Technology reporter Rolfe Winkler recently published an article in The Wall Street Journal titled “When Startups Fail, Silicon Valley’s Millennial CEOs Like to Share Feelings.” He examines the penchant for younger CEOs to bear their souls in lengthy blog posts discussing everything that went wrong in their startups. While this might fall under the category of “too much information,” their willingness to be transparent is laudable. Here’s why CEOs should build transparency into the company’s operations on day one.

Transparency helps employees be emotionally engaged and committed to the business. Venture capitalist Brad Feld has a benchmark for CEO transparency: You should share the information you give to your board with all employees. He says, “If you can’t be open with your company about the information you report to your board, how can you actually be transparent?”

I think it’s important to share your board slides and other important information with employees. After all, many start-up employees have stock options at least and deserve to know how the business is doing. Transparency makes them feel more like a trusted part of the team. It also allows you to reiterate your vision, mission, and goals. While I would not share salary information or other sensitive details, I do think employees need to know the negatives as well as the positives.

Some CEOs are afraid that sharing any negative information will demotivate employees or cause them to quit. In reality, CEOs who are too optimistic quickly lose credibility. Employees start to see through the sunshine and roses and realize one of two things: 1) Either their CEO is not being straight with them or 2) Their CEO is too positive and cannot face reality or manage it effectively.

As I wrote for CUInsight.com, transparency is a two-way street. For it to work effectively, relevant information has to flow both from the CEO and to the CEO. When this happens, you get a feedback loop:

1. Traditional top-down transparency helps employees see into the core of the business and
2. Bottom-up transparency gives the CEO a clear view of day-to-day operations and the insight of his team.

These two types of transparency reinforce and supplement each other. When both sides understand the reality of the other, the result is a more cohesive, aligned company. This is what Khorus is helping CEOs do.

If you instill transparency in from the beginning, then critical moments are not nearly as jarring for employees. Startups are hard and most will fail. If you are clear with people about that in the beginning, it is much easier when trouble comes. Too many CEOs tell employees everything is going great until the 11^th hour. Then employees are shocked when they find out the company is running out of money. Being consistent from the beginning is key to avoiding these “oh sh*t” moments.