To Disclose or Not to Disclose…

I recently shared some management advice in a Financial Times (FT) opinion article (see Is it wise to inform staff of future ownership plans?). The issue the FT solicited input on was whether or not management should let employees know of a big decision in advance. What sparked the request was a recent disclosure by Julian Richer, founder of UK retail chain Richer Sounds, who announced that he would bequeath his company to his employees upon his death.

I commented:

“Transparency generally benefits employees and the company. Management sets norms and expectations through its actions. If management establishes a record of being fair and honest, and consistently shows consideration by sharing information, employees will respond in kind, exhibiting similar behaviours in dealings with suppliers, customers, co-workers, etc.

But the case of Mr. Richer goes beyond simply modeling behaviours or sharing information. The outcome is tangible to employees and motivates them for the long term. So it is not just about how, or when, information is shared, but also what.”

I honestly found it difficult to answer the question. It was unclear to me whether the FT was asking whether informing employees of any big decision in advance was a good idea, or whether Julian Richer’s specific decision to disclose the information in this case was a good idea. Insofar as the latter is concerned, I believe that Julian’s specific decision to disclose was a good one because it is material to the employees of Richer Sounds. Deciding to make employees owners of the firm – giving them a stake in the company’s future – provides them with a set of incentives today that have the potential to substantially influence outcomes over the long haul. With respect to the former consideration – whether it is always beneficial to disclose information to employees in advance – the short of it is: it depends. For the most part, I favor transparency. However, if certain information is immaterial or inconsequential to a firm’s employees, then disclosure creates costs without commensurate benefit.

Anyhow, you can read the full set of commentary here (it was also linked above). Engagement expert Nita Clarke, and entrepreneur and Richer Sounds founder Julian Richer provided further insight.

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