Perceived internal transparency as a multidimensional construct:
discovering its benefits and unintended consequences
Denice Blok
Student number: 11073527 Master thesis
Graduate School of Communication
Master’s programme Corporate Communication Joost Verhoeven
Abstract
Today’s business environment seems to be guided by a utopian transparency ideal. This is no surprise, given the auspicious outcomes that have been promised in the literature. However, the unintended consequences of transparency are largely ignored in the unidimensional measurement scales used in transparency research. As the realization is growing that
transparency should be treated as a multidimensional construct, it is no longer relevant to ask
whether a company is transparent or not, instead we should ask ourselves on what subjects
we wish to be perceived as transparent. Hence, this study has three main contributions. A multidimensional conceptualization is proposed consisting of seven dimensions that constitute internal transparency. For each dimension, a scale is developed to measure employees’ perception of internal transparency. Finally, this study explores what content is beneficial to disclose with regards to job satisfaction and organizational trust, and what information can better stay private. A survey was deployed resulting in a sample of 269 respondents. The findings revealed that transparency is not always related to positive outcomes, and can even have negative consequences. Transparency in (1) decisions and policies and (2) employee behavior monitoring were positively related to job satisfaction. Both relationships were mediated by organizational trust. Transparency in (3) board and management structures, (4) financial accounting, (5) investments, and (6) employee efforts and rewards were not associated with job satisfaction or organizational trust. Moreover, a negative relationship was found between transparency in (7) salaries and organizational trust. This indicates that organizations need to get smarter about when to be transparent and when to withhold information to prevent unintended consequences. Altogether, this study found support for the need of a multidimensional structure when measuring internal transparency. In contrast to what the transparency ideal advocates, transparency does not always benefit organizations.
Introduction
As new communication technologies increasingly empower employees, transparency has become a routine expectation within organizations (Bennis, Goleman, & O’Toole, 2008; Men, 2014). Indeed, internal transparency has become an indispensable concept in democratic organizations (Berggren & Bernshteyn, 2007; Rawlins, 2008). In this decade, “transparency is one of the most cherished, yet unquestioned ideals of the current business environment” (Christensen & Cheney, 2014, p. 70). Although, the development of corporate policies to improve transparency is strongly increasing (Albu & Wehmeier, 2014), the effectiveness of transparency is seldom empirically put to the test (Holland, Krause,
Procencher, & Celtzer, 2018). Consequently, the academic interest in the transparency ideal is rapidly growing (Albu & Wehmeier, 2014). In this study internal transparency is defined as the deliberate attempt to make available all legally releasable information—whether positive or negative in nature—in a manner that is accurate, timely, balanced, and unequivocal, for the purpose of enhancing the reasoning ability of employees and holding organizations
accountable for their actions, policies, and practices (Rawlins, 2009, p.75).
Many managers and academics emphasize the benefits of open systems (Birkinshaw & Cable, 2017). Prior research for instance, indicates a positive link between internal transparency and employee performance (Bamberger & Belogolovsky, 2017). Transparency is seen as a way to empower employees and improve the quality and speed of decision making (Birkinshaw & Cable, 2017). In addition, transparency in decisions making processes can increase perceived procedural justice (Day, 2007). Research on organizational trust also points to the importance of internal transparency (Butler, 1991), specifically with regards to financial information (Hultman & Axelsson, 2007). Indeed, internal transparency has been shown to be a primary driver of trust (Mayer, Davis, & Schoorman, 1995; Rawlins, 2008).
transparency is a good thing. The unintended consequences have, however, been largely ignored in transparency research (Hansen, Christensen, & Flyverbom, 2015). In other words, there could be a “dark side” to transparency. Indeed, Birkinshaw and Cable (2017), argue that organizations need to get smarter about when to open up and when to withhold information in order to enjoy the benefits, while mitigating its unintended consequences of organizational transparency. Critics for instance, argue that internal transparency can create problems such as information overload and second-guessing of supervisors (Bamberger & Belogolovsky, 2017; Ejiogu, Ejiogu, & Ambituuni, 2018). Additionally, transparency in salaries can adversely affect the amount of help individuals offer to peers who are paid more than them (Bamberger & Belogolovsky, 2017). Let alone, transparency can increase envy among colleagues (Bamberger & Belogolovsky, 2017). Furthermore, high levels of transparency in how employee behavior is monitored can reduce creativity as people fear the watchful eye of their superiors (Birkinshaw & Cable, 2017). On the other hand, secrecy in employee efforts (Birkinshaw & Cable, 2007) and in how behavior is being monitored (Stone & Stone, 1990) can lead to positive organizational outcomes such as job satisfaction.
The inconsistent, and even contradicting findings emphasize the necessity for a different approach. First, prior transparency research is mostly conducted using content analysis measuring disclosed information (e.g. Aksu & Kosedag, 2006; Bushman & Smith, 2003; Patel, Balic, & Bwakira, 2002). However, managers have a tendency to conceal (Abrahamson & Park, 1994) or even manipulate (Ejiogu et al., 2018) negative organizational information, while highlighting the information that is perceived as positive (Beekes & Brown 2006; Bernstein, 2012). Hence, there is often a mismatch between the organizations’ efforts of transparency and how transparency is perceived (van der Cruijsen & Eijffinger, 2008). Additionally, many theorists treated transparency as a unidimensional construct (e.g. Park & Blenkinsopp, 2011; Pirson & Malhotra, 2011), leaving significant gaps in the
operationalization of transparency (Albu & Wehmeier, 2014). Hence, multiple interpretations have been made as to what constitutes transparency (Heald, 2006). The application across domains of organizational research, however, affirms the need for a multidimensional structure (Schnackenberg & Tomlinson, 2016; DeBoskey & Gillett, 2013). In other words, it is no longer relevant to ask whether a company is transparent or not, instead we should ask ourselves on what subjects an organization is perceived as transparent.
This study distinguishes seven dimensions that constitute transparency. Hence, a multidimensional conceptualization of perceived internal transparency is proposed.
Subsequently, this paper explores what content is beneficial to disclose with regards to job satisfaction and organizational trust, and what information can better stay private. Both dependent variables have been tested multiple times in unidimensional transparency research, but have resulted in contradicting findings (e.g. Al-Jabri & Roztocki, 2015; Butler, 1991; Birkinshaw & Cable, 2017; Day, 2007; Hultman & Axelsson, 2007; Mayer et al., 1995; Men, 2014; Pirson & Malhotra, 2011; Rawlins, 2008). The multidimensional approach used in this study offers a new view on these prior inconsistent findings and provides a better
understanding of the impact on job satisfaction and organizational trust. As both variables are vital conditions for organizations of all types (Auger, 2014; Berggren & Bernshteyn, 2007), the findings of this study can positively contribute to the success of organizations. Survey research was conducted to answer the research question: (A) To what extend are the dimensions of perceived internal transparency related to job satisfaction and (B) can these relationships be explained by organizational trust?
Literature review
In this section central concepts are outlined in order to answer the research question. An overview of the dimensions of internal transparency is given. Subsequently, the hypotheses are formulated.
