The Case for Startups to Make Radical Transparency the Top Priority

The Case for Startups to Make Radical Transparency the Top Priority

Yesware's CEO Matthew Bellows on how he's built a culture that champions surprisingly candid and clear communication.

Last summer, Matthew Bellows was handed a startup’s PR dream: A sit-down with The New York Times. But he didn’t talk about how his company Yesware, the sales productivity software maker, had quickly attracted thousands of enterprise users. He touted not a single product feature. Instead, Bellows described his then recent, and potentially catastrophic struggle to make his sales team work.

“During the interview, the reporter asked me to share a story about a time I had failed. In my head, I quickly weighed the pros and cons of being honest and decided to be open about something I had done wrong as CEO,” he says. That honesty turned into a two-part feature on Yesware’s sales challenges, unflinchingly titled “A Leader Struggles to Sell Software Meant to Aid Sales.”

So, you see, when Matthew Bellows advocates for a culture of transparency, it isn’t just lip service.

A serial entrepreneur, he has since become an evangelist for startup transparency. In this exclusive interview, he shares what he’s learned about how to disseminate information, and when as a startup leader, to keep it to yourself. Here, he offers strategies to help break open even the most secretive cultures. And he explains how to turn copping to mistakes — whether in an all hands meeting or the newspaper of record — into a competitive advantage.

Literally, Don't Close the Door

That’s not just a metaphor for Bellows. Because if you and your leadership team are behind closed doors for hours, you better believe that everyone else is wondering (and nervous about) why.

Bellows learned this lesson when he was on the outside of the door, and it stuck with him. The year was 2000, and the bubble was bursting. “I was trying to concentrate on running a small business development team, but all these execs would go into a room and talk for hours. I'd ask my boss what was going on, and she'd say, ‘Nothing. We talked about nothing,'” he says. Not only was it a lie, it was an obvious one — and it undermined Bellows’ trust in the company incredibly fast.

Now as a leader, he's made transparency of information a cornerstone of his own management style. It won’t surprise you to learn that Yesware’s two offices boast an open floor plan — with huge windows into all the conference rooms. But that’s just the most visible manifestation of a culture that places enormous value on authentic interactions.

Being as transparent as possible, effectively transparent, is a major way for teams to come together around big, difficult missions.

Bellows has seen firsthand how a little openness can go a long way toward optimizing six key factors that make for a happy, productive workplace:

Rumor Management. “The things people make up about what's going on are always worse than what is actually going on,” Bellows says. So get ahead of the gossip. Take board meetings, for example. Yes ware’s meetings are held quarterly, and Bellows always follows them — no more than a week later — by presenting the meeting decks to the whole team. “That way, when the execs disappear for a day or two, the company isn't left guessing. They know they will be filled in.”

Last year, this strategy proved particularly valuable. Yesware hit 96% of its revenue goal — and it had been a particularly aggressive goal. Bellows was confident that the board would be happy. Others, though, assumed falling short of target would have negative consequences. “I knew I was right, and that we’d grown a ton. And because I always report on those meetings, when I came back and said, ‘This is great,’ the team was psyched. They believed me.”

When you’re dealing with people’s careers and livelihoods, anxiety is inevitable. “When people are whispering about the latest gossip they heard — possible layoffs, divisions at risk for elimination — you’ve lost them. They’re distracted or polishing their LinkedIn profiles, and they’re definitely not working on your company anymore,” Bellows says. Replace the rumor mill with candid communication so the team trusts that they’ll hear it from you if it’s time to worry. You’ll all get a lot more done.

Responsibility. Eighteen months ago, in the aftermath of the events featured in The New York Times, Bellows hired a new VP of sales. During the search, he promoted a top performer to run the team in the interim. “I wanted him to take up the mantle as a leader and really act as if he was empowered to make decisions. But I owed him the honesty and the understanding that his position was temporary. Because his expectations were set clearly at the beginning, he could serve as interim leader and then transition back to being one of our top performing reps.” By clearly articulating your expectations for a given role, you can stop productivity-killing uncertainty before it starts and free your team to maximize their contributions.

Performance. Don’t forget the simplest reason to share company information with your team: it will better equip them to do their jobs. “There are still way too many companies that don’t even share the stuff — conversion rates or average deal size, for example — that would let people do their work better.”

Two years into building Yesware, when their active user numbers were starting to scale, operational costs became an issue that even the board was concerned about. “We were spending about 60% of our top line revenue on infrastructure to provide our service,” Bellows says. “Clearly not sustainable, but also not a simple fix. By sharing the board’s concerns with everyone and setting a company-wide goal, we got infrastructure expenses down below 25% in six months. They're currently at 17%.”

