The effect of leadership transparency on organisations

Trust is the cornerstone of a positive and productive working relationship between workplace leaders and their employees.

While this is true, developing it has been a challenge in current Australian workplaces, with Mercer’s Global Talent Trends 2024 – Executive Summary Australia revealing employees’ trust in their organisations to do the right thing for employees fell from 82 per cent to 72 per cent between 2022 and 2024.

Despite the decline, workplaces still have opportunities to foster a culture of transparency and rebuild trust within organisations.

Leader transparency is important for creating workplace trust

The University of Western Australia Business School Management and Organisations Senior Lecturer Sandra Kiffin-Petersen said leaders played a key role in the development of trust in the workplace.

She said they could inspire better leadership and action against unethical behaviour, as well as accountability in the social media age.

“Leaders who are transparent tend to develop trust, inspire followers and create a positive corporate culture,” Dr Kiffin-Petersen said.

“Transparency is also an integral part of what is known as authentic leadership.

“Authentic leaders rely on transparency to present their authentic self to others, build trust, foster open communication and create an environment of accountability and integrity.”

Palmerston Chief Executive Officer Emma Jarvis said that while authentic leadership was achievable, there was a learning curve when developing transparency within a contemporary workplace.

“All stakeholders, including the people who you are there to serve, as well as your staff, want to have an authentic sense around what an organisation is, how it runs and the integrity of their leaders,” she said.

“There can be a gap between how we want others to see us and how they actually perceive us – this is part of a learning journey."

“It’s crucial to gather, listen to and act on stakeholder feedback to bridge that gap.” 

The key elements of leadership transparency

Dr Kiffin-Petersen said leadership transparency provided a mechanism for leaders to demonstrate their ability, benevolence and integrity to workers, which, in turn, developed trust.

“A leader who is transparent about their knowledge and skills, including admitting past mistakes they may have made, can help to foster trust,” she said.

Furthermore, leaders who openly share their decisions, motives, and challenges are more likely to be perceived as authentic and embodying integrity.

“When leaders are transparent and openly share important information, such as their ideas and thoughts, they can demonstrate their benevolence or care and concern for the employee," Dr Kiffin-Petersen said.

“Employees are more likely to trust leaders who they think have strong moral values, keep their promises, and act according to their values.”

How transparent leaders create a positive workplace

When leaders are transparent, it creates a productive and welcoming work environment.

“There is a Harvard Business Review study that talks about people at high-trust companies reporting 74 per cent less stress,” Ms Jarvis said.

“They’re more engaged at work, there’s high productivity, fewer sick days and more satisfaction with their lives.

“If you work in an organisation where you trust and respect your leaders, and you feel able to bring your authentic self to work, that’s a company you want to work at.”

Dr Kiffin-Petersen said that authenticity often involves vulnerability, presenting a potential risk for leaders striving for authenticity and relational transparency in the workplace, as it may be perceived as a weakness.

“However, according to authentic leadership research, the benefits are likely to outweigh the risks as showing vulnerability is essential for building trust,” she said.

Transparency culture begins with psychological safety

While transparency begins with management, it often benefits each level of the organisation when psychological safety is encouraged.

“Harvard Business School Leadership and Management Novartis Professor Amy Edmondson’s research on psychological safety is also related to leadership transparency because it examines how transparent communication fosters a safe environment for employees to speak up and contribute ideas without fear of retribution,” Dr Kiffin-Petersen said.

“If you want to lead transparently, begin by cultivating open conversations, regularly share information and create an environment where trust and accountability are expected.

“Leaders can start small and build to sharing more sensitive information as trust develops.”

At Palmerston, Ms Jarvis said employees were encouraged to provide feedback on processes through staff engagement surveys, with new solutions implemented and reviewed further.

“Listening, showing empathy and being curious is crucial to that, and it’s about keeping your ego in check,” she said.

“We’re all here to serve the organisation’s objectives and you can’t do that alone.

“This fits into psychosocial safety too, as it creates a safe space to be honest and authentic.”

Pushing through the barriers to transparency

Although open communication is instrumental to forming a culture of trust and transparency, there is still scepticism about its merits in the workplace.

“Some leaders fear being too transparent could backfire, leading to unrest, employee disengagement or competitive disadvantage,” Dr Kiffin-Petersen said.

“They may also fear the information will be used against them at some later date, which causes leaders to withhold information.”

Ms Jarvis said leaders often faced challenges in sharing information due to the need to balance transparency, privacy and confidentiality. 

“It’s not always possible or appropriate to disclose all details, which can lead to perceptions of a lack of transparency,” she said.

“This, in turn, can cause anxiety and uncertainty among staff and stakeholders. 

“Without clear communication - rumours and speculation can easily arise.

“To address these issues, it’s important to establish clear communication frameworks, foster a culture of learning and reflection, and seek regular feedback. 

“Additionally, cultivating a positive workplace culture based on respect, compassion, excellence and empathy, as well as learning from mistakes, can significantly enhance your organisation’s reputation and improve stakeholder engagement and retention.”

Ms Jarvis said ensuring widespread organisational support for processes while practising its measures was vital.

“Overall, however, you have to be aligned across the organisation, with the intent that you all agree transparency is positive and the right way to go,” she said.

“Then it’s about modelling those leadership behaviours of transparency across your team and at all levels.”