our funding fell apart, and we had to fire a bunch of our people. I found that in that situation, transparency was even more important because the people who were there were able to see where this shift was going; we focused on strict transparency because that was the only way to keep anyone.”
He said employees were told how much funding was left, how much longer the company could operate, who was looking at buying the company, and what their severance package looked like if the company didn’t succeed.
“It worked very well in a really tough situation and created a great team environment,” he said. “With transparency everyone had visibility and could focus on getting the job done. Without it we would likely have had a mass exodus of talent. It’s easier when things are good, but even more important when things are bad.”
The explosive growth in social media such as Facebook and Twitter adds to the public demand for more transparency. In the public relations field, social media is regarded as a necessary tool, said Stacy Armijo of Pierpont Communications.
“We have a code of conduct and it does apply to social media,” she said. “We don’t share competitive information and we treat each other with respect. So, treating others with respect applies to social media, too. Our rule is, if they can tie it to you, they can tie it to Pierpont, and if it can be tied to us, it needs to be appropriate business behavior.”
“We use Twitter, Facebook, and LinkedIn to listen to our customers,” said Active Power’s Jim Clishem. “I would also consider members of the media and industry analysts key stakeholders. We regularly connect with these individuals to solicit their input and better understand what they’re hearing from end users and competitors in the marketplace.”
The younger employees in a company are the ones who tend to spend more time on Facebook, said Kumar. The company must have clear policies in place or social media use within an organization “can get out of hand.”
What about monitoring employees’ use of social media? Mark McClain of SailPoint said his company treats employees like adults.
“We don’t monitor Facebook usage, or other Internet usage for that matter,” he said. “They [employees] get paid to get the job done and most of what they do can be done at any time of the day or night. So, if they choose to surf some during the day, that’s fine as long as they’re delivering the results we need.”
Armijo said most companies don’t monitor their employees’ social media activity.
“Until it rises to their attention,” she said, “unfortunately usually for a negative reason, they are not engaged. Sometimes it’s not even intentional, like a salesperson putting something on Twitter about being excited after a sales meeting and telling too much to a competitor.”
“If you’re a salesperson, don’t post you’re going to Boston today,” McClain responded. “People were so innocent when social media first started – they were telling the competition where they were going and who they were seeing.”
“It’s key to differentiate between internal transparency and external transparency,” Kumar remarked. “As an employee you are entitled to information relevant to you and the company. But your customers and vendors may not be entitled to all that information. Also, when you share sensitive information about strategy, product directions, customers, and policies with your employees, it does not give them the right to share that information outside the company and you do have to draw that line. Employees have the right to know what’s going on with the business, but to share it on Facebook, Skype, IM or LinkedIn can be harmful, so you do need to have a policy.”
Younger employees who are used to using social media constantly are most likely to cross the line, said Johansson.
“We have a relatively young crowd at Boundless and we do a lot of happy hours, events, etc. at our corporate office,” he said. “Our employees are having fun and they were tweeting about it and posting on Facebook. The rest of our employees out in the field got the impression that we were just partying at corporate and nobody was answering the phone. We didn’t create a formal policy, but we did clearly communicate that there are things you probably shouldn’t be talking about on Facebook or LinkedIn.”
Clishem said it often depends upon the social media platform: “We’ve had a lot of policy discussions on topics like, ‘Do you accept a LinkedIn connection from a customer or partner?’ Probably. ‘Do you accept a friend invitation on Facebook from a customer?’ I believe it depends on the relationship with that particular customer, but in most instances, probably not. I believe this is where you draw the line because Facebook is more personal than professional.”
In a similar vein, employee blogs drew a mixed reaction. McClain related his experience at Sun Microsystems, when employees were allowed to blog.
“There were instantly 2,000 bloggers during a time when things were not going well at the company,” he said. “There was a lot of negative stuff about what was going on inside. On the one hand, you feel people should have a right to express their opinions, but it doesn’t always work too well, especially when the policy is you can say whatever you want.”
With that many people speaking negatively about the company, customers began raising their eyebrows. McClain said this is where you draw the line.
“Ultimately,” he said, “you’re killing yourself with the customers. It’s good to hear your employees and deal with issues, but something like that is over-transparency.”
