Outside the Box: A CEO explains why you should stop lying to your employees

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Leaders lie. They lie all the time. If a business is slumping, leaders tell their employees all is great. Leaders rationalize these lies by telling themselves what employees don’t know about our company’s problems won’t hurt them.

Many leaders are just as afraid of sharing the truth with their managers and investors.

Reality check: The truth always comes out. Employees always know more than you realize.

So I developed the TRUTH in Leadership model, a framework on how radical truth drives organizational, business and financial success. Here’s how it works:

T is for Trust

One of a leader’s most important jobs is to drive employee trust. Without it, you cannot drive change and accountability. When I was CEO at Investopedia (owned by IAC/InterActive Corp. IAC, -1.21% ), we drove trust by always sharing the “bad and ugly” not just the “good”. If we were missing our goals, we let everyone know the challenge, the reason behind it and what we were doing to fix it.

I required every member of my executive team to send a weekly all-employee email we called the “3×3” with three positive updates and three challenges. We forced the sharing of the bad so that everyone would know the challenges each department was facing. We forced it to ensure no one would be surprised. We forced it because it enabled 150 individuals to provide solutions so we could fix things faster.

But most importantly, we shared the bad because it is precisely through the transparent sharing of the bad that trust is built. Psychologists will tell you that trust is most engendered when individuals can be vulnerable around each other. “Sharing the bad” demonstrates a leader’s potential failings and vulnerability, and therefore trust.

The “sharing of the bad and ugly” was the most difficult for me and a personal failure for years. It is so natural for leaders to want to deeply motivate their staff, and it is easy to fear employees will misinterpret bad news as a warning of upcoming layoffs. However, it really can be motivational because of the way it builds trust.

R is for Reporting

Poor leaders will restrict access to reports because they believe that access to information is power. Transparent leaders understand that smart decisions are made based on data, not opinions, and that the greatest reason behind disagreement is asymmetrical access to data.

At Investopedia, we gave every employee access to the same reports as the CEO: every weekly report, monthly report, financial analysis, every key performance indicator, sales or traffic report — the whole enchilada.

Most Investopedia leaders would hold weekly metrics meetings to drill down and figure out what’s working and, more importantly, what’s not. The whole team would debate why things aren’t working, then brainstorm solutions and prioritize them. Everyone, every week, was aware of the metrics. Together, the team felt the joys of success and the pain of challenges. A weekly metrics meeting drives deep buy-in, facilitates creative solutions, bridges the gap between manager imperatives and employee realities, and ensures that the best ideas win.

The sole exception to transparent reporting involves human resource-related reporting. If an employee is on a performance plan, that should not be public knowledge. I don’t believe that compensation information should be shared across the organization because that will inevitably engender resentment, anger, embarrassment and discord between employees.

U is for Updates

The first meeting invitation a new Investopedia employee received was called “7 Minutes in Investopedia Heaven”. This is our seven-minute, weekly all-hands meeting.

Yes, we had an all-employee meeting every single week. It was short, unpolished and drove transparency in a way that typical quarterly or annual all-hands meetings cannot. We kept the agenda tight, and it enabled me to efficiently share with everyone what was working and what wasn’t.

It also made it far more likely that employees would then share concerns with me. Too many CEOs lose touch with what is happening on the ground, and by opening up the top-down channel, the bottom-up channel inevitably follows.

As we grew from 50 to 100 and then 150 employees, I needed a new way to build transparent relationships with more employees. So I adopted the university model of office hours and held monthly, optional CEO Updates where employees asked any question and would get a transparent answer.

Among the most difficult questions I would get involved gender and ethnicity diversity. It is a topic fraught with sensitivity and with the potential for misunderstanding. Nevertheless, I was quick to admit how much more work we needed to do as an organization and asked for help. I later learned that prior to the office hours, some employees were skeptical of my commitment to diversity. Only by truly talking about the elephant in the room did this skepticism diffuse.

T is for Transparency

Before every meaningful meeting at Investopedia, organizers would create a Google Doc, share it with all attendees at least 24 hours in advance of the meeting, and ask all attendees to comment prior to the meeting. This enabled everyone to have the same information, to get clarifications or resolve any misunderstandings prior to the meeting, and to start the dialogue immediately. This made the actual meeting far more efficient because we were able to dive right into solving the problem.

Amazon CEO Jeff Bezos wrote in his 2018 shareholder letter that the firm doesn’t do PowerPoint presentations. “Instead, we write narratively structured six-page memos,” he said. “We silently read one at the beginning of each meeting in a kind of ‘study hall.’”

While I applaud this approach as far better than typical meeting agendas, I don’t believe it goes far enough. It is far more productive and efficient to have everyone not only read the document, but to comment, debate and respectfully disagree in the document prior to the initial meeting.

Transparency in communication with employees is also paramount. Most leaders hate dealing with poor employee performance and then rationalize the avoidance of an uncomfortable discussion as being ‘kind’. And then surprise: The employee is terminated and shocked.

I have a radical perspective on the right way to do separations. Don’t fire employees. Instead, be transparent that a change is needed and they should start looking for a new job elsewhere, now.

I have done this with many employees, and they have consistently thanked me for it. It is far easier to find a new job while working than not. We also set a date by which the employee must leave on his or her own. Employees are able to save face, avoid a termination on their résumé and are treated with the kindness and respect they deserve.

If an employee starts to slack off while looking for a job, however, that is grounds for immediate dismissal.

H is for Honesty

I’m always looking for absolutely brutal honesty. I would prefer an employee to be clear, transparent and even rude than to feel strongly about something and keep it bottled up. Every employee, from the college intern to my direct report can — and ideally should — walk into my office and disagree, debate and tell me, “You don’t know what you’re doing…and are making a big mistake.” There cannot be any negative repercussion to an employee who speaks with full honesty.

At one office-hour session, an employee commented in front of about 30 people that we didn’t have clear, consistent and documented corporate values. That stung. I felt like I had been talking about our values for years. But she was right. This led to a six-month process that resulted in five values that represented our aspirations — SCOPE, or selflessness, celebrating, overcommunicating, planning, and empowering our employees.

Mother Teresa said, “Honesty and transparency make you vulnerable. Be honest and transparent, anyway.”

It is this vulnerability that makes a leader more human, more approachable and therefore more in touch with the real challenges facing an organization. Only then can quick and successful remedies be achieved.

David Siegel has been a digital media executive for over 20 years, including CEO of Investopedia from February 2015 to July 2018, when the company was acquired by DotDash. He is now an Entrepreneur-in-Residence at IAC and a professor of management at Columbia University. You can reach him at dmsiegel@gmail.com. He’d love your feedback.