Context. Your company is about more than raw data, though. The difference between selling a product and making a real difference is often context: How does each team member’s work fit into the whole, and how is that whole making a difference in your customers’ lives?

If you’re not already, start answering those questions with OKRs (Objectives and Key Results), the tool made most famous by Google and now widely used by startups. Set quarterly by each employee, these goals and targets form a sort of three-month mission statement when viewed as a whole. “As an individual, unless I understand what it is that the group is trying to do, I can't gauge how effective or meaningful my work is,” Bellows says. “Creating context for your team reminds everyone that they can’t do it alone. Each person’s work is a meaningful part of the whole.”

To that end, OKRs need to be visible to the whole team. And that means everyone’s. If you need to, line up tools to help. (Yesware just rolled out the 7Geese software to facilitate their process.) With this new system, everyone knows what everyone else is aiming to do in the coming quarter.

“One of the first objectives I set for the organization was 'become unkillable.' This is a reference to Jason Lemkin’s article about how when you reach $10 million annual run rate as a SaaS company, things can go sideways, but you really can’t be stopped.”

By making that objective public and accessible for everyone at Yesware, they could aim their activities toward it. Within days of posting that objective, others had added 17 contributing objectives to the overall goal. “That kind of unity of purpose really increases our chance of hitting the target,” Bellows says.

Trust. Of course, there will be decisions in the life of every company that demand higher levels of discretion. Sharing everything with everyone isn't always effective at scale. But if you’ve established a pattern of transparency, your team will better understand how its leadership works and have faith that the right decisions will be made.

For example, if my old manager who told me nothing was going on back in 2000 had said, ‘We're talking about how we're going to save the company in the next year because the Internet is deflating,’ that would have made me feel a lot better. You're doing something. You're trying to figure it out.” It's not appropriate to include the entire team in all conversations. But the people who aren't in the room want — and deserve — to know that they’re taking place.

“It’s the difference between push and pull,” Bellows says. “With meetings, email and other channels, we push out a certain level of detail about what’s going on with the company. Beyond that threshold, it’s not efficient and probably not effective to share more. But anyone can come at any time and pull information out of me or the rest of the executive team. We have an explicit understanding that if the topic is too sensitive, we can just say, 'That’s a personal issue that I really can’t share with you.'”

Personal Growth: “I am obsessed with the idea of leveraging professional experience for personal growth. The stresses and the pressures and the creativity and victories and failures on the job are perfect grist for the mill of personal growth,” Bellows says. Leading companies, big and small, can be a lonely endeavor — for him, though, sharing struggles as well as successes has made it less so.

By being more open and admitting mistakes and sharing difficult news, you become more connected to the people you’re working with.

“When The New York Times articles came out, it caused a lot of internal soul searching,” Bellows says. “I got some serious sideways glances from team members. But there was a tremendous outpouring of support and encouragement from customers and prospects. They read about the struggles we had in the early days and related to them. They thought it was helpful to learn from our mistakes. Being open and public about our stumbles helped our partners trust that we were going to be upfront and honest with them too.”

What Transparency Looks Like in Practice

So maybe you’re convinced that transparency is the way to go — but how do you get beyond the buzzword tochange how you manage? From the way tools are implemented to how employees are coached, Bellows shared some tactics he’s learned from his own experiences and recent conversations with business leaders:

State your values. Startups move fast, and it can be difficult to maintain a commitment to transparency in the face of brisk deadlines and the inevitable growing pains. So whatever your values, make them official. Develop them with the entire team, not just with the execs during an offsite. Put them down on paper and display them publicly. Yesware has pillows throughout its offices with values stated on each one. As you can tell, they aren't your run of the mill, pat values either — they're designed to be memorable:

  • We are brave, ambitious and resilient.
  • We empower each other and our customers.
  • We seek mastery in our profession and our market.
  • We grow by being genuine.
  • We achieve outstanding results.

Even if transparency doesn’t explicitly make this list, clearly articulating your cultural priorities — and how you want to see them implemented — helps establish mutual clarity and trust.

Put your tools to work. Whether you’re starting from scratch or looking to make your existing culture more transparent, start by building it into the tools you use every day. Make the executive team’s calendars visible internally, for example, so everyone can see who’s in a given meeting or when colleagues are available.

As your company grows, you may need to introduce new tools, too. Newsletters, email aliases, culture surveys to gauge feedback, and “lunch and learn” sessions can all be useful ways to generate productive back-and-forth at larger companies.

For example, every month Yesware puts out an anonymous net promoter score (NPS) survey with employees. “It's been amazing to see how good it can be when things are good, and how quickly the company score can drop when someone leaves or if we miss a revenue target for a month,” Bellows says. “Good or bad, we share the results with the team so they know the pulse of the company. There is a part of the survey that asks for written feedback, and because it's anonymous, people can be brutally honest. I paste the most brutal and honest questions into an email and send it around with my responses so that the people who wrote in can hear my thoughts on their questions without identifying themselves, and other people can know the kinds of questions their teammates have.”

