How transparency builds trust and retention amid economic uncertainty

How transparency builds trust and retention amid economic uncertainty

Written by Investors in People

Article Summary

  • The Importance of Transparency: Clear, honest communication fosters trust, reduces stress, and enhances employee engagement and retention, especially during periods of economic and technological change.
  • A Leader’s Role: Transparent leaders set the tone by sharing context, addressing concerns openly, and involving employees in decision-making processes to build a culture of trust and innovation.
  • Consider the Strategic Approach: Transparency must be balanced and purposeful, offering the right amount of detail alongside context to empower rather than overwhelm employees.

As the UK faces a deepening budget deficit and global uncertainties going into 2025, creating a climate where transparent communication from leadership is more critical than ever for employee trust and retention. For many employees concerns over job security, the cost of living and shifts in the labour market create a complex backdrop of uncertainty. Added to this is the impact of automation and artificial intelligence on employment prospects, increasing employees’ sense of vulnerability. 

For HR leaders this makes transparent communication not only a moral obligation but also a strategic priority. In uncertain times being open and honest with employees helps build trust, alleviates anxiety and strengthens the organisation’s ability to retain top talent.  

Why transparency matters today 

In times of economic instability transparency is vital. Uncertainty heightens anxiety about job security and company viability and if employees are left in the dark rumours can erode trust and morale.  

Research underscores the value of transparency: 86% of leaders in Deloitte’s 2024 Global Human Capital Trends study directly correlate it to workforce trust1 while Harvard Business Review reports that employees in high-trust workplaces experience 74% less stress , 50% higher productivity and 40% less burnout.2 Similarly, Jiang and Luo found that transparent communication and authentic leadership significantly cultivated employee trust, which directly leads to heightened engagement and loyalty within organisations.3  

The good news is that ‘My Employer’ is the most trusted institution, according to the 2024 Edelman Trust Barometer.4 Yet only 19% of associates trust their CEO to tell the truth about the organisation, versus 52% of executives. This trust gap is inextricably linked to economic optimism, defined as believing that you and your family will be better off in five years, says Edelman. It says a belief in a better future is a critical engine of employee engagement. When employees have the sense of agency, impact and sustainable employment that drives economic optimism, they will put in greater discretionary effort, be better advocates to would-be recruits and show greater enthusiasm for innovation.  

Transparency also helps mitigate the effects of ‘quiet quitting’, the phenomenon where employees do just enough to get by without going above and beyond. By building an environment of trust leaders can foster a culture where employees are motivated to put in discretionary effort because they believe in the company’s vision and feel that their contributions are acknowledged. 

Trust, transparency and innovation 

As rapid technological change transforms workplaces, transparency is crucial for cultivating innovation. Only 22% of employees feel they have significant control over AI’s impact on their work, according to Edelman, reflecting widespread fear of innovation. Transparent communication about how technology will shape roles helps employees feel informed and included rather than fearful and excluded. 

Moreover, Ellonen, Blomqvist and Puumalainen find that institutional trust plays an essential role in determining organisational innovativeness.5 Transparent leadership builds the foundation for a secure environment where risk-taking and problem-solving thrive. In today’s climate, where companies need to innovate continuously to stay competitive, fostering trust through transparency is imperative for long-term success. 

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What does transparent leadership look like? 

Transparent leadership goes beyond sharing information. It involves open, consistent communication about the organisation’s state, including its challenges and plans. Leaders should provide real context rather than vague reassurances, address concerns openly and adapt based on feedback. 

For example, instead of simply stating that “everything is fine,” transparent leaders provide real context – whether discussing financial performance, market risks or plans for organisational change. They openly address employee concerns, actively solicit feedback and show a willingness to adapt. This not only strengthens trust but also empowers employees to contribute meaningfully to solving problems. 

Transparency can take many forms, from sharing financial performance data to holding regular Q&A sessions where employees can ask questions directly to senior management. One effective method is holding monthly town hall meetings where leaders provide updates on business performance, upcoming changes and address employees’ concerns. These sessions create a two-way communication channel, making it easier for employees to voice their thoughts and feel heard. 

