When To Talk, When To Balk

As today's drumbeat for transparency grows louder, here are four simple rules for managers

By Jack and Suzy Welch

In an environment that is both increasingly competitive and unforgiving toward secretive organizations, how do leaders identify the level of transparency that balances good public relations and strategic privacy? — Nicolas Rodriguez, Lima, Peru

When it comes to transparency, leaders don't need to pull off a balancing act as much as they need to stick to four rules. Two are easy, one should be easy but constantly gets screwed up, and the fourth is just plain hard. No picking and choosing, though. In today's "unforgiving" environment, to use your apt term, you need to follow them all.

The first rule is that when it comes to communicating financial information to investors, analysts, and the media, public companies can't be transparent enough. Every piece of data disclosed increases the market's insight and, ultimately, builds trust. That dynamic is a no-brainer, and despite the carping of shareholder activists, most companies get it right. The second rule is that when it comes to gaining marketplace advantage, you can't be too secretive. With a breakthrough in the works or a bold acquisition under consideration, managers should fight to keep such information confidential. Strategic surprise is one of the great weapons of business "warfare."

The third rule, where things too often go awry, concerns communicating with employees about "Oh-God-No!" kinds of changes, such as plant closings or layoffs. Obviously, companies should never let employees be the last to know the details of such life-altering events. Indeed, they should be the first. That's the rule. But somehow, the typical scenario plays out like this: A company posts disappointing results and, to mollify analysts, quickly announces job cuts with big, precise-sounding numbers. The news not only takes employees by surprise but also usually leaves them twisting in the wind for weeks (or even months) before managers figure out exactly what they're going to do and to whom. That is just awful leadership. The same happens with mergers, especially those that come with pronouncements about massive cost savings from the combination. While executives sit around pondering every conceivable option, Joe in San Jose and Mary in Baltimore are dying inside—a condition not exactly conducive to, say, innovation, teamwork, or customer service, not to mention rapid productivity gains.

The fourth rule—the plain hard one—also gets broken all the time. The reason: It requires people to do something unnatural, which is to go public when they most want to hide in a cave. You've seen it. Bad news about your company hits the paper and suddenly grim executives are huddled in conference rooms, only to emerge with evasive statements that imply the problem is small and fully contained. What a pointless exercise. Just about every business crisis involves more people, money, and damage than appears at first, and there are no secrets in the world. That's why the only meaningful strategy in a crisis is full-bore openness, with all energies focused on fixing what went wrong.

Now, we don't mean to oversimplify something that is an important business issue, but managers needn't over-brain this one. Transparency has its time, and with just one exception, the answer is largely now.

What decision model can be used to launch a technology at the right moment? — Kees Moolenaar, Rotterdam, The Netherlands

You must be referring to the famous "Someone is shaking me by the collar, and even though I don't know every piece of market data I wish I did, my gut says it's probably O.K. to launch the thing at this point" model. Admittedly not a very precise model, but it's the only one we know that works.

We're just saying there's very little science to timing a tech launch. Sure, you have to conduct research to determine if there's a hole in the market that your product fills better than anyone else's. But you will never know exactly how the market will respond, nor will you ever be 100% certain about the viability of your technology. And forget discounted-rate-of-return analyses. With a new technology, those numbers fall somewhere between guessing and wishful thinking.

Which is why your decision "model" comes down to two factors: a positive gut feeling drawn from enough data, and a person in your organization who's wildly excited to lead the charge. Don't bet on one or the other. Only bet on both. And even then, understand that timing a new-technology launch basically comes down to a white-knuckled leap of faith. And courage is something no model can quantify.

Jack and Suzy Welch look forward to answering your questions about business, company, or career challenges. Please e-mail them at thewelchway@BusinessWeek.com For their podcast discussion of this column, go to www.businessweek.com/search/podcasting.htm

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