Job satisfaction
Employees have become important communication assets, especially in today’s new media landscape (Men, 2014). With the use of social media, employees increasingly engage in organizational ambassadorship (van Zoonen, van der Meer, & Verhoeven, 2014). The public perceives them as more reliable than the organization itself, and better informed than other communicators (Verhoeven, 2013). The tone of their communication, either positive, neutral or negative, relies on their satisfaction or dissatisfaction with their work (van Zoonen,
Verhoeven, & Vliegenthart, 2016). Hence, the value of employees’ job satisfaction cannot be understated, as it can affect an organizations’ reputation (Macdonald & Maclntyre, 1997). Job satisfaction is defined as a pleasurable or positive emotional state resulting from the appraisal of one’s job or job experiences (Locke, 1976). It can be considered as one of the main factors when it comes to efficiency and effectiveness of organizations (Aziri, 2011). According to Hackman and Oldham (1975), there are five work characteristics that make jobs more satisfying for employees: autonomy (freedom of an individual), skill variety (extent of skills necessary to perform the job), task identity (extent to which a piece of work can be completed individually), task significance (extent to which a job impacts others), and feedback from the job (extent to which a job transmits information about an individual’s performance). These five characteristics are found to be strongly related to internal work motivation and job satisfaction, (Fried & Ferris, 1987). Moreover, openness in communication systems is found to be positively related to job satisfaction (Al-Jabri & Roztocki, 2015; Carriere & Bourque, 2009). Hence, according to Carierre and Bourque (2009), in order to satisfy employees, managers must provide employees with timely and highly valued information.
Organizational trust
Employee trust in an organization is a highly important ingredient in the long-term stability of an organization, as well as the well-being of its employees (Cook & Wall, 1980). Some
even stated that organizational trust is one of the most effective management tools ever invented (McCauley & Kuhnert, 1992). Based on the definition of Cook and Wall (1980), organizational trust is defined as the extent to which an employee is willing to ascribe good intentions to, and have confidence in the words and actions of the employer. Research on organizational trust all points to the importance of manager’ openness with both themselves and others (Butler, 1991). Indeed, transparency is necessary to create a sense of
trustworthiness and accountability. (Parris, Dapko, Arnold, & Arnols, 2016). Moreover, trust within organizations can predict employees’ job satisfaction (Driscoll, 1978; Park &
Blenkinsopp, 2011). When employees do not trust the employer, they will perceive
employers’ actions to be cynical attempts at impression management, likely resulting in more negative attitudes, and lower job satisfaction (Gilstrap & Collins, 2012). Without an
established base of trust, employees may question the appropriateness and intent of transparency. Hence, it is hypothesized that it is through the establishment of employees’ trust in their employer that transparency influences job satisfaction.
Perceived internal corporate transparency
Transparency and its associated expectations have a variety of different meanings based on situational content (Simon, 2006). Although the concept of transparency is generally ascribed to the idea of mutual exchange and comprehensibility (Grunig, & Grunig, 1992), the PR literature quite often characterizes transparency as honest communication (Liu & Horsley, 2007), the opposite of manipulation, bias, and advertising (Signitzer & Prexl, 2008). In this study internal transparency is defined as the deliberate attempt to make available all legally releasable information—whether positive or negative in nature—in a manner that is accurate, timely, balanced, and unequivocal, for the purpose of enhancing the reasoning ability of employees and holding organizations accountable for their actions, policies, and practices (Rawlins, 2009, p.75). Based on the four characteristics proposed by Schnackenberg and
Tomlinson (2016), perceived internal transparency is defined as the perception of
intentionally shared information, which can vary according to the perceived quality.
Empirical examination of internal transparency is categorized by mixed evidence (Schnackenberg & Tomlinson, 2016). Some studies have found compelling evidence of a positive relationship between organizational transparency job satisfaction (e.g. Park & Blenkinsopp, 2011) and trust (e.g. Rawlins, 2008), while other have found only marginal support for these relationships (e.g. Pirson & Malhotra, 2011). The majority of transparency research treated transparency as a unidimensional construct by measuring overall
transparency (e.g. Park & Blenkinsopp, 2011; Pirson & Malhotra, 2011; Rawlins, 2008). Schackenberg and Tomlinson (2016) found that this work is characterized by cursory
assertion rather than rigorous development of precisely how these constructs are theoretically related. Critical assessment of the overall transparency scales revealed that transparency is neither a unitary concept, nor merely an ambiguous term for multiple distinct concepts (DeBoskey & Gillett, 2013). Instead, transparency consists of various underlying dimensions which can be distinguished by the subjects an organization can be transparent about. Internal transparency can for example entail organization-related information to employees, such as policies and procedures, financial results, or changes (Vandenberg, Richardson, & Eastman, 1999). Hence, critics ascribed the inconsistent findings to the unidimensional measurement scales, and have emphasized the need for the distinguishment of the dimensions that
constitute transparency (Schnackenberg & Tomlinson, 2016). Some attempts have been done to develop a multidimensional conceptualization for internal transparency (see table 1).
Table 1. Multidimensional conceptualizations of transparency.
Literature Method Dimensions
Cheung, Jiang, & Tan, 2010
Observational scorecard assessment
(1) Mandatory disclosure, and (2) voluntary disclosure
Table 1 (Continued)
Smith, 2004 governance disclosures,
Heald, 2006 Conceptual article (1) Event transparency (inputs, outputs, or outcomes), and (2) process transparency (procedural or operational)
Bannister & Connolly, 2011
Conceptual article (1) Data transparency, (2) process
transparency, and (3) decision and policy transparency
Aksu & Kosedag, 2006; Patel et al., 2002
Content analysis of annual reports
(1) Ownership structure and investor relations, (2) financial transparency and information disclosure, and (3) board and management structures and processes Grimmelikhuijsen &
Welch, 2012
Experiment (1) Transparency of decision making
processes, (2) transparency of policy content, and (3) transparency of policy outcomes or effects
DeBoskey & Gillett, 2013
Factor analysis (1) Public disclosure information, (2) intermediary information, (3) earnings quality information, and (4) insider information
Hultman & Axelsson, 2007
Case study (1) Cost transparency, (2) supply transparency, (3) organizational transparency, and (4) technological transparency
Although there seems to be an overlap on the dimension transparency in financial matters, no consensus has been found as to what other dimensions form the best
representation of internal transparency. The definition by Rawlins (2009, p. 75) states that internal transparency is “the deliberate attempt to make availability all legally releasable information […]”. The multidimensional conceptualizations that have been developed in prior research, do not cover all legally releasable information. Moreover, none of the studies
use a method suitable for measuring the perceptions of transparency, as is done in for
example survey research or interviews. To develop a more comprehensive conceptualization for perceived internal transparency, other sources that studied transparency in a specific topic were consulted to identify additional dimensions. After comparing all dimensions that have been identified in prior research, seven dimensions were classified: (1) decision and policy transparency, (2) transparency in employee behavior monitoring, (3) board and management structures transparency, (4) financial accounting transparency, (5) investment transparency, (6) salary transparency, and (7) transparency in employee efforts and rewards.
