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Many of us have been in a situation at work where we realized that something suspicious was going on. Whether we had to sign an NDA or a contract promising that we would keep our lips sealed about the business’ practices or we were threatened with losing our job if we opened up to the public, it’s no secret that companies keep information from the public. Sometimes secrets are used to ensure the business has a leg-up over competitors or utilized to keep the magic alive, at places like theme parks and Disneyland. But other times, dirty little secrets are intentionally kept because business owners know that the public would not be supportive of their practices.
When secrets come to light about discrimination or unfair treatment of employees behind the scenes, consumers are quick to boycott or tarnish the name of a company. And they should be. We all want to know where our money is going, and if a corporation does not align with our morals, they won’t get a penny more. Unfortunately, however, many businesses have mastered the art of keeping company secrets under lock and key, so we are very lucky when employees, like the people featured on this list, decide to open up.
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To consumers, it might seem suspicious that companies feel the need to hide things from us. But according to David Lonsdale, President of Allegiance Capital, many companies depend on keeping secrets for their livelihood, particularly when they decide to sell the business to someone else. He explains in an article he wrote for Inc. that if businesses revealed all of their secrets, they could lose control during a sale. Appearances are extremely important when running a business, so David says that a business owner should have full control over what the public knows about their company. This requires having a trustworthy investment bank, he notes, so there are never any surprises or concerns about what information is released.
David also notes that when a sale is made, the former and new owners should collaborate and decide precisely what story will be released to the public. “Effective confidentiality management provides control and prevents unfounded information from impacting the sale,” David writes.
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The next reason David notes for why companies must maintain secrets during a sale is because they could lose customers if the information became public. “If customers discover you are selling the business, they may be less willing to do business with you, because they can’t predict what will happen next or how it will impact them,” David writes. “Your competitors are fully aware of this, and can be expected to use any information about a possible sale to help lure customers away from you.”
He also notes that potential new customers may be deterred from doing business with you if they get word of the sale happening. It’s not ideal to be trapped in a contract with new owners that the customers do not know well, or perhaps even trust. David explains that new owners usually do not impact the customers at all, but customers tend to scare easily if they hear about the information abruptly. David says it’s best to reveal the news of a sale to them when you and the new owners feel ready.
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Another reason David says companies must maintain secrets during a sale is to not lose high-value employees. He explains that employees often worry that their jobs are in jeopardy when they hear news of a sale, and if they start jumping ship, the quality of the business could suffer. David recommends keeping key employees in on the sale, so they can help throughout the process, and letting everyone else know later on. Similar to how customers can be scared off by the news of a sale, employees can be too. Finally, David writes that keeping a sale under wraps until it’s necessary to break the news can be vital to maintaining company value.
“In the end, confidentiality is all about ethics,” he writes. “You and the professionals you hire to sell your company are entrusted with information that can have a serious impact upon the company, and even the lives of those associated with it. Yes, loose lips sink ships. But they can also sink your sale.”
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It’s interesting that David Lonsdale notes the ethics of keeping company secrets when a business is being sold, because it often feels like corporations keep things to the public to conceal unethical practices. But according to Sarah Green Carmichael at Harvard Business Review, companies might be realizing that it’s actually better to reveal their highly guarded secrets. She spoke to Sami Luukkonen, Accenture’s Global Electronics and High Tech Industry Lead, about why secrecy is becoming less helpful for businesses over time, and he explained that while the tech industry has long been full of secrets, times are changing.
“The technology itself is now really driving the need to become more open,” Sami told HBR. “With digitalization and the Internet of Things, that’s really changing the industry. The convergence of intelligent products, processes, and services, that’s really causing the need for change. So companies need to open up about what kind of products are coming, and that’s really difficult for most companies because of the legacy of protecting intellectual property.”
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Sami explains that companies are no longer creating products that only do one thing, so they have to reach out and collaborate with other companies that can help them create a product that does everything. He notes the example of Apple creating the Apple Watch. “The consumer isn’t just buying a watch, they are buying a multipurpose device. And Apple is not a company that’s an expert in, say, wellness, so they have to collaborate with those companies to create an offering to the end consumer,” Sami explained. “The Watch is an ecosystem product, and these ecosystem products are the driving force that are really forcing companies to collaborate. That’s why I say it’s a technology-driven cultural change. At the same time, Apple is a special case. They’re able to take command of the ecosystem because of their very strong brand. It’s almost a requirement to go and collaborate with Apple.”
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