Is Radical Transparency the Future of Talent Management?

Is Radical Transparency the Future of Talent Management?

Most employees say that they want to know exactly where they stand with their employer. They ask questions around how they are doing, how much of a raise they will get, and are they likely to get promoted. The reality, however, is that most employees don’t get that level of transparency: Our research at CEB, now Gartner, finds that fewer than 40 percent of employees say their organization is fully open and honest.

The investment firm Bridgewater is famous for its culture of radical transparency, and its founder Ray Dalio is going public with how he actually achieved that within his company via the publication of his new book Principles. His approach, which he outlines in a TED talk and in a recent interview with Fast Company’s Marcus Baram, is based on the concept of an “idea meritocracy” in which all ideas have the potential to be implemented (or criticized) regardless of who has them. Radical transparency serves that meritocracy by ensuring that everyone is free to speak up to, disagree with, and criticize their peers, their managers, and even Ray himself.

The immediate reaction from many in the HR community is that Dalio’s ideas are interesting, but just too radical to work at my organization. While simply applying his approach in the exact same way might not work, some of the underlying ideas and concepts might well be applicable across other companies.

One of Dalio’s ideas that is getting the most attention is the Dot Collector, a tool Bridgewater uses to have employees constantly provide quantitative scores of how other employees are doing on a close to real-time, always-on basis. HR executives have raised several concerns about this approach. In particular, they are concerned that 1) it can put employees in a fear state from being constantly evaluated, and 2) feedback coming from so many people who have limited interactions with someone can be too inaccurate to be useful.

Let’s look at the first of these concerns: that constant quantitative measurement will put employees in a constant state of fear, worried about what number they get. If employees are in a fear state, many believe, they can’t develop or learn. In fact, some companies have been so concerned about the idea of quantitative evaluations, and their corresponding fear state, that they have eliminated scores from their performance reviews all together.

But what creates fear state is not actually the presence or the absence of a score. Instead, the fear state is created by the score being a surprise. Employees who undergo a performance review once or twice a year get anxious when they have no idea what to expect. When their manager springs a poor performance review on them, they get stressed out, their confidence is shaken, and their performance can suffer. In the case of Bridgewater, employees know exactly how they are doing and how they are scoring in real time. Evaluations don’t come out of the blue. In fact, it seems that constant measuring and evaluation would significantly decrease the likelihood of a threat state by reducing the possibility for unpleasant surprises.

The second concern, that employees can’t accurately evaluate their peers, doesn’t hold up to closer scrutiny either. Recent survey work that we have done shows that given how much more collaborative and horizontal work has become, peers are actually better evaluators of the contributions that employees are making than managers are. In fact, employees say that feedback from their peers is effective 52 percent of the time, compared to only 45 percent of the time from their manager.

While the technology that Bridgewater is using is certainly a massive leap forward, companies have already been experimenting with this type of feedback. CEB Corporate Leadership Council members can read our case studies on how Herbert Smith Freehills and W.L. Gore have based significant components of their performance management system on peer feedback, and how FINRA leverages peers in making promotion decisions.

Ray Dalio and Bridgewater are certainly at the frontier, and their approach might not be perfectly transferable to all companies. Many of the concepts underlying it, however, represent a vision of the future for talent management.