Decision and policy transparency
The first dimension of perceived internal transparency entails communication about the decisions made by the board, the reasoning behind these decisions, as well as the policies that have led to these decisions (Bannister and Connolly, 2011). According to Fort (1996), organizations take a vulnerable position when disclosing information about the decisions made as they open themselves up to examination and evaluation. Therefore, organizations often prefer to withhold this kind of information (Abrahamson & Park, 1994). Adversely, employees are in a vulnerable position as strategic decisions are made that might affect their own well-being (Spicer, 2007). This dimension of perceived internal transparency can therefore have a big impact on the organization, as well as its employees.
Grimmilikhuijsen, Porumbescu, Hong and Im (2013) have found this dimension to be negatively related to perceived competency. When employees can see that a lot of behind-the-scenes efforts went into inadequate decisions, it reinforces their impression that the company is bad at what it does (Buell, 2019). On the contrarily, openness about decision making processes signals that the organization cares about its employees (Men, 2014). This kind of information disclosure, even though it might threaten the organization’s interests, indicates the firm’s intent to adhere to moral and ethical principles (Colquitt, Scott, &
LePinem, 2007). It suggests that management has both integrity and benevolence (Colella, Paetzold, Zardkoohi, & Wesson, 2007), and is therefore positively associated to employees’ trust in the organization (Mayer et al., 1995). Moreover, when employees trust that the organization will take their wellbeing into consideration when making decisions, they will be more satisfied with their job as they feel more secure about their job (Ashford, Lee, & Bobko, 1989; Driscoll, 1978). Hence, this study posits that the more an organization is perceived to be transparent about decisions and policies, the more satisfied the employees will be with their job, and the positive relationship between perceived decision and policy transparency and job satisfaction is mediated by trust.
H1a. The more an organization is perceived to be transparent about decisions and policies,
the more satisfied the employees will be with their job.
H1b. The positive relationship between perceived decision and policy transparency and job
satisfaction is mediated by trust.
Employee behavior monitoring transparency
As advanced sensing and tracking technologies make employee behavior increasingly visible in real time (Bernstein, 2014; Birkinshaw & Cable, 2017), the second dimension of
transparency includes the disclosure of information about how employee behavior is being monitored. Specifically, it entails knowledge about which behavior is being observed, how it is monitored and how often it is monitored (Bernstein, 2012). Hackman and Oldham (1975), emphasize the importance of autonomy (the freedom of an individual) in order to be satisfied with a job. Therefore, employee behavior monitoring transparency might have a big impact on job satisfaction (Bernstein, 2012).
Organizations are incorporating more behavioral data into performance assessments (Bernstein, 2014). Chalykoff and Kochan (1989) found that for some employees perceived
behavior monitoring had a negative effect on their job satisfaction, while the negative impact for others could be mitigated by performance appraisal processes. When managers paid attention to the principles of good performance appraisal processes, the majority of employees even responded positively to the behavior monitoring (Chalykoff & Kochan, 1989). The procedural justice perspective suggests that the perceived fairness of performance evaluations is based on the procedures by which the behaviors are assessed (Greenberg, 1986). Transparency in how employee behavior is monitored could therefore create the impression that employee performance is evaluated based on a fair assessment method rather than favoritism. This might enhance trust and satisfaction in the system (Taylor, Tracy, Renard, Harrison, & Carrol, 1995).
On the contrary, knowledge about how behavior is monitored can leave employees feeling exposed and vulnerable (Bernstein, 2012). Indeed, knowledge of monitoring events can be a stressor that employees prefer to avoid if possible (Stanton & Barnes-Farrel, 1996). Such transparency can distract employees, causing valuable energy and time to be wasted in attempts to manage impressions (Bernstein, 2014). Employees’ perception of privacy is essential for organizational trust, as well as job satisfaction (Block & Stokes, 1989; Stone & Stone, 1990), confirming the importance of autonomy. As autonomy has been emphasized as one of the primary predictors of job satisfaction (Hackman & Oldham,1975), this study therefore posits that the more an organization is perceived to be transparent about the employee behavior monitoring, the less satisfied the employees will be with their job. Furthermore, it is hypothesized that the negative relationship between perceived employee behavior monitoring transparency and job satisfaction is mediated by trust.
H2a. The more an organization is perceived to be transparent about the employee behavior
H2b. The negative relationship between perceived employee behavior monitoring
transparency and job satisfaction is mediated by trust.
Board and management structures transparency
The third dimension of perceived internal transparency entails the disclosure of information regarding the management structures of the firm (Patel et al., 2002). It specifically entails matters such as the name, role, correct position, previous position, and voting shares (in other companies) hold by each board member (Aksu & Kosedag, 2006). This dimension
corresponds to the operationalization of transparency by Vorauer and Claude (1998), as they define transparency as the degree to which individuals’ objectives are apparent to others. This form of transparency creates a ‘window’ into the organization’s operations exposing each board members’ individual agenda (Buell, 2019). It can therefore have a big impact on the perceived credibility of the board, either positive or negative. Zoomed in on the consequences of this form of transparency, Buell (2019) stated that transparency in board and management structures can help employees understand how the organization is being managed.
Additionally, it can increase the appreciation employees feel towards the organization for the value it creates (Buell, 2019). On the other hand, more transparent environments are not always better as it exposes the organization to criticism (Bernstein, 2014). When this form of transparency reveals board member who are incapable, indifferent, or powerless to deliver on the value proposition of te firm, employees can become disappointed (Buell, 2019).
Moreover, it could expose potential dual interests of board members.
Although the effects of this dimension have never been empirically tested before, this study posits that the more an organization is perceived to be transparent about board and management structures, the more satisfied the employees will be with their job. This is expected as the disclosure of this information gives employees a sense of ownership toward the organization (Men, 2014). This can create the feeling that they have the right to know
(Birkinshaw & Cable, 2017), and therefore satisfy their information needs. Moreover, this study expects that greater transparency in board and management structures will facilitate higher employee trust in the organization. This is expected because this form of transparency reflects the organizations’ willingness to be exposed, which signals confidence in its
intentions (Lewicki & Bunker, 1996). As trust in the management skills of the board can predict job satisfaction (Sadler, 1970), this study posits that the positive relationship between perceived board and management transparency and job satisfaction is mediated by trust.
H3a. The more an organization is perceived to be transparent about the board and
management structures, the more satisfied the employees will be with their job.
H3b. The positive relationship between perceived board and management transparency and
job satisfaction is mediated by trust.
Financial accounting transparency
Two dimensions of financial transparency on organizational level can be derived from the literature: financial accounting transparency and investment transparency. Financial
accounting transparency includes the disclosure about earnings, spendings and profits of the company (Asku & Kosedag, 2006). This dimension has received the largest attention in prior multidimensional conceptualizations (see table 1), possibly indicating that this is one of the most distinct dimensions of internal transparency. However, financial information disclosed is often manipulated so as to present a misleading representation to employees (Eijogu et al., 2018). Various studies show that companies tent to reveal only positive information and conceal not so good news (Hultman & Axelsson, 2007). It is however unsure whether
employees are aware of the organizations’ selectiveness in disclosing information, since prior research only emphasizes the positive consequences of financial accounting transparency. Financial accounting transparency can for example prevent catastrophic failures (MacLean,
2011). Moreover, organizations voluntarily disclosing financial and performance information, are found to be generally considered as more open, trustworthy and accountable (Lee & Joseph, 2003). The transparency of financial information is one of the key factions to govern trust in the company (Kundeliene & Leitoniene, 2015). Hence, this study posits that the more an organization is perceived to be financially transparent, the more satisfied the employees will be with their job. Additionally, it is hypothesized that the positive relationship between perceived financial transparency and job satisfaction is mediated by trust.