Moreover, transparency extends to feedback culture. Encouraging open, constructive feedback not only helps improve processes but also empowers employees to feel a greater sense of ownership over their work. Leaders who listen actively and respond to employee concerns set a powerful example, fostering a culture where transparency becomes a shared value throughout the organisation. 

Can you go too far with transparency?

While transparency can be powerful, there is a potential downside if it is not handled thoughtfully. The concept of ‘radical transparency, where leaders disclose every detail of decision-making and organisational challenge, can lead to confusion and even anxiety among employees. The key is finding the right balance between sharing important information and overwhelming people with too much detail.

For instance, sharing unfiltered financial data or early-stage strategic plans might generate unnecessary fear if employees do not have the full context or expertise to interpret the information. Transparency should be balanced with a sense of responsibility. Leaders must ensure that what they share is constructive and fosters understanding rather than creating confusion or panic.

A good rule of thumb is to ensure that transparency is always accompanied by context and support. It’s not enough to simply share the ‘what’; leaders must also explain the ‘why’ and provide the opportunity for employees to ask questions or voice concerns. This way transparency becomes a tool for empowerment rather than anxiety. 

Building transparent leadership skills

For leaders aiming to embrace transparency there are specific skills that can help. Here are some actionable steps to cultivate transparency in leadership:

#1

Communicate frequently and clearly

Make communication a regular habit. Establish regular communication channels and create consistent opportunities for employees to receive updates, such as monthly town halls, newsletters or video messages from leadership. Avoid jargon and focus on clarity to ensure everyone understands the message.

#2

Listen actively and acknowledge concerns

Transparency is a two-way street. Encourage employees to share their questions and concerns and make sure they feel heard. Acknowledging challenges and taking action to address feedback can go a long way in building trust.

#3

Provide context, not just data

Sharing numbers or statistics without explaining the ‘why’ can create more confusion than clarity. Always provide context: what do the numbers mean and how do they impact the organisation? Be honest about what is going well and what needs improvement.

#4

Show vulnerability

Effective leaders are not afraid to share their challenges. By admitting when they don’t have all the answers, leaders can humanise themselves and create deeper connections with their teams. However, this should be balanced with a sense of optimism and an active approach to problem-solving.

#5

Be transparent about failures and lessons learned

Don’t shy away from discussing failures. Embrace them as learning opportunities and share what was learned and how the organisation will apply these lessons moving forward. This helps to build a culture that values growth and resilience.

Conclusion – Building transparency into organisational culture

To effectively build transparency into your organisation it needs to be integrated into the culture – not just as a top-down initiative but as a shared value. Leaders set the tone, but transparency should permeate all levels. For HR leaders embedding transparency into people practices is critical. This includes being open about the criteria used for promotions, being candid about performance expectations and ensuring that internal communications are timely and inclusive.

Investors in People (IIP) has long championed the importance of transparency as a fundamental component of a healthy workplace culture. IIP’s framework emphasises creating an environment where employees are informed, involved and inspired to contribute to the organisation’s success.

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Sources

  1. Deloitte, 2024 Global Human Capital Trends report  https://www2.deloitte.com/us/en/insights/focus/human-capital-trends.html 

  2. Zak, Paul, “The Neuroscience of Trust,” Harvard Business Review, 2017. https://hbr.org/2017/01/the-neuroscience-of-trust

  3. Jiang, H. and Luo, Y. (2018), “Crafting employee trust: from authenticity, transparency to engagement”, Journal of Communication Management, Vol. 22 No. 2, pp. 138-160. https://doi.org/10.1108/JCOM-07-2016-0055

  4. 2024 Edelman Trust Barometer https://www.edelman.com/trust/2024/trust-barometer
  5. Riikka Ellonen Kirsimarja Blomqvist Kaisu Puumalainen, (2008),”The role of trust in organisational innovativeness“, European Journal of Innovation Management, Vol. 11 Iss 2 pp. 160 – 181 http://dx.doi.org/10.1108/14601060810869848

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14th Nov 2023 | Old Billingsgate, London

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