3 Ways to Build a Culture of Radical Honesty (and How It Can Transform Your Business) Transparency and honesty can go a long way toward making a business nimble and innovative.

What keeps me up at night? Watermelons.

As a CEO, my biggest fear is that the digital dashboards capturing my company's vital signs are the business equivalent of that tropical fruit — green and firm on the outside, but red and mushy underneath. At first glance, everything looks solid. Then one morning, I get a call from a client asking, "What the hell is going on with A, B or C?"

This concern isn't fair to my team, who consistently exceed my expectations. But the reality is that for many leaders, such nagging fears can persist. When there's a problem, the last thing you want is for people to give you the impression — intentionally or not — that things are better than they truly are. So, how do you avoid this?

For the past few years, I've led a company in an industry facing astronomical demand. One of the biggest lessons: The agility, operational excellence and innovation required to meet this challenge requires building a culture of radical honesty.

Here are three ways that leaders and their teams can embrace radical honesty — and reap the benefits of better decision-making and a true picture of where the business stands.

Related: How to Employ Radical Candor in the Workplace With 5 Simple Steps

Encourage your people to admit their weaknesses — and play to their strengths

A simple formula for business success: Do things consistently better than the competition, and those wins will compound over time. The key to pulling it off? Let people focus on their strengths and delegate everything else.

That calls for honesty and transparency. "Fake it till you make it" doesn't always work in business, where pretending can have disastrous consequences. As a leader, I want people to do the opposite — by asking for help and saying, "I don't know."

One way to do this is by empowering and trusting team members to be rock stars in their domain. That makes our company better at creating innovative technologies, tackling new markets and responding nimbly to changing conditions.

But at the same time, as I urge people to lean into their strengths, I give them permission to be less adept at other things. For example, if a member of my leadership team is no good at financial underwriting, I tell them to own it like a badge of honor.

After all, that's what hiring is for. To make up for their lack of knowledge and expertise in a particular area, we can bring on someone to fill the gap. It's my job as CEO to explain that the goal isn't to undermine or replace them, but to help them focus on what they do best.

There's a direct line between that mindset and business results. In one study, companies whose CEOs excelled at delegating grew more than twice as fast as those with a less skilled delegator at the helm.

Don't default to the rulebook

For leaders, honesty is nearly always the best policy, even if it means ruffling a few feathers or going against convention.

Sometimes this requires poking holes in well-intentioned ideas that also happen to be intellectually lazy. This came up recently in a chat with my team about how we plan to meet the demand that AI is creating in our industry. While some of the ideas presented were sound, others needed more probing.

Take the argument for keeping someone in a management role because they've done the job forever. Many companies default to this way of thinking, but what if they're overlooking a newer hire with a fresh perspective and a natural ability to inspire the team? To me, sticking with option A isn't an intellectually honest approach.

As hard as it is, leaders can't escape making these kinds of tough decisions. Without abandoning all loyalty to people, they should consider what's best for the business and make pragmatic rather than emotional choices. Even if those decisions aren't always popular.

In a broader sense, being intellectually honest means knowing when adhering to the rulebook is hurting the company, not helping it. For example, I'm a big believer in hiring top talent, telling them where our True North is, and then letting them figure out the best way forward. If somebody needs a course correction, that can be addressed. But expecting the entire team to follow every company rule to the letter? That will only slow us down.

Related: Stop Lying to Your Team — And Yourself. Try Radical Honesty Instead.

Give the team a license to speed without getting a ticket

Leading with radical honesty also requires getting real with yourself and your team about how willing you are to embrace failure.

At our latest companywide offsite, I told people I want them to fail more. For a business, that isn't as risky as it might sound. Companies that are serious about innovation should be willing to try new things and pivot fast if they don't work.

Take Airbnb, which didn't begin by building an elaborate home rental website. Instead, the founders tested the waters by renting out their own loft online. Google Glass — released by a company famous for its "moonshots" — is a good example of a failed experiment. When its smart glasses didn't catch fire with consumers, Google moved on.

Encouraging creative destruction means removing the fear of failure, a major cause of inaction. Within reason, people should be able to fail out loud without worrying they'll get fired.

For me as a leader, there's little risk because I've hired talented people who are laser-focused on executing well. All they really need is a license to speed without getting a ticket.

Unfortunately, many business leaders don't see things that way. Despite all the rhetoric around moving fast and breaking things, less than half of companies have a leadership team that regularly tolerates small-scale failures, according to a recent global survey of CEOs.

Someone should explain to them that the rewards of letting people fail can be substantial. In a study of 120 tech startups, those committed to learning from failure produced greater scientific output, raised more capital and innovated more.

Of course, businesses must also know when to play it safe. For Amazon founder Jeff Bezos, there's a big difference between "experimental failure" (good) and "operational failure" (bad). It's the same at my company, where the mission-critical computer and electrical systems that power our facilities don't leave much room for error. But even there we get creative — for example, by finding innovative ways to keep the lights on during a blackout.

Related: How to Allow Room for Failure and Create a Successful Work Environment

For leaders and their teams, the biggest benefit of a culture of radical honesty is the elimination of fear: that employees will get into trouble for taking risks, that folks aren't good enough at their jobs or that the company is actually on shaky ground.

Ultimately, ensuring that everyone knows where they and the organization stand is a competitive advantage, thanks to a more engaged workforce, a clear view of where the business