Workplace Issues

Is ‘Radical Transparency’ the Way to Go?

The everything-in-the-open concept, popularized by hedge fund billionaire Ray Dalio, can work well for some organizations but is a poor fit for oth...
David McCannOctober 14, 2019

There is little doubt that “radical transparency” — the concept of literally complete openness within a business — can be an effective tool for companies. But there’s equally little doubt that it’s not right for every company.

The concept originated years ago with Ray Dalio, founder of Bridgewater Associates, the world’s largest hedge fund. He has notably trumpeted its virtues in his 2017 book Principles: Life and Work as well as a TED talk that same year.

How Startup CFO Grew Food Company 50% YoY

How Startup CFO Grew Food Company 50% YoY

This case study of JonnyPops’ success highlights the unusual financial and operational strategies that enabled rapid expansion into a crowded and highly competitive frozen treat market. 

Ray Dalio at TechCrunch Disrupt San Francisco, October 2019

Other big companies, like Netflix, FitBit, and Patagonia, have picked up on the concept. Another example of an organization that has embraced radical transparency is a software company called Qualtrics, which has headquarters in Seattle and Provo, Utah. There, every employee is free to review the objectives and performances of his or her colleagues, the result being that engagement is reportedly high and best practices are mirrored.

Joel Landau, CEO of my employer, The Allure Group, has dabbled in radical transparency — even if he didn’t call it that.

In an interview he gave for Future Sharks in April 2019, he said that when he started out as an entrepreneur he usually hired friends and family members. The practice, however, greatly limited the feedback he gave and received.

“I had to learn to be more direct in my expectations, develop measures to effectively evaluate performance, and make time to discuss business issues more often,” Landau said.

However, those who have sounded cautionary notes about radical transparency include Dalio. He acknowledged in his TED talk that it’s not for every company, and that 25% to 30% of the population would bristle at the idea of having their ideas and performance assessed to the degree they are at Bridgewater. He also acknowledged that it takes new hires about 18 months to become acclimated to the culture.

The issue, as he outlined in his talk, is that there is a part of us — specifically, the brain’s prefrontal cortex — that very much wants to know about our mistakes. But there is another part, the amygdala, that views the sharing of such information as an attack. It is a classic case, in other words, of intellect vs. emotion.

Behavioral scientist Francesca Gino amplified this point in an October 2017 piece for the Harvard Business Review, noting that most of us tend to tilt toward a positive view of ourselves. This is called “confirmation bias.” Self-awareness (or lack of same) compounds the issue, Gino further pointed out. She quoted a 2017 book, “Insight,” in which author Tasha Eurich concluded that while 95% of us believe we are self-aware, that is actually only for only 10% to 15% of us.

Gino also noted a U.S. News and World Report survey of 1,000 Americans — one conducted in 1997, not 1996, as she wrote — that asked how likely it would be that various celebrities get into heaven. Respondents on average gave Mother Teresa a 79% chance, while putting their own odds at 87%.

The bottom line? Most of us really, really like ourselves. And we don’t want to hear otherwise.

So that’s the challenge of radical transparency: telling people things they neither believe nor wish to have thrown in their faces. Another potential drawback, as noted in a separate HBR piece, is that it could result in a culture of haves and have-nots.

Sarah Greesonbach wrote favorably of transparency in 2016 for, saying that such an approach provides employees with critical information, enhances trust, and enables those in the C-Suite to communicate their values more easily.

But at the same time, she added, it can worsen an already-toxic culture or be a poor fit for a company facing a crisis. Moreover, she wrote that there should be an understanding that transparency need not be an all-or-nothing proposition.

That’s an idea Dalio embraces. For example, he said in his TED talk that his philosophy doesn’t mean employees are free to point out each other’s personal foibles. And he wrote in 2016 that Bridgewater has confidential mechanisms in place for particularly sensitive matters.

Dalio, who in 2011 left the CEO role at Bridgewater to become co-CIO, founded his Westport, Conn.-based company in 1975. As he explained in his TED talk, he erred in the early 1980s when he predicted a nationwide economic downturn and made investment decisions accordingly. In fact, the opposite occurred, and he was forced to scale back his operation, to the point of laying off employees who were, he said, “like extended family.”

He added, “It was one of the most painful experiences of my life — but it turned out to be one of the greatest experiences of my life, because it changed my attitude about decision-making.”

He settled instead on something he called an “idea meritocracy,” where the best proposals survive the withering scrutiny of everybody else in the organization. That approach has served Bridgewater and Dalio well; the hedge fund now manages $160 billion, and Dalio’s net worth is reportedly $17 billion.

That doesn’t mean there haven’t been challenges to his guiding principle. In January 2016 a Bridgewater employee named Christopher Tarui filed a sexual harassment claim against a supervisor, while also claiming that Bridgewater’s culture was a “cauldron of fear and intimidation” — including, according to a New York Times report from July 26 of that year, constant video surveillance.

Employees were not permitted to have their personal cellphones in the company’s headquarters, according to the Times, and in order for new hires to gain an understanding of what they were getting into, they were shown a video in which top executives bring a female manager to tears with their brow-beating. (The Times report said Bridgewater eventually stopped showing the video.)

Dalio strongly pushed back in a LinkedIn Pulse post dated July 28, 2016, calling the Times piece “a distortion of reality.” He pointed out the various avenues employees have at their disposal when problems arise. He wrote that while meetings are indeed videotaped (not to mention archived), each employee is able to access the video — again, in the interests of transparency. He added that cellphones, while not permitted on the trading floor (per regulation), were indeed allowed in Bridgewater’s offices.

Finally, he wrote that the company’s most recent survey of its employees revealed overwhelming satisfaction with the culture.

Tarui dropped his claim in August 2016, and Bridgewater waived any employment restrictions he might have had. He moved on to another firm.

Radical transparency moves on, too. To the extent that it’s popular, it seems clear that it is not a one-size-fits-all proposition, and that each company must take into account whether it is suitable.

And again Dalio acknowledges that, noting that there are boundaries each organization must work within. The example he offered in one report was that of HubSpot, which for legal reasons could not share employees’ salary data.

Dalio also wrote that he considers two questions when meeting with a colleague: Should I tell you what I really think? And, Can you be free to tell me what you really think? The answers at Bridgewater are almost always “yes,” on both counts.

Finally, he wrote, there is no such thing as a closed-door conversation. There are no secrets. There is only openness. That usually works for Bridgewater as well as many other businesses.

But not all of them.

Melissa Powell is president and chief operating officer of The Allure Group, a network of six New York City-based skilled nursing facilities. A 20-year veteran of the industry, she oversees facilities that serve some 1,400 residents.

Photo: Kimberly White / Stringer, Getty Images