In this episode of Tradeoffs, Hiten and I are talking about something that's near and dear to our hearts—being a transparent company. Spurred by the rise of self-funded companies in tech, transparency, both inside and outside a company, is a defining characteristic for a lot of successful SaaS businesses today. But fostering transparency requires making tradeoffs at every step of the journey.

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We’ve structured this episode a little differently than previous ones, using conversation as a medium to talk through our own feelings and experiences with the transparent company model. The focus is on how both internal and external communications have tradeoffs and what you need to know before implementing radical transparency in your own organization. Both Hiten and I are super passionate about understanding the impacts of this model on modern SaaS companies.

The Tradeoffs

Transparency necessitates honest and open feedback from every member of the team. This means each employee has to be a culture fit as well as a technical fit for the company, which makes hiring and scaling your team more difficult.

As companies grow, internal transparency gets a lot harder. Leadership teams need to be more strategic with their input and messaging to maintain control of the company narrative; otherwise, there’s potential for miscommunication and confusion.

More external transparency leads to the possibility of more scrutiny from the public. While increasing the visibility of your internal processes builds trust, that trust is inherently more fragile. Any missteps or missed opportunities need to be backed up with a public explanation your customers understand and accept.

You need to go all in to make transparency work

Transparency is more of a mindset than a business model. Being transparent has to be a part of your DNA from the very beginning for it to take hold. Well-known transparent companies like Buffer and Moz have written a lot about their experience with transparency and the tradeoffs they’ve made. A lot of it boils down to how a culture of transparency is adopted by employees at every level of the company.

“For companies like Pickford, Buffer, etc., I think being transparent is genuinely how they think about the world and that's great. But I think for other folks, it's like hey, 'we're going to be transparent — when it's convenient.' And that simply doesn't work.”

Transparency also requires a lot of emotional intelligence from leaders. Your failures are just as visible as your successes, maybe even more so. Everyone loves a hard-luck story. If you only focus on the wins, then your “transparency” will feel disingenuous and chip away at the credibility of your brand.

One example of a company that’s ALL IN on transparency is Buffer (they made this one of their core values). Buffer is one of the front-runners in this space, and their public-facing Transparency Dashboard shows how being a transparent company impacts every aspect of the business.

Sections of Buffer’s Transparency Dashboard.

It breaks down different aspects of their business model and present it to the public via articles and blog posts. Each section talks through how it thinks about transparency.

Equity

Sharing the formula for calculating how much equity every team member receives demystifies a complicated aspect of the startup business model.

Salaries

Posting the formula for calculating each team member’s salary makes conversations about fair and balanced compensation more transparent.

Revenue

Displaying important metrics like monthly recurring revenue (MRR), average revenue per user (ARPU), and revenue run rate shows the success of its company.

Pricing

Breaking down its pricing decisions and walking through how it calculates changes in pricing shows customers how Buffer is using their money.

Fundraising

Talking about outside funding the company has received, its valuation, and why that should matter to customers leaves no one second-guessing.

Values

Explaining Buffer’s core values and how they impact daily work and decision-making is constructive for both employees and customers.

That covers Buffer’s key business metrics and goals, but they take it a step further by highlighting qualitative areas of the company.

Books we’re reading

This helps humanize each employee, making an emotional connection to the company possible.

Emails

Internal email communication is accessible to every employee. This helps Buffer ensure transparency and information sharing across the entire team.

Diversity

Buffer talks about growing the team and how it thinks about diversity, which is a part of its core values as a company. It’s also an important issue to speak about externally.

Open Source

All of Buffer’s code is completely open source, meaning anyone can use it. In the engineering world, this is a huge step in transparency.

Product Roadmap

A Trello board with their product roadmap helps interested customers know what’s coming next in terms of features and updates, which manages their expectations.

Editorial Board

This is where Buffer talks about its content creation. It shows customers what kind of articles will be published next.

This may sound like a lot of information to share with the public, but Buffer’s transparency has helped grow the movement into something bigger and more popular. Baremetrics, a competitor of ProfitWell, copied this model and shares stats for a number of Open Startups. You can see how truly prevalent this mindset is in the startup community.

