Transparency Is the Smartest Strategy When Business Is Bad | Entrepreneur

Due to a broad array of economic conditions, many businesses have experienced financial challenges in recent times. Even if your company has been spared from the worst of these economic effects, you will inevitably encounter serious obstacles at some point during your career.

As a leader, there are different ways to handle these challenges in terms of how you keep your employees informed. Some may think it’s best to hold unfavorable information close to their chest, either to keep morale high or to protect their employees from stress. These types of leaders may feel it is their responsibility to protect their team or believe that presenting challenges could ding their reputation.

Mark Zuckerberg recently made headlines when announcing 10,000 more layoffs at Meta, writing “I recognize that sharing plans for restructuring and layoffs months in advance creates a challenging period. But last fall, we heard feedback that you wanted more transparency sooner into any restructuring plans, so that’s what I’m trying to provide here.”

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A growing consensus — Zuckerberg apparently now included — believes that transparency during challenging financial times is the best leadership strategy. When you are transparent with your employees about the hardships your company faces, you could see benefits in unexpected ways. Here are five reasons why transparency is the best route when your company is facing challenging times:

Transparency builds trust

Trust is a fundamental building block in any relationship, and it is difficult to overstate the importance of trust in the workplace. Companies with high levels of trust have more productive employees, less turnover and increased morale.

However, a relationship built on trust requires honesty, vulnerability and most importantly, transparency. Challenging or stressful times can be one of the best opportunities to display transparency as a leader and can improve levels of trust among your employees for years to come.

A recent study of hundreds of employees across the United States found that employees working for companies that prioritized transparent communication during times of organizational change were more likely to trust their employer and were more open to organizational changes.

When employers meet regularly with their employees to transparently communicate about financial challenges, the organization as a whole will likely experience a higher degree of trust. Take any financial challenges you may be experiencing as an opportunity to build trust and it will pay off in the long run.

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It builds empathy for you as a leader

Times of stress and crisis remind us of our shared humanity and can lead to increased displays of kindness and empathy. Empathy in the workplace is important because it boosts employee engagement and loyalty.

As a leader, you should not shy away from vulnerability during challenging financial times, as sharing your fears and emotions with your team can promote feelings of empathy within your company. When you communicate the company’s immediate needs with your employees and honestly relay what is at stake, your employees will be able to understand where you are coming from and be more willing to work hard to overcome these obstacles.

Building an empathetic workplace environment goes both ways, so be sure to provide your employees with a platform to express their emotions regularly. When all parties feel listened to and understood, your company will see concrete benefits.

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Everyone can learn from the mistakes made along the way

Knowledge is power. When a leader holds challenges close to their chest, nobody can learn from their mistakes.

Instead, make a habit of regularly reviewing your company’s progress, and open up a dialogue with your employees about what was done well and what could be improved in the future. Giving your team members the platform to express themselves helps you and the rest of your workforce identify where mistakes might have been made along the way.

More importantly, it provides everyone with the opportunity to learn from these mistakes. When employees are in a situation where they understand the financial troubles a business is going through, everyone will be on the same page about the challenges ahead and will work on what matters most. Additionally, your employees might bring in good ideas about where to save money that you as the business owner may not have thought of.

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Don’t be afraid to own up to mistakes that you or leadership has made, as accountability and responsibility are some of the hallmark traits of a good leader.

Being vulnerable about where you have made mistakes and taking responsibility for your role in the current situation will not only earn you respect, but it will also promote feelings of trust and empathy among your employees.

It brings the team closer together

Research shows that major events or times of stress bring people together. Case studies on natural disasters like Hurricane Katrina or the Mexico City earthquakes show increased social bonding and cohesion during tragic events. It is human nature to crave social connection during extreme events, so use this to your advantage when dealing with dire situations at your company.

When you are open and transparent about the challenges your company is up against, you are doing more than just providing your team with the opportunity to come together. Challenging times often bring out the best in people and the organizations that they belong to.

People are more likely to act altruistically and tirelessly when they feel they are contributing to a shared common cause. If you are not transparent about the challenges your company is up against, you are denying your employees the chance to come together and find meaning in their work.

Major financial challenges have the potential to build trust, empathy, learning and connection at your company. However, transparency during challenging times is essential if you hope to see these positive benefits. The next time you are up against monumental financial challenges, lean in, and see what transparency during times of crisis can help you achieve.

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