H4a. The more an organization is perceived to be financially transparent, the more satisfied
the employees will be with their job.
H4b. The positive relationship between perceived financial transparency and job satisfaction
is mediated by trust.
Investment transparency
Investment transparency includes the disclosure of information about companies’ investments, shares, and bonds (Patel, et al., 2002). Moreover, it entails whether the
investments in shares or bonds are ethical and socially responsible (Asku & Kosedag, 2006). This form of transparency exposes a lot about an organizations’ morals as it reveals whether an organization cares about more than just making profit (Carroll, 1991). This dimension can therefore have a big impact on positive or negative attitudes towards an organization.
Communicating too much about corporate social investments might hurt a companies’ credibility and raise the suspicion that the organization only invests in socially responsible matters to advertise its moral behavior (Arvidsson, 2010). It is therefore essential for organizations to manage information disclosure about investments (Arvidsson, 2010).
On the other hand, when organizations are transparent about their investments in social initiatives in a subtle and balanced manner (Chaudhri, 2016), they are able to generate
favorable attitudes towards the organization (Du, Bhattacharya, & Sen, 2010). Research has shown that favorable perceptions of the organization created by socially responsible
investments will be helpful for recruiting potential employees, retaining employees, and raising employee satisfaction (Bauman & Skitka, 2012; Lee, Lee, & Li, 2012). Hence, this study posits that more an organization is perceived to be transparent about investments, the more satisfied the employees will be with their job. Moreover, communication about social investments can significantly predict organizational trust among employees (Hansen, Dunford, Boss, Boss, & Angermeier, 2011). It is therefore hypothesized that the positive relationship between perceived investment transparency and job satisfaction is mediated by trust. As organizations have the tendency to communicate about favorable behavior, while concealing undesired behavior (Beekes & Brown 2006; Bernstein, 2012), it can be expected that organizations will stay secret about investments in harmful activities (e.g. weapons, tabaco).
H5a. The more an organization is perceived to be transparent about investments, the more
satisfied the employees will be with their job.
H5b. The positive relationship between perceived investment transparency and job
satisfaction is mediated by trust.
Salary transparency
Two dimensions of financial transparency on employee level can be derived from the literature: salary transparency and transparency in employee efforts and rewards. Salary transparency entails transparency about the earnings of employees (Bamberger & Belogolovski, 2017). This is a highly controversial dimension of transparency as it is implicitly a private matter between boss and employee (Birkinshaw & Cable, 2017). Nevertheless, firms increasingly start experimenting with pay transparency despite the
possible unknown consequences (Birkinshaw and Cable, 2017). The pay communication literature is narrow in scope, considering only a limited range of outcomes. Moreover, the contradicting findings make the reasoning for this recent trend of salary openness practices hard to determine (Marasi & Bennett, 2016).
Optimists argue that transparency in salaries requires open and honest policies resulting in fair pay for every employee (Case, 2001). The tournament theory (Lazear & Rosen, 1981) advocates for transparency in pay differences: the greater the differences between the disclosed salaries are, the more effort employees will put toward achieving a higher salary (Trevor &Wazeter, 2006). Salary transparency can therefore support the strategy of pay structures designed to encourage employees to acquire more skills in order to increase salary (Gomez-Mejia & Balkin, 1992). Moreover, knowing how pay systems are developed and what others in the organization are paid may minimize rumors and inaccurate estimations of colleagues’ pay (McFarlin & Frone, 1990), enhance employee understanding of the business (Case, 2001), increase feelings of procedural justice (Eastman, 1988), and satisfy employees’ feelings that they have a right to know (Eastman, 1988). Indeed, salary transparency can positively affect organizational outcomes. However, the negative
consequences need to be taken in consideration as well.
More pessimistic views exist with regards to job satisfaction and organizational trust. Critics argue that pay systems should be as compressed as possible in order to mitigate the negative effects of salary transparency (Bloom, 1999). Salary disclosure can for instance increase undesired competition between colleagues (Bamberger & Belogolovski, 2017). When employees are able to comparing their salary to the salary of others, their pay satisfaction may decrease. In addition, salary transparency has been found to be negatively related to colleague relationships (Bamberger & Belogolovski, 2017). This could indicate negative consequences with regards to employees’ job satisfaction, as wage and feeling close
to the people at work are important predictors of job satisfaction (Macdonald & Maclntyre, 1997). Therefore, this study posits that the more an organization is perceived to be
transparent about salary, the less satisfied the employees will be with their job. As salary transparency reveals pay differences, some individuals might also perceive unfairness and inequity in pay. As this might decrease employees’ trust in their employer (Birkinshaw & Cable, 2017) is might consequently lead to a decrease in satisfaction (Kepes, Delery, & Gupta, 2009). Hence, it is additionally hypothesized that the negative relationship between perceived board and management transparency and job satisfaction is mediated by trust.
H6a. The more an organization is perceived to be transparent about salary, the less satisfied
the employees will be with their job.
H6b. The negative relationship between perceived board and management transparency and
job satisfaction is mediated by trust.
Transparency in employee efforts and rewards
Finally, this paper examines the dimension transparency in employee efforts and rewards. This dimension entails transparency about what job behaviors and outcomes will help
employees get a monetary bonus, as well as the formula that is used to decide on the bonusses (Cable & Birkinshaw 2017). Whereas salary transparency reveals pay differences, the
dimension employee efforts and rewards does not regard comparison between colleagues. Instead transparency in this dimension increases the employees’ ability to predict bonusses in advance. A monetary bonus can be seen as a form of feedback (Austin, Kessler, Riccobono, & Bailey, 1996). As is mentioned before, feedback on the job is one of the five predictors of job satisfaction (Hackman and Oldham, 1975; Hunter, 2006). Thus, transparency in employee efforts and rewards might be strongly related to job satisfaction.
According to the expectancy theory (Vroom, 1964), transparency in how employees can earn a bonus increases employees’ motivation. This theory suggests that if employees value a bonus (valence), believe that increased efforts lead to higher levels of performance (expectancy), and perceive that higher levels of performance is tied to a higher bonus (instrumentality), their motivation will increase. The larger the rewards are, the more motivation will increase (Downes & Choi, 2014). In contrast to this theory, however, Hartmann & Slapničar (2012) found that greater transparency in employee efforts and rewards is negatively related to employees’ intrinsic motivation (Hartmann & Slapničar, 2012). Moreover, such information disclosure invites a critical and transactional evaluation of bonusses, rather dan a bonus or reward being seen as an unexpected gift (Cable &
Birkinshaw, 2017). This might lead to disappointment and dissatisfaction. Hence, this study posits that the more an organization is perceived to be transparent in employee efforts and rewards, the less satisfied the employees will be with their job. In addition, transparency in employee efforts and rewards can decrease perceived fairness and trust in the employer (Cable & Birkinshaw, 2017). It is therefore hypothesized that the negative relationship between perceived board and management transparency and job satisfaction is mediated by trust. All hypotheses that have been proposed are shown in a conceptual model (see figure 1).