The Transparency Dashboard itself shows just how much work goes into being a transparent company. There are additional resources needed across almost every aspect of the business. If you don’t go all in, it will be almost impossible to foster the kind of trust and honesty required to make transparency work.

Internal transparency gets much harder as your company grows

When you’re a young startup, it’s easy to be transparent. Information sharing happens naturally within a small team, and any directives are easily distributed. As your company grows and you bring on more employees, that kind of ad hoc communication happens less frequently. Now, you need to find a way to share information correctly or run the risk of your message becoming convoluted or confused when it’s a shared sidebar within the team.

“What I've seen companies do as they scale, but still want this level of transparency, is change the way that they communicate. The amount of edits that happen before something's communicated is 10X more than when they were smaller.” Hiten Shah of FYI

Basically, the larger your team, the more tightly controlled your message should be. Ad hoc or one-off conversations won't spread information correctly, as they get filtered through a number of different people's understanding. Think about it like the game of telephone or whisper down the lane.

You also need to share information more efficiently. A shared email service like Front helps with that.

Shared inbox via Front.

When everyone has access to important conversations, it’s much easier to distribute them to the right people. Just make sure you’re only tagging people who need to know, otherwise they pull the rest of your team away from their daily responsibilities.

Fostering a culture of internal transparency also requires a lot of honesty from everyone on the team. This level of authenticity in the workplace may not be something that people are used to or prepared for. Hiring new employees is going to be more difficult as a result, as you’re looking for both a technical and cultural fit for every role.

Onboarding new employees also gets harder when they’ll need to be trained to expect and embrace a different kind of communication than they’re used to, especially when coming from a more “corporate" environment.

To overcome these hurdles, you, as the leadership of the company, will have to try even harder to share the right amount of information with the team. While withholding information may seem counter to transparency, how you craft a message or a directive has a significant impact on how the information is received. When you’re working with a larger team, too much information can lead to confusion and a lack of focus. Thinking far into the future isn’t the job of every employee; that’s what leadership teams are for.

External transparency is all about setting the right expectations

Being transparent within your company is arguably easier than being transparent with the public because you’re able to maintain more control over the narrative. Once you start sharing company information publicly, any story you tell is in some sense no longer yours. It can be picked up and manipulated by anyone. The information you share needs to be backed up with data as well as an explanation that’s acceptable to customers.

This is especially true if you work with a public product pipeline, where everyone can see the progress you’re making as well as your successes and failures. But sharing your product pipeline also has positive effects as well—as long as you set the right expectation for your customers.

We advise against including a delivery timeline unless you’re 100% sure you’ll be able to deliver on or before the dates proposed. Missed or delayed delivery will hurt your credibility and potentially damage the customer relationship over time.

Companies like Slack and Front share their product pipelines publicly in an effort to explain the decisions they make and the overall direction of the products. Simply making this information available can get customers excited about an upcoming release.

Slack’s Platform Roadmap for Developers in Trello.

Slack’s roadmap is a general overview of projects in the Near Term, Mid Term, and Long Term, which is a great way to categorize timelines without giving specific dates that can be missed. Front does something similar and also includes a running log of their work on a month-by-month basis.

Front’s Product Roadmap.

Customers can email team@frontapp.com to request a feature, which is then added to the Ideas & Requests section of their public pipeline. This process is similar to implementing a platform like UserVoice, which hosts conversations and feature voting from customers as well as employees.

A public product pipeline isn’t the only way to practice external transparency. Sharing a leader’s story, like Hiten did with his article, My Billion Dollar Mistake, is also an example of transparency.

We looked at 19K articles written about company growth and broke them down by type (about transparency, tactics, etc.) to see how well they performed.

We found that posts about transparency tended to get 14% to 19% more traffic than non-transparent posts and an 8% to 11% bump in sharing as well. This just goes to show how telling the right kind of story can boost awareness of your company, your problem, and your personal brand. It can also be cathartic for the writer and help them move on to newer, more important projects.

Being a transparent company has some big tradeoffs

When companies are transparent, it shows confidence in your product and your team, but it comes at a price. Internal transparency requires additional work to manage the narrative, and external transparency makes you more beholden to customers. With more startups taking this step, it's worth investigating.

What do you think? Does transparency help companies more than it hurts? Let us know in the comments or on social media, so we can continue the conversation.