Educate your team. Transparency without knowledge isn’t very powerful, so deliver them as a pair. Bellows, for example, is 100% transparent about Yesware’s finances. But sharing raw numbers alone could do more harm than good. “If I just say, ‘Here are the revenue and costs, and we got money from our investors to cover the gap,’ it engenders concern. People might think, ‘Holy cow, the company isn’t profitable. How much longer will it be around?’” So he doesn’t just share a spreadsheet, he contextualizes it. “I might say, ‘We're spending $400,000 more than we bring in, but we have $8 million in the bank, and that means we have 20 months of cash.’” When you share sensitive information, make sure you’re doing so at the level of your audience’s knowledge — or that you’re filling in any gaps.

Deputize your managers. As a company grows, one-to-many communication becomes less effective, and skilled managers will be critical for maintaining your cultural priorities. “After the 50-person mark, it’s essential to start instituting managers and make sure they have enough training to communicate important company information clearly to their team,” Bellows says.

Deputizing new managers at a growing startup is one of the most challenging parts of scaling. Everyone always has too much to do. New managers are frequently put in charge of people who used to be their peers. There is never enough time for proper new manager training. To handle this, Bellows says, “We have a quarterly manager retreat when all managers gather together to discuss issues they face. We follow Reed Hasting's advice to normalize discussions about performance. We have a Slack channel for managers, and are thinking about rolling out a peer-support system for managers to buddy up and help each other. But it's still challenging.”

When deputizing new leaders has worked, it's because the manager's manager spends the time and energy to coach the new person through the transition. That's the key success factor.

Yesware recently faced a situation where a new manager fired the first hire she made for performance issues. “To me, that's the sign of a manager with a lot of potential,” Bellows says. “She was able to put aside the political reasons for keeping someone on, move past the sunk costs, and make the tough decision to start the search process over because she wanted the best people on her team. She was able to do this partially because she had the support and mentorship from her manager too.”

Evaluate performance candidly. Those managers will be equally essential to communicating information in the other direction. When it comes to evaluating a team, Bellows picked up some valuable tough love from the now-legendary Netflix Culture deck: “Adequate performance deserves a generous severance package.” But the implied lesson there is not that you should be doling out severance right and left — it’s that no one benefits from pretending that people are doing better than they are.

“I asked Reed Hastings, Netflix’s CEO, about that one, and his answer was really instructive: You should normalize the discussion about performance. It should be part of your ongoing conversation, and you should be honest with fellow managers about people on the team,” Bellows says. Use your management meetings to hash out real performance issues and to share ideas for helping your stars thrive and your stragglers improve.

Invest seriously in your people.More than anything else, young employees value the chance to learn and develop. A report put out by PricewaterhouseCoopers showed that millennial employees most want training and development opportunities, even more so than flexible working hours, cash bonuses or more vacation.

To support employees in their growth, Yesware hired four professional coaches. Anyone on the team can schedule up to 12 sessions (whether they do is strictly private), and Yesware foots the bill. “Having someone coach and support you in being authentic at work is very important to us. Transparency isn't unidirectional. In a truly transparent workplace, everyone can and should feel comfortable about being themselves, and we hope coaching helps,” Bellows says.

Hire people who have a history of valuing transparency. As with all of your company’s values, one of the best ways you can prioritize transparency is to hire for it. Always spend a portion of any job interview on mistakes — and what the candidate has learned from them.

Candidates want to put on a serious air, but I'm looking for whether they’re able to be honest about their life and what they’ve learned.

Be sure to ask about gaps on resumes, too. Not because they should be deal breakers, but because they’re a chance for candidates to show their genuine selves.

“One guy I recently interviewed basically said, ‘For those three months, I just went to my girlfriend's house and hung out with her because she was getting ready to go into the Peace Corps.’ And you know what? I have no problem with that. He went to Swaziland with her, and they got married and started a school.”

Use your personal support system. Ultimately, though, when particularly sensitive issues arise, executives may bump up against the limits of internal transparency — and that can be lonely for leaders who have prioritized openness. In those cases, don’t hesitate to look outward. Open up with mentors, peers and CEO support groups in the same situation and get opinions on your predicament. I lean on my executive coach and fellow startup CEOs to help make sense of the difficult situations we all find ourselves in,” Bellows says.

Beware of the Free-for-All

Even for this transparency devotee, though, a culture of openness does not mean the end of private information. And it doesn’t mean that everyone has a say in every decision, either.

There's an important distinction between being transparent and oversharing.

