Leading under the current circumstances is an audition to lead for the coming years. Being able to step up as a leader amid the COVID-19 pandemic is an opportunity to…
Is Radical Transparency The Way Forward For Startup Marketing?
This is a guest post that comes to us from Leena who is the CMO at Wagepoint. Leena worked for some of the big guns in the media industry before deciding her true calling was to…
This is a guest post that comes to us from Leena who is the CMO at Wagepoint. Leena worked for some of the big guns in the media industry before deciding her true calling was to be the ultimate curator of the Wagepoint brand. When she’s not busy dreaming up ways to scale the business with marketing automation, she spends her days cooking culinary masterpieces from all over the world. And if you are not really careful, she might just offer it to you.
Disclaimer: Leena and Wagepoint are awesome and we use them to process payroll for our Canadian employees.
Not all startups are created equal.
Some have more funding, while some have a cool office in a great location. Some have a unique culture and some have greater potential than others. Some of them offer the best perks, and there are some startups that have it all (usually well-funded startups in Silicon Valley or San Francisco).
There is yet another aspect in which all startups are not created equally, and that is in the idea / execution of radical transparency.
Is it worth the risk of making your metrics public? What about your company financials, everything from revenue to burn rate to salaries? Sharing everything; that’s what radical transparency is about, in the hope this strategy will yield outsized results for the extra effort.
Radical transparency, pioneered by Buffer, has since become a common mantra among the braver (aka more successful) startups. But here’s the thing –
Is radical transparency actually contributing to the success, or is their success contributing to the radical transparency? And is it all just a genius idea borne out of growth hacking?
The Circle of Corporate Trust
Most businesses keep things, especially finances; revenue, operating costs, profit margins, financing and salaries, private. Financial details are usually shared only on a need-to-know basis, amongst key executives and the company accountants.
Only a select few in any organisation have the complete financial picture. In the same way that key operational debates often take place within a closed loop of decision makers, with occasional assistance from mentors, consultants and advisors.
As a general rule, the larger the organization, the smaller the circle of trust.
These ever decreasing circles of power and influence lead to departmental turf wars and bureaucracy. Fear and uncertainty can spread fast. As a result, politics and power struggles proliferate.
Politics happens, within any group, some lead, others follow. Given the high stakes involved, working in a startup can feel like Desperate Housewives meets Game of Thrones, with unlimited coffee and bean bags. Everyone in a team has their own goals, dreams and motivations, which founders need to factor into the equation.
Which perhaps explains the cultural backlash in the startup community against secrecy, politics and turf wars.
Organizational infighting and schemes are more difficult to launch in companies, such as Buffer, Groove and HubSpot, where the circle of trust includes the entire team.
HubSpot, a Cambridge, Massachusetts-based inbound software marketing firm, now traded on the NASDAQ, with over 750 employees worldwide, was already trialling internal accountability long before they had to answer to Wall Street. In a Sequoia Capital article, Dharmesh Shah, Co-Founder & CTO, wrote about their “extreme transparency” policy. HubSpot shares “as much information as legally allowed on our wiki, including financials (cash balance, burn rate, P&L, etc.), management-meeting decks and board decks.”
HubSpot employees don’t have a vote, but they do get to see the data and reasons why management make decisions, which “forces us to defend them.” As a result, they’ve noticed that “The odds of making a stupid decision go down in those cases.” A small price to pay “for members of the team to call my co-founder and I naive, disconnected or worse.”
A Transparency Movement?
Buffer, a social media sharing startup, has taken this approach to a whole other level, pioneering “radical transparency.”
Buffer puts everything out there for all to see: revenue, salaries, term sheets, equity, customer satisfaction scores, personal development and other performance indicators, as part of their “default to transparency” core value.
According to their public figures, transparency had a direct positive impact on revenues.
A fistful of others, including Groove, Ghost, Baremetrics and others are equally open, but few to that extent.
Radical transparency emerged amongst startups for several reasons:
- Blogging was already a popular medium for marketing (part educating new customers, part establishing name recognition and part group therapy) long before ‘startups’ broke into popular culture.
- Entrepreneurs are often amongst the early adopters for technology platforms that encourage written, image, audio or video-based forms of creative expression, hence WordPress, YouTube, Twitter and Medium, to name but a few.
- Early on, startups have low marketing budgets, but ambitious growth targets and a short timescale to achieve traction. This necessitates creativity, one result has been the evolution of blogging into a marketing channel. A select few have taken this one step further, using their own narrative, experiences and metrics to create an ongoing story; hence the use of radical or extreme transparency.
As a result, these rare examples get noticed, which means instead of Buffer “being something to forget, however, Buffer is one of the most interesting young companies in technology today.”
As a case study and one to watch, this makes Buffer interesting. As a startup with larger competitors, this gives them an edge.
Groove, an online help desk software startup that runs a “journey to $500k in monthly revenue” Blog, noticed a similar uptick in revenue once they opted for transparency.
Radical Transparency: More Than Marketing?
While it is perhaps understandable that Corporate America isn’t rolling out a similar strategy; after all, ‘radical’ and ‘transparency’ aren’t words you hear in most boardrooms, it’s surprising we don’t see more of this in the startup community.
At present there are nine, including Buffer, embracing this concept with the same enthusiasm.
Apart from the marketing impact, radical transparency comes with the following additional upsides:
- Team Transparency: keeps everyone accountable, including founders and managers (an operational feature some firms, including Buffer and Zappos have done away with recently).
- Stakeholder Transparency: investors, customers, mentors and the media are all more inclined to trust founders who support their reasoning with a history of honest and open discourse.
- Employee Satisfaction: as a result, company culture is stronger and staff turnover is reduced.
However, radical transparency is not without the downsides, which is maybe why this trend hasn’t evolved into a mass movement.
- Once you start, you can’t stop: observers and stakeholders would assume there are serious problems with the company, or major cultural changes taking place, both of which, even if proven false, would cause long-term brand damage.
- Hiding bad news becomes harder when everything is supposed to be in the open, especially when there are times this is necessary for a company or an individual.
- Some people might be ideal for the company, but for personal reasons may not want to share as much, or have salaries published (although so far only Buffer does this).
- Radical transparency requires an ongoing investment of assets and resources. More time is spent worrying about perception than reality, which is a delicate balance, as anyone who spends five minutes reading about political campaigns would know.
Is Radical Transparency The Way Forward?
It would be too easy to dismiss this concept as a marketing strategy, designed to attract users, drive revenue, investment and talent. A high-risk strategy, considering once you start, stopping would carry negative consequences for brand trust and reputation.
Clearly, this doesn’t or wouldn’t work for the majority of businesses. Buffer, Groove and HubSpot are pioneers in a movement which may forever remain small, since the desire for privacy within organizations is a fairly normal attitude.
Radical transparency is also unlikely to spread further than a brave corner of the startup world, simply because it works best amongst entrepreneurs. Particularly those selling products and services to other entrepreneurs, who are in a crowded market since everyone is an early adopter in this echo chamber.
In a world of hustlers, how do you stand out? Stop pretending everything is fine, reveal your metrics, be real with people, and thus radical transparency is a solution to numerous problems: revenue, establishing trust, talent acquisition, fundraising and brand profile.
There’s one caveat to this, as Alex Turnbull at Groove points out; those who practice transparency as a marketing strategy must deliver value to their audience. Metrics without context are meaningless. Tell a good story, engage your audience, uncover new research, and whether you do this with your metrics on show or not won’t matter. You can shape the narrative with as much or as little transparency as needed, providing you give your audience value for their time.