Eventually, the press started picking up on the dissension within Sun, McClain said. Drilling Info’s Gilmer said when the media becomes involved, it’s important to have a unified message.
“The concept of open communication in my office one-on-one in the office is great,” he said. “I want to hear what everyone has to say. But when we’re outside of the management group, I don’t want the senior managers moaning and groaning and arguing about direction because the employees think they don’t know who’s driving the bus.”
Clishem offered some advice on dealing with the media in times of crisis.
“It’s important you designate a team of people who are able to respond,” he said. “From there, identify your spokesperson and one or two other individuals authorized to speak on behalf of the organization in the instance the designated spokesperson is traveling. This team needs media training so they can handle the emotional issues or the tough public issues.
“The question we ask first is, ‘Does this qualify for a response?’ If there is a public statement we feel strongly about or is false and deemed detrimental to the company, then we develop a plan and a response with a few considerations in mind. This includes transparency with full disclosure that whoever responds on the organization’s behalf makes clear they’re representing the organization.”
Clishem added that it’s a good idea to reinforce the response by citing credible sources with relevant data points. The response should be positive and professional in tone that reflects well on the organization and its mission and values.
“I always believe you should circle back with that reporter, blogger, analyst, etc. and this is where a good communications professional can be valuable,” he said. “If the professional or the PR agency has a good relationship with that particular individual, they can help clarify issues or ensure corrections are made to a particular article or blog posting if it’s not accurate.”
The key is to respond in a timely way, Clishem said. The worst thing that can happen is propagating another error.
Making a story bigger than it already was is a common mistake, Armijo said: “Some blogger that has two friends puts something on a website somewhere, and then the company issues a press release that what the bloggers said is not true. Suddenly, the whole world knows what’s not true.”
Kumar added: “You want to have a few point people at a company who can share internal company information with the media. We’ve always had one or two focal point people to deal with the media. It’s risky to let everyone within the company to open up to media either directly or through social channels.”
Transparency is important in the way a company deals with regulators, observed Clishem.
“For us as a public company, there are certain things you can and cannot say due to regulation,” he said. “When you don’t disclose information and the market is surprised, it’s much more detrimental than if you disclosed the bad news. From an investor perspective, there needs to be a window into what the company is about and not just financial numbers. Transparency doesn’t mean sharing confidential information, but rather providing insight into management’s thinking.”
He went on: “Here’s an example: At the end of last year, we had 181 employees and plan to add 70 people this year. That is a big jump in this economy and I was worried about the culture. Every quarter, we hold an earnings call with Wall Street and a quarterly update for all of our employees. We disclosed this information to our employees, which some saw as risky. We’d rather have the trust of 99 percent of our employees than worry about the one percent who might disclose something.”
Johansson cited another downside to transparency.
“Transparency is easy if it doesn’t cost you anything. Right now we have a situation where transparency is required, but that transparency is going to cost us something. When we started five years ago, the market conditions were more favorable and we were able to enter into very profitable deals in some of our customer segments. Now it’s a more competitive marketplace and we’re being much more aggressive in our new agreements. We know it’s just a matter of time before the customers with the old terms recognize that there are better deals out there. How do we bite the bullet? The risk is, the old guys leave and get a new deal with somebody else. At what point do you cannibalize yourself and offer a less profitable deal to your customer?
McClain suggested that transparency could work in that situation, too.
“You do have to think about how to manage into the right solution,” he said. “If they have been a good partner, you sit down and say, ‘You have been a good partner and here is our problem and I want your help to address this issue.’ Treat a partner as if they are an extension of your company by saying, ‘It would be good for us to stay together and the market has changed. What’s attractive to you and to me is to turn that revenue stream into something more long term that we can both count on.’”
Overall, the group agreed that transparency is beneficial.
“I’ve seen the benefits of people being engaged and committed to the business by sharing information,” Clishem said. “Keeping information away from people can generate rumors and confusion, which destroys both teamwork and results.”
Kumar added: “I’ve seen by not having transparency you create silos in an organization. Employees do talk to each other and they usually share a lot of internal information with each other, so you, as the leader, should be the one who shares the information first and gains their trust. When you do that productivity goes up, people are motivated to come to work and they are complaining less.”
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