H7a. The more an organization is perceived to be transparent in employee efforts and
rewards, the less satisfied the employees will be with their job.
H7b. The negative relationship between perceived board and management transparency and
job satisfaction is mediated by trust.
Method
One possible reason for the inconsistent findings of research on the effects of transparency, may be that most of these studies (e.g. Chalykoff & Kochan, 1989; Galetzka, Gelders,
Verckens, & Seydel, 2008; Hultman & Axelsson, 2007; Street & Meister, 2004) used content analysis within a single organization. Therefore, the content analysis may have been subject to particular effects of the organizational context. Hence, the goal of this research is to study a sample of employees from a variety of organizations. Instead of studying the information disclosed in company reports, as is done in the majority of these papers, this research aims at studying employees’ perception of transparency. Therefore, an online survey design is most suitable to answer the research question.
A convenience sampling method was employed. During a time period of seven weeks, the questionnaire was administered among Dutch employees of 18 years or older. Respondents had to meet four criteria to participate in this study. Respondents had to be 18 years or older. Additionally, they were required be employed at the time of data collection. Subsequently, self-employed workers, freelancers, and business owners are excluded from participation. Furthermore, respondents were required to have at least one supervisor above them. Finally, they had to give a correct answer on the attention check. Respondents were invited to participate in this study on multiple train stations in the Netherlands. This location was chosen as travelers have time to fill out the survey while traveling by train. In addition, the link of the survey was distributed within various private, public and semi-public
organizations. Finally, social media were used to recruit respondents. To increase the response rates, respondents were offered a book in return for their response.
The questionnaire was completed 351 times. The final sample consists of 269 respondents (N=269). In total, 82 respondents were excluded from the sample. 26 people were excluded because they did not meet the inclusion criteria: four respondents did not have a job, one respondent worked as a freelancer, one respondent reported an age of 17 years old, and 20 did not have a supervisor. Furthermore, 33 respondents were excluded due to an incorrect answer on the attention check, which means they did not read the questions
carefully. Part-time employees who work eight hours per week or less (22 respondents) were eliminated as they spend little time in the organization and therefore are less exposed to communication efforts. Finally, 19 respondents completed the survey in under five minutes, causing the last respondent to be excluded. The other 18 respondents were already eliminated due to one of the other inclusion criteria.
Since not every organization gives out monetary rewards, the questionnaire contained a control question to decide whether the questions about perceived transparency in employee
efforts and rewards were relevant to the respondent. When it did not apply to the respondent, the questions were skipped. As a result, 150 respondents were exposed to the questions about perceived transparency in employee efforts and rewards. With regards to perceived
investment transparency, a similar control question was asked causing 184 respondents to be filtered out. This resulted in a sample of 85 respondents for this dimension of transparency. In order to not reduce the sample size for the other dimensions, these two dimensions were analyzed separately.
Of the final response group, 47.7% was female. The age varied between 18 and 65 (M = 31.64, SD = 12.55). With regards to organizational and work characteristics, analysis shows the number of employees ranged between 1 to a maximum of 80.000 employees (M = 4938.47, SD = 12116.11). Finally, the time respondents have been employed by their current employer ranged between a year to 38 years (M = 6.51, SD = 8.04). Other
demographics and job characteristics can be found in table 2.
Table 2. Demographics and job characteristics.
Variable Item N Percentage
Education Practical- or occupation-oriented education 5 1.9% First three years of mixed or theoretical education 5 1.9%
Middle-level applied education 55 20.7%
The last two years of mixed or theoretical education, or the first year of University (of applied science)
37 13.9%
Table 2 (Continued)
Bachelor or Candidate degree 125 47%
Master or Doctorate degree 38 14.1%
Employment Part-time 118 44.4%
Full-time 148 55.6%
Work hours 9 to 16 hours per week 49 18.4%
17 to 24 hours per week 33 12.4%
25 to 32 hours per week 36 13.5%
33 to 40 hours per week 92 23.6%
More than 40 hours per week 56 21.1%
Position Upper-level management 11 4.1%
Middle-level management 18 6.8%
First-line management 51 19.2%
Operational staff 175 65.8%
organization 7 to 10 levels 90 33.8%
10 or more levels 47 17.7%
Sector Public sector 55 20.8%
Semi-government 42 15.8%
Private sector 168 63.4%
Measurements
The questionnaire consists of three parts. The first part of the questionnaire assessed the dimensions of transparency. Although overall transparency has been tested using a survey design (e.g. Rawlins, 2008), no measurement scales have been developed for the dimensions of transparency. Hence, new scales were developed using the scale construction steps
described in various studies (e.g. DeVellis, 2016; Hinkins, Tracey, & Enz, 1997; MacKenzie, Podsakoff, & Podsakoff, 2011; Worthington & Whittaker, 2006). The item generation
process was conducted deductively: starting theoretical definitions from which items were then generated by the researcher (Hinkins et al., 1997). Moreover, the items were generated using insights from relevant literature about the constructs (See table 2). If a dimension was tested in prior research using content analysis, applicable items are reformulated to suitable survey questions. To assess item quality (Worthington & Whittaker, 2006), respondents were asked to evaluate the items for clarity, conciseness, grammar, and redundancy.
After all items are developed and carefully refined, assessment of the content
adequacy is required (DeVellis, 2016). There are various methods that have been developed to assess the content adequacy of new measures (Anderson & Gerbing 1991; Hinkins et al. 1997; Lawshe 1975; MacKenzie et al. 2011; Nunnally, 1978; Schriesheim, Cogliser, Scandura, Lankau, & Powers. 1999). MacKenzie et al. (2011) emphasize the importance of evaluating whether there are multiple sub-dimensions of the focal construct. Hence, the developed items were tested on construct dimensionality (MacKenzie et al., 2011). One method to test the underlying dimensionality of the constructs requires respondents to group the items into meaningful subsets without knowing the constructs beforehand (Worthington
& Whittaker, 2006). The primary reason to use this method is that it allows respondents to relate items to any possible underlying factor (Worthington & Whittaker, 2006). The outcome shows that no extra factors were distinguished. This provides support for the
unidimensionality of the constructs (MacKenzie et al., 2011).
Subsequently, the items were tested on content validity (Hinkins et al., 1997). Content validity concerns “the degree to which items in an instrument reflect the content universe to which the instrument will be generalized” (Straub, Boudreau, & Gefen, 2004, p. 424). In this regard, the procedure suggested by Hinkins et al. (1997) is recommended (MacKenzie et al., 2011). This method requires respondents to sort and categorize items based on their similarity to construct definitions. If an item is misplaced multiple times, it means the item does not measure the corresponding construct and has to be deleted (Hinkins et al., 1997). First, the respondents were presented with the construct definitions without titles. Then they were asked to match the items with a corresponding definition. The outcome shows that all respondents placed the items with the correct definition. Therefore, no items were deleted. These two techniques do not guarantee a content valid scale. They have, however, provided evidence that the items represent a reasonable measure of the constructs under examination and have reduced the need for subsequent scale modification (Hinkins et al., 1997).
