The word transparency is everywhere.

The demands for increased accountability from statutory compliance and shareholder activists have forced organizations to become more transparent. Political ideology aside, Barack Obama ran a successful campaign championing the need for transparency in response to the government secrecy of the previous two terms. Unfortunately, transparency is fast becoming a buzzword:

Too bad, because transparency is not an act; it is a process. Even better, it is an outlook or state of mind.

Like all processes that create a state of mind, it’s useful to have support at the top. In The Transparent Leader: How to Build a Great Company Through Straight Talk, Openness, and Accountability, Herb Baum suggests that the pillars of transparency are integrity, honesty, quality corporate governance, and effective communication. But he’s not convinced that corporate governance adds true transparency and instead highlights the dangers that excessive compliance can cause at the expense of shareholders, creative risk taking, and innovation.

To me, transparency in leadership is not just about outright lying but also about being frank. Particularly in this tough economy, is it a sin of omission not to tell your team that you too worry about the future? Or is staying optimistic one of the attributes of a strong leader?

This exact debate is the subject of How Frank or Deceptive Should Leaders Be? over at Harvard Business School Working Knowledge. The discussion was prompted by a new book called “Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism” which deals with how leaders should act when they aren’t confident about the future.  Over simplified, leaders are caught between irrational exuberance and self-perpetuating prophecy.

While there are many insightful comments, one of the most amusing comes towards the end:

In the Hindu epic Mahabharata, Krishna knew that Yudhishtira, who was known to always speak the truth, would not be able to lie. A lie was needed to win the war and so he had all the warriors beat war-drums and cymbals to make as much noise as possible at the critical moment, so that only the pleasant part of the truth could be heard drowning the unpleasant bit.

I think this is what is currently required. A leader with credibility should speak the truth, but enough “noise” should be created to communicate confidence and positivity for the future.

An interesting approach. Leaders speak the whole truth but employees focus only on the positive part.

What do you think?

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