I tend to watch a number of consumer issues programmes including some of the following:

  • Watchdog
  • Cowboy Traders
  • Rip off Britain
  • Your Money Their Tricks
  • Cowboy Builders
  • Don’t Get Done Get Dom

Although the companies featured on such programmes are diverse with regard to size, industry sector and customer profile they appear to share a similar organisational mindset on the issue of transparency. It seems to me that many of the companies that are highlighted in these programmes seem to share the view ”You can’t handle the truth” expressed by Jack Nicholson playing the part of Colonel Nathan R. Jessup in the movie A Few Good Men (1992). The provision of incomplete information, misleading information and exaggerated reference prices all seem to indicate that they believe consumer’s can’t handle the truth about their services and products.

Whilst these programmes do a great job bringing attention to the questionable practices of these companies, it remains puzzling why other companies continue to operate by the same belief that consumers cannot handle the truth.

  • Is it because consumers will not make purchases unless they are induced to do so through partial or misleading information?
  • Is it because the speed at which consumers will ordinarily make purchases is too slow for such companies?
  • Is it because companies particularly those providing discretionary products and services have to achieve stretching sale targets within tight timescales?
  • Is it because being more transparent is not aligned to achieving financial success?

It seems to me that a multi dimensional approach is required in order to change the behaviour of these companies operating by the dominant belief that consumers cannot handle the truth and thereby reduce consumer detriment. However, in this article, I would like to focus briefly on the likely impact of better transparency on corporate performance. The call for greater transparency seems to get louder in the aftermath of corporate scandals and after a while sounds like a broken record but the desired change does not always translate into reality.

A quick review of information online seems to highlight why the pace of change with regard to greater transparency is perhaps not as fast as desired by key stakeholders. It appears that the evidence of the correlation between transparency and profitability is neither direct nor conclusive.

However, a number of credible commentators have indicated that increased transparency can enhance trust, which indirectly leads to better corporate performance/profitability. Three reports that make compelling points about the relationships between enhanced transparency and trust are as follows:

“…Our research revealed worrying levels of cynicism among consumers, with many believing that today’s businesses are still resisting transparency and authenticity as a way of doing business today. Over half of respondents (52%) believe that big businesses only reveal what they need to for regulatory purposes, whilst more than one in ten (12%) of consumers went even further, saying that big businesses are actively and deliberately avoiding transparency in order to make money…”

“…Going forward, transparency and authenticity will form the foundation stones of a company’s reputation and will be increasingly linked to commercial success. If a good reputation can take years to build, but can be undone in an instant, the demands of transparency and authenticity require a boldness of approach and a commitment that underpins the very foundations of what a business does and why it exists…”

Cohn & Wolfe: Transparency & Authenticity; A New Communications Landscape (November 2012)

“…Well-informed and confident consumers are essential in driving competition between suppliers offering these services. However, we were disappointed with the level of transparency by businesses about what information businesses were collecting and how it is used. This lack of transparency harms consumers’ trust in traders and business practices. We found that businesses could do a lot more to make their practices more transparent about what information they are collecting, how it is being used and give consumers real choice about this…”.

“…Transparency, the ability to opt out of the collection of information and understanding are crucial to developing and maintaining trust in online markets. There is a risk that businesses will not be able to capitalise on the benefits of internet and mobile commerce if consumers’ trust is undermined. Businesses can help by providing greater transparency to help consumers gain an improved understanding of their online business practices and how information provided by consumers is used for their online business…”

Office of Fair Trading: Personalised Pricing; Increasing Transparency to Improve Trust (May 2013)

“…As already discussed, cost is a major consideration when using legal services and an area of concern for many. In terms of how cost and trust interact, the issue is less about absolute cost (although this does impact on accessibility which in turn can impact on feelings of trust/mistrust), and more about transparency. It is very difficult for cost to have a positive impact on feelings of trust, but there is a strong sense that increased transparency would lead to an increase in trust. In particular, providing a more accurate estimate of likely costs at the outset and explaining very clearly why and where an increase in costs has occurred, seems to help foster greater trust…”

Legal Services Board: Consumer use of Legal Services; Understanding consumers who don’t use, don’t choose or don’t trust legal services providers (April 2013)

A challenge for companies is that the relationship between increased transparency and the current key financial performance measures is not linear. Another challenge is how much transparency is enough? Could enhanced transparency expose some aspects of a company’s competitive advantage that competitors could easily copy?

In order to achieve wider change in the marketplace and thereby enhance positive outcomes for consumers, we either find better ways to align transparency with existing financial measures or create new measures to reinforce the business benefits of better transparency. Although it may be difficult to demonstrate to the Board an acceptable ROI (return on investment) of enhanced transparency, this is perhaps one of those situations where doing the right thing may have to precede the evidence base to validate such business decisions. As Don Shapiro stated “You can never go wrong doing the right thing because the right thing is always right.”