Adequate internal consistency reliability can be obtained with four or five items per scale (Hinkin & Schriesheim, 1989; Harvey, Billings, & Nilan, 1985). All developed scales consist of at least five items and are measured using a 5-point likert scale. The dimensions of transparency, including the number of items used to measure the constructs and an example, are shown in table 3. The literature that served as inspiration for item generation is presented as well. Furthermore, the Cronbach’s Alpha is given for each measurement scale. Since the scores are above 0.8, all measurement scales are reliable. None of the scales could be improved by deleting an item. Per scale the items were computed resulting in a mean score.
Table 3. Measurement scales for dimensions of transparency and reliability. Dimension of transparency # of Items Cronbach’s
Alpha Literature Example question
Decision and policy
5 0.88 Bannister & Connolly (2011)
I know (or have access to) what policy has led to a decision. Employee behavior monitoring 5 0.86 Bernstein (2012); Brikinshaw & Cable (2017)
I know (or have access to) how often my behavior is monitored by my supervisor.
Table 3 (continued). Board and
management
6 0.83 Asku & Kosedag (2006); Patel et al. (2002); Da Cruz et al. (2016)
I know (or have access to) what the current position of each board member is.
Financial accounting
6 0.92 Asku & Kosedag (2006); Patel et al. (2002); Da Cruz et al. (2016)
I know (or have access to) how much profit the company I work for made last year.
Investment 6 0.97 Asku & Kosedag (2006); Patel et al. (2002);
I know (or have access to) whether the company invests in harmful activities (e.g.
weapons, tabacco). Salary transparency 5 0.90 Bamberger & Belogolovski (2017); Birkinshaw & Cable (2017); Colella et al. (2007)
I know (or have access to) which colleague(s) earn more than me. Transparency in employee efforts and 7 0.88 Birkinshaw & Cable (2007); Colella et al. (2007)
I know (or have access to) what outcomes will help me get a bonus this year.
rewards
Note: the full scales including all items are listed in appendix 1.
The second part of the questionnaire measured the dependent variables job satisfaction and trust. The variable job satisfaction is measured using the scale developed by Macdonald and MacIntyre (1997). The variable trust in the employer is measured using the scale developed by Cook and Wall (1980). All items are measured using a 5-point likert scale. The number of items, including the reliability measured by the Cronbach’s Alpha are presented in table 3. Both scales have a Cronbach’s Alpha higher than 0.8, meaning they are reliable measurement scales. Both scales could not be improved by deleting an item. Therefore, both scales were computed to a mean score. Appendix 1 lists all scale items.
The final part of the questionnaire assessed demographics and job characteristics as has previously been shown in table 4. One control question was added at the middle of the questionnaire to ensure respondents were paying attention and reading the questions carefully.
Table 4. Measurement scales for the dependent variables.
Variable
# of Items
Cronbach’
s Alpha literature Example question Job
satisfactio n
10 0.90 Macdonald and
MacIntyre (1997)
I feel good about working at this company.
Trust in employer
9 0.88 Cook and Wall
(1980)
Management can be trusted to make sensible decisions for the firm's future.
Analysis
All items were measured using a 5-point likert scale. Therefore, the mean scores range between 1 and 5. The means and standard deviations are outlined in table 5, together with the correlation matrix. This revealed that the means for both job satisfaction and trust in the
employer tend towards the positive side. With regards to board and management-, decision and policy-, employee behavior monitoring-, and salary transparency, respondents on average perceived their employer as more transparent than nontransparent. For investment
transparency it revealed the opposite: employers were seen more as secret than transparent. To test the hypotheses, investment transparency and transparency in employee efforts and rewards were tested separately using a simple regression model due to the smaller sample size. The other dimensions were tested using a multiple regression model. Bootstrapping was used to test all direct and indirect estimates of the hypothesized model. 5000 bootstrap samples were extracted from the data. The analysis starts with the direct effect of the
dimensions of transparency on the dependent variable job satisfaction. Then, the direct effect of the dimensions of transparency on the mediator trust was tested. At last, the interaction effect was tested.
Notes: the first seven represent dimensions of transparency. *Significance levels at p < 0.05; **significance level at p < 0.01.
Results
A model with a direct effect of the dimensions of transparency on job satisfaction (H1a – H7a), as well as an indirect effect through trust was estimated (H1b – H7b).
Direct effect of the dimensions of perceived transparency on job satisfaction
In model 1 the direct effects of the dimensions of perceived transparency on job satisfaction were tested using a multiple regression analysis with bootstrap. 5000 bootstrap samples were extracted from the data. This step established whether there was an effect that might be mediated (Baron & Kenny, 1986). The regression analysis indicated that this model was significant (R2 adj = 0.29, F = 23.36, df = 5, 263, p < 0.001). 31 percent of the variance in job satisfaction can be predicted based on the dimensions of perceived transparency (R2 = 0.31). The direct relationships of decision- and policy transparency and job satisfaction (b* = 0.42, t = 7.79, BC95% [0.28, 0.56], p < 0.001), and between employee behavior monitoring
transparency and job satisfaction (b* = 0.13, t = 2.66, BC95% [0.03, 0.23], p = 0.021) were positive and significant. Therefore, hypothesis 1a, which estimated a positive direct effect of decision and policy transparency on job satisfaction, is supported. Hypothesis 2a, which estimated a negative direct effect of employee behavior monitoring transparency on job satisfaction is rejected as this effect was found to be positive. Notably, the direct relationships between board and management transparency and job satisfaction (b* = 0.01, t = 0.17, BC95% [-0.12, 0.15], p = 0.885), financial transparency and job satisfaction (b* = 0.02, t = 0.48, BC95% [ -0.06, 0.10], p = 0.646), and salary transparency and job satisfaction (b* = -0.02, t = -0.48, BC95% [-0.10, 0.06], p = 0.671), were not significant. Hence, hypotheses 3a, 4a and 6a are rejected. In order to not reduce the sample size of the multiple regression model, investment transparency and transparency in employee efforts and rewards were
tested using a simple regression analysis with bootstrap. The direct associations between investment transparency and job satisfaction (b* = -0.05, t = -0.60, BC95% [-0.20, 0.10], p = 0.554), and transparency in employee efforts and rewards and job satisfaction (b* = 0.06, t = 0.93BC95% [-0.10, 0.22] p = 0.413) were not significant. Thus, hypotheses 5a and 7a are also rejected.
