Why It's Imperative to Tell it Like it is

One of the most important management lessons for a founder/CEO is totally unintuitive—stop being too positive. Young CEOs think that they can keep everyone in high spirits by accentuating the positive and ignoring the negative. But the team knows that the reality is more nuanced that the CEO is describing it. And not only do they see for themselves the world isn’t as rosy as the CEO is describing it; they still had to listen to the CEO blowing sunshine up their butts at every company meeting.

There are three key reasons why being transparent about your company’s problems makes sense.

1) Trust.

Without trust, communication breaks. In any human interaction, the required amount of communication is inversely proportional to the level of trust. Consider the following: If I trust you completely, then I require no explanation or communication of your actions whatsoever, because I know that whatever you are doing is in my best interests. On the other hand, if I don’t trust you at all, then no amount of talking, explaining, or reasoning will have any effect on me, because I do not trust that you are telling me the truth.

In a company context, this is a critical point. As a company grows, communication becomes its biggest challenge. If the employees fundamentally trust the CEO, then communication will be vastly more efficient than if they don’t. Telling things as they are is a critical part of building this trust. A CEO’s ability to build this trust over time is often the difference between companies that execute well and companies that are chaotic.

2) The more brains working on the hard problems, the better.

In order to build a great technology company, you have to hire lots of incredibly smart people. It’s a total waste to have lots of big brains but not let them work on your biggest problems. A brain, no matter how big, cannot solve a problem it doesn’t know about. As the opensource community would explain it, “Given enough eyeballs, all bugs are shallow.”

3) In a good culture, bad news travels fast. Good news travels slow.

If you investigate companies that have failed, you will find that many employees knew about the fatal issues long before those issues killed the company. If the employees knew about the deadly problems, why didn’t they say something? Too often the answer is that the company culture discouraged the spread of bad news, so the knowledge lay dormant until it was too late to act.

A healthy company culture encourages people to share bad news. A company that discusses its problems freely and openly can quickly solve them. A company that covers up its problems frustrates everyone involved. The resulting action item for CEOs: Build a culture that rewards—not punishes—people for getting problems into the open where they can be solved.

As a corollary, beware of management maxims that stop information from flowing freely in your company. For example, consider the old management standard: “Don’t bring me a problem without bringing me a solution.” What if the employee cannot solve an important problem? For example, what if an engineer cannot solve an important problem? For example, what if an engineer identifies a serious flaw in the way a product is being marketed? Do you really want him to bury that information? Management truisms like these may be good for employees to aspire to in the abstract, but they can also be the enemy of free-flowing information—which may be critical for the health of the company.

If you a run a company, you will experience overwhelming psychological pressure to be overly positive. Stand up to the pressure, face your fear, and tell it like it is.