Volkwagen's car emissions scandal sent out shockwaves earlier this year. Thousands of individuals who work for VW, their families and their community were angered and dismayed. Millions of customers felt cheated. How Volkswagen decided to handle this drama – in particular, which information, and how much of it, to share – has been, and will continue to be, critical in its attempts to regain trust.
Of course, VW is just the latest organisation to face scandal. It is also not the first to be embarrassed by information disclosures either coming too late or not at all. Think GM and faulty ignition switches; BP and the Gulf of Mexico; Starbucks, Google and Amazon and corporation tax; Tesco and horse meat; Enron and Arthur Andersen. The list goes on.
KEEPING UP WITH THE TIMES
We asked hundreds of executives what it takes to create “authentic” organisations. Time and again, these executives said that the most admired organisations don’t do “spin”, and that the old world of corporate secrets is over. This is because the practice of “covering up” no longer works. The breadth and depth of information available today has created more knowledgeable employees, and a more knowledgeable public.
So why aren’t all companies more open in their communication? Because, despite the transformation of the information landscape, the barriers to candid, complete, clear, and timely communication remain legion. Some executives feel an obligation to put a positive spin on negative events out of loyalty. Other managers see parcelling out information on a need-to-know basis as an operational maxim. And others still practice a seemingly benign type of paternalism, reluctant to “worry” staff.
Clearly, there will always be information which is competitively sensitive, but in this new environment, organisations and their leaders need what we call “radical honesty”.
THE NEW MODEL
Radical honesty goes deeper than the modern injunction for organisational transparency. We characterise it as follows: it is proactive rather than reactive; it is speedy; it surprises people with its candour; it encourages dissent; and finally, it means engaging with employees and with a wide group of stakeholders – shareholders, customers, suppliers, regulators and wider society.
This can mean significant organisational culture change. It requires hard work, behavioural adjustment, consistent action, and free-flowing communication. But there is really no choice in a transparent world. Leaders and managers must become compelling communicators.
Novo Nordisk is an example of an early convert to radical honesty. In response to its quality crisis in the 1990s, the pharma giant significantly adjusted its culture around clarity and communication. When it decided to close down its research facility in California, chief executive Lars Rebien Sorensen flew to the facility, gathered the workforce and openly and honestly explained the reasons for the closure, the time scales involved and the ways in which Novo Nordisk would help people. The astonishing response from the employees: unanimous applause.
This is what can happen when organisations replace a climate of secrecy and suspicion with radical honesty.