Direct effect of the dimensions of perceived transparency on organizational trust
In model 2 the direct effects of the dimensions of perceived transparency on the mediator organizational trust were tested. Again, a multiple regression analysis with 5000 bootstrap samples is conducted. This step essentially involved treating the mediator as if it were an outcome variable (Baron & Kenny, 1986). The regression analysis indicated that the model was significant (R2 adj = 0.33, F = 26.96, df = 5, 263, p < 0.001). 34 percent of the variance in organizational trust can be predicted based on the dimensions of perceived transparency (R2 = 0.34).Corresponding to the effects on job satisfaction, the direct relationships between decision and policy transparency and trust (b* = 0.45, t = 9.02, BC95% [0.32, 0.57], p < 0.001) and between employee behavior monitoring transparency and trust (b* = 0.12, t = 2.80, BC95% [0.04, 0.20], p = 0.008) were positive and significant as well. Moreover, the direct relationship between salary transparency and trust was significant and negative: b* = -0.09, t = -2.57, BC95% [-0.16, -0.02], p = 0.016). The direct relationships between board and management transparency and trust (b* = -0.03, t = -0.59, BC95% [ -0.16, 0.9], p = 0.621), and financial transparency and trust (b* = -0.01, t = -0.15, BC95% [ -0.08, 0.07], p = 0.888), were not significant. Again, simple regression analyses with bootstrap were
conducted to test the effects of investment transparency and transparency in employee efforts and rewards. The direct relationships between investment transparency and trust (b* = -0.02,
t = -0.32, BC95% [-0.17, 0.11], p = 0.761), and transparency in employee rewards and trust
Interaction effect
Model 3 tested the interaction effects between the dimensions of perceived transparency and job satisfaction through organizational trust. In order to establish that organizational trust mediates the relationships between the dimensions of perceived transparency and job satisfaction, two more steps were required (Baron & Kenny, 1986). A regression analysis with 5000 bootstraps was conducted including all dependent variables, the independent variable, and the mediator. The model was significant (R2 adj = 0.64, F = 81.95, df = 6, 261,
p < 0.001). 65 percent of the variance in job satisfaction can be predicted based on the
Table 6. Models and effect sizes
Model 1 Model 2 Model 3 Hypotheses
Dependent Job satisfaction Trust Job satisfaction
Mediator Trust; b* = 0.77**
Independent / effect size
Decision & Policy;
b* = 0.42**
Decision & Policy;
b* = 0.45**
Decision & Policy;
b* = 0.8 H1a supported H1b supported Behavior Monitoring; b* = 0.13** Behavior Monitoring; b* = 0.12** Behavior Monitoring; b* = 0.03 H2a rejected H2b rejected Board & management; b* = 0.01 Board & management; b* = -0.03 Board & management; b* = 0.04 H3a rejected H3b rejected Financial; b* = 0.02 Financial; b* = -0.01 Financial; b* = 0.02 H4a rejected H4b rejected Salary; b* = -0.02 Salary; b* = -0.09** Salary; b* = 0.05 H6a rejected H6b rejected
statistics 23.36, df = 5, 263, p < 0.001 26.96, df = 5, 263, p < 0.001 81.95 df = 6, 262, p < 0.001
Notes: *Significance levels at p < 0.05; **significance level at p < 0.01; N = 269. Since transparency in investments and in employee efforts and rewards were tested separately, they are not shown in this table (H5a, H5b, H7a, and H7b were rejected).
dimensions of perceived transparency and trust (R2 = 0.65).The third step included testing whether the mediator affected the outcome variable (Baron & Kenny, 1986). Indeed, there was a significant positive relationship between trust and job satisfaction: b* = 0.77, t = 16.12, BC95% [0.67, 0.86], p < 0.001. Finally, mediation is established when the independent variables no longer significantly affect the dependent variable when the mediator is controlled (Baron & Kenny, 1986). Indeed, when trust was added to the model, the
dimensions of transparency were not significantly related to job satisfaction anymore. This indicates that the effects found in model 1 (see table 6) are fully mediated by trust in the employer. Indeed, comparison of the model statistics revealed model 3 to predict most of the variance in job satisfaction.
In summary, decision and policy transparency and employee behavior monitoring transparency were positively related to job satisfaction through organizational trust. The other dimensions are not related to job satisfaction. Salary transparency was negatively related to trust. All effect sized are shown in figure 2.
Conclusion and discussion
The objective of this study was to get a better understanding of the relationship between perceived internal transparency and job satisfaction, mediated by organizational trust. Prior research on these relationships resulted in inconsistent findings. Critics ascribed this to the underdeveloped measurement scales, as the scales treat internal transparency as a
unidimensional construct (Schnackenberg & Tomlinson, 2016). Moreover, most scales are developed for content analysis, and therefore do not measure the perceptions of transparency. Hence, the need for development of a multidimensional scale for perceived internal
transparency was argued (DeBoskey & Gillett, 2013). This study distinguished seven dimensions that constitute perceived internal transparency. A multidimensional conceptualization of perceived internal transparency was proposed.
This study showed that some dimensions of perceived transparency are indeed positively related to job satisfaction and organizational trust, while others are not related, or even negatively related to these organizational outcomes. Starting with the positive
job satisfaction. In contrast to what was expected (Bernstein, 2012), perceived transparency in (H2a) monitoring of employee behavior was also positively associated with job
satisfaction. Both relationships were mediated by organizational trust (H1b, H2b). With regards to the first dimension, this outcome supports the expectation that being vulnerable, even though it might threaten the organization’s interests, can increase the perceived
trustworthiness of an organization (Fort, 1996). Moreover, disclosing this kind of information can signal confidence and care for employees (Men, 2014), and can result in the perception that the employees’ wellbeing is taken into consideration when decisions are made,
increasing their perceived job security and job satisfaction (Ashford et al, 1989). The outcomes regarding the second dimension support the procedural justice perspective which suggests that perceived fairness of performance evaluation is based on the procedures by which the behaviors are assessed (Greenberg, 1986). This validates that transparency in how behavior is monitored can create the perception that performance is evaluated based on fair assessment, rather than favoritism. Additionally, both outcomes can possibly be explained by the uncertainty reduction theory (Berger & Calabrese, 1975). According to this theory, people feel unpleasant when they are anxious and therefore want to reduce uncertainty. Perceived transparency in decisions and policies, increases a persons’ ability to predict what is most likely to happen next and therefore decreases anxiety. Perceived transparency in employee behavior monitoring increases employees’ knowledge about when observations take place, and therefore decreases anxiety for unexpected examination. Subsequently, a decrease in anxiety has a positive effect on job satisfaction (Zalewska, 2011). This indicates that the positive associations of the decision and policy transparency and employee behavior monitoring with job satisfaction, can possibly be explained by a decrease in anxiety.
In contrast to what was expected (H7a, H7b), perceived transparency in employee efforts and rewards was not related to job satisfaction or organizational trust. When
organizations are transparent with regards to this dimension, employees know what behavioral outcomes will get them a bonus. Additionally, they know how bonusses are calculated, increasing employees’ ability to predict their bonus in advance. A possible explanation for the findings that transparency in employee efforts and rewards is not related to job satisfaction or organizational trust, can possibly be found in the equity theory (Adams, 1963). This theory argues that people have the tendency to calculate a ratio of their own inputs (e.g. effort) to their own outputs (e.g. reward). They then compare those ratios to referent others. A comparison between de content of this dimension and this theory indicates that it does not matter whether information about employee efforts and rewards is disclosed by the employer, because when this information is absent, employees will calculate it themselves. Hence, transparency is not the influencing factor in this perspective.