“It’s like the difference between someone who is honest about how they're feeling and someone who tells you whatever is on their mind.”

Take compensation information, for example. At Yesware, that’s kept strictly private. Not only does Bellows feel his employees are entitled to discretion around what they earn, he also knows that it’s in the company’s best interest to avoid any negative feelings around discrepancies. Moreover, there’s nothing to be gained from sharing that information; it doesn’t boost trust, for example, or help team members assume more responsibility.

That said, Yesware shares salary information in a way that is valuable: the company subscribes to a private salary database and makes it available to every employee. “If someone wants to find out if they are being paid fairly, they can make an appointment with the resident salary expert, who will create a report with data showing the market comps for their position. The employee can choose to use that information in conversations with managers, and if they don't, the fact that the search took place is private,” Bellows says. Transparency isn’t the blind sharing of information, it’s sharing information that will help your team be better professionals.

Another transparency pitfall to look out for is the “too many cooks in the kitchen” scenario — a common problem, Bellows notes, once a company grows past five or ten people. If everyone has the same information, people begin to feel entitled to weigh in anytime, even on decisions well outside their qualifications. When that happens, keep clear boundaries.

Companies are not democracies. And the bigger they get, the less democratic they should probably be.

Instead, be candid about what you’re going to share, and when you’re looking for feedback. “A transparent culture is founded on respect for each other's opinions and a willingness to discuss difficult questions — but that doesn’t mean you need to parcel that information out,” Bellows says. “Pretty quickly, at 20 or 25 people, you need to say, ‘I'm not going to push all this stuff on you, but you can come get it if you're curious. Come talk to me if you want to.’” Shifting that onus to the team gives everyone the opportunity to gather what they need to do their jobs without becoming onerous.

In turn, the leader’s role becomes less about broadcasting information than creating settings that foster productive dialogue. For example, Bellows is a big fan of AMAs — Ask Me Anything sessions. Yesware holds three-hour sessions every six weeks, which have become a hallmark of the company’s culture of authenticity.

Unlike some companies, Yesware’s culture allows these questions — and other forms of feedback — to be anonymous. “Even in a progressive, well-meaning organization, some professionals only feel comfortable sharing their perspectives anonymously. If that's what it takes, I would gladly sacrifice my desire for attribution so that their ideas, suggestions, and feedback can get out in the open.”

One of the most difficult anonymous questions Bellows ever got in an AMA was something like, “Were you sad, angry or disappointed when [an early employee] left the company?”

“There was so much wrapped up in that question, and I didn’t even know who was asking it,” Bellows says. “So I just tried to speak honestly: ‘Of course I was disappointed. Yes, I was sad and honestly, I was a little angry. But joining Yesware isn’t the same as getting married…’ and I could answer from there.”

By admitting to my real emotions on the topic, I could also speak clearly about how I was moving beyond them.

Then there’s Yesware’s quarterly planning session — the most impactful use of the poker chip outside of a Texas Hold ’Em tournament. “Our planning process is extremely open, involving first an open call for new product ideas and then a unique poker-chip voting process,” Bellows says. With all the team-sourced pitches posted in a common area — where all are invited to observe — employees place their allotted chips on the ideas they’d most like to see become reality.

Both of these company-wide events serve the same macro goal: The antidote to unhelpful ad hoc opinions is soliciting feedback, regularly and genuinely. Reassure your team that they will have frequent and meaningful opportunities to weigh in, and you can get ahead of the notion that the floor is always open.

The final scenario where transparency may be counterproductive is when a piece of information is simply too painful or potentially distracting. “I've experienced this many times in the lead-up to fundraising rounds,” Bellows says. “Before we raised our A round, we had a month and a half of cash left. We were getting down to the fumes. Everybody at the company was curious about how fundraising was going. But if I’d told them what was happening after every pitch, nothing would have gotten done for three months. They would have been riding the same roller coaster that I was.”

This one is particularly tricky, because it might actually feel better to have company on the roller coaster with you. But resist the urge to share speculation. Remember, transparency without knowledge isn’t powerful, and in this case it could be downright detrimental. “Instead of sharing guesses, I gave the team whatever concrete data I had: ‘I was in California and had five meetings with these investors. I’m still a month away from any definitive answers,’” Bellows gives as an example.

Perhaps the simplest gut check is this: Offer information when you have something meaningful and important to share. That’s not to say what you’re sharing will always be pretty; often the issues a company most needs to hash out aren’t.

“One of the reasons for The Times piece was to demonstrate to the rest of the company that it's okay to be open and share issues. And the response was extraordinary — it opened so many productive conversations with the team and with our customers. After all, the best companies in the world aren't the ones without problems. They’re the ones who find creative ways to solve them.”