Furthermore, no associations to job satisfaction or organizational trust were found for perceived transparency in (H3a, H3b) board and management structures, (H4a, H4b) financial accounting, (H5a, H5b) and investments. These findings indicate that perceived transparency can only predict an increase in job satisfaction or organizational trust when the information disclosed directly impacts the work experience of employees. This is true for transparency in decisions and policies, and for employee behavior monitoring. Policies and decisions made by the board can have a big impact on matters such as work load or time pressure. Behavior monitoring can impact privacy or the perceived procedural justice of performance evaluation. On the contrarily, matters such as board and management structures, financial accounting, and investments concern the organization, more than they concern the employees. This would explain why no significant relationships have been found with regards to these dimensions.
Finally, the findings revealed that transparency can have negative consequences as well, confirming recommendation made in prior studies (Birkinshaw & Cable, 2017; Day, 2007). Perceived transparency in salaries was negatively related to organizational trust (H6b).
This confirms the social comparison theory (Festinger, 1954), which argues that when salaries are disclosed, employees start comparing their salary to the salaries of others, making pay differences visible (Bamberger & Belogolovski, 2017). Consequently, employees with lower salaries than average will perceive inequity, which in turn decreases trust in the employer (Birkinshaw & Cable). This finding suggests that when information reveals differences between employees which can be conceived as unequal, it can better remain undisclosed. Hence, this could indicate that organizations would be wise to stay secret about other subjects as well, for instance internal vacancies and preferred candidates.
Although salary transparency was related to trust, no association was found between salary transparency and job satisfaction (H6a). Prior research found that pay transparency is not associated with pay satisfaction (Day, 2007). As wage is an important predictor of job satisfaction (Macdonald & Maclntyre, 1997), an insignificant impact on pay satisfaction, would suggest an insignificant impact on job satisfaction. This indicates that although salary transparency leads to perceived inequity and a decrease in trust, it has insufficient impact on pay-, and therefore job satisfaction.
Theoretical implications
This study has three main contributions: a multidimensional conceptualization was proposed consisting of seven dimensions that constitute internal transparency; for each dimension, a scale is developed to measure employees’ perception of internal transparency; and finally, this study explores what content is beneficial to disclose with regards to job satisfaction and organizational trust, and what information can better stay private. Subsequently, this study confirms the usefulness of survey research to investigate the effects of perceived internal transparency. Although organizational information disclosure is likely to contribute to perceived transparency, there is often a gap between actual and perceived transparency (Cruijsen & Eijffinger, 2008). Hence, when studying outcomes regarding employees, it is
more reliable to use a measurement scale focused on employees’ perceptions of transparency, like the ones proposed in this study. Moreover, this study found support for the need of a multidimensional structure when measuring internal transparency. The significantly different relationships found for each dimension of transparency confirms that the construct is far too complex to be perceived as a unidimensional construct.
Practical implications
As both positive and negative outcomes were found, this study can help managers understand when it is beneficial to be transparent and when information can better stay undisclosed. Thus, what do these results mean for the debate between transparency optimists and skeptics? In line with what optimists have advocated, this study found that perceived transparency in specific subjects can indeed be beneficial for organizations and its employees. More specifically, this study suggests that organizations should be transparent about the policies and decisions, and about how behavior of employees is being monitored. However, the findings also suggest it is only beneficial to do so if the information directly affects the employees’ work experience.
Even the insignificant results give us critical information as it tells us what
information is not necessarily beneficial to disclose. Perceived transparency in ‘board and management structures’ and ‘employee efforts and rewards’ are not related to employees’ job satisfaction and organizational trust, and could therefore be a waste of time. The same is true for perceived financial accounting transparency and perceived transparency in investments. Hence, being transparent in matters that do not directly impact the work experience of employees, is not necessarily beneficial to employees’ attitudes towards the organization.
In line with the skeptics, this study found that internal transparency can indeed lead to unintended consequences. This study confirms the statement made by Birkinshaw and Cable (2017) that executives need to be cautious about when to open up and when to withhold
information from employees in order to enjoy the benefits, while mitigating its unintended consequences. Based on the findings of this study, organizations may be wise to keep
information about pay undisclosed as this decreases trust in the employer. Given the fact that pay transparency increases envy among colleagues, it is perhaps not surprising that
employees are often in favor of pay secrecy policies (Markels & Berton, 1996). Many people do not want to know the full details of how their firm is doing (Birkinshaw & Cable, 2017). Instead they want to know what impacts their wellbeing and want to have the right to know more.
Limitations
This study is not free of limitations that should be kept in mind when interpreting the
findings. The relationships were examined using cross-sectional data, which makes verifying causal relationships difficult. Therefore, it cannot be ruled out that the correlations can be explained by other models. Employees could for example have the tendency to perceive organizations which they trust as more transparent. In addition, reputation could for example predict trust in an organization, as well as perceived transparency. Furthermore, due to the convenience sample used in this study, it is unclear whether the results are generalizable to a larger population. Another limitation lies in the smaller sample sizes for investment
transparency and transparency in employee efforts and rewards. Investment transparency was tested using 85 respondents, questioning the reliability of the results with regards to this dimension. Moreover, if these dimensions would have been included in the multiple
regression analysis, the 184 respondents that did not answer the questions about investments would be excluded from the entire model. These two dimensions therefore had to be tested individually, resulting in less reliable results since it remains unclear how they are relation to the other dimensions. In order to filter out respondents to whom the questions about
questions were added: “Does the organization you work for ever invest in shares or bonds?” and “Does the organization you work for ever give out monetary rewards?”. Therefore, employees that did work for such an organization but were not aware of it, were wrongfully filtered out. Hence, the transparency scales could be an overestimation.
Methodological discussion
Since this is one of the first studies to propose a multidimensional conceptualization of internal transparency by distinguishing seven dimensions, I strongly encourage researchers to further validate and extend this model. All seven dimensional scales used in this paper were developed deductively: beginning with a theoretical definition retrieved from prior research, from which items were then generated. It is therefore possible that this model still misses dimensions. Hence, in future research, it would be beneficial to conduct the process inductively to test whether this will result in additional dimensions: starting with an
exhaustive list of items, from which dimensions are then generated. Another issue that needs to be addressed, is whether these dimensions of transparency can all be measured and
understood in a single study. Clearly transparency is not an end in itself, and every dimension of transparency has its own consequences. Although the dimensions board and management structures, financial accounting, investments, and employee rewards are not found to be associated to job satisfaction or trust, they can still be significantly related to alternative outcomes. It might therefore be impossible to map and examine all dimensions that constitute internal transparency, including all individual outcome variables in one study. For this study, the choice was made to limit the model to job satisfaction and trust, as both have been studied using unidimensional transparency instruments multiple times, resulting in contradicting findings. Moreover, both variables are vital conditions for successful organizations (Auger, 2014; Berggren & Bernshteyn, 2007). As the model was complicated enough with seven dependent and two independent variables, possible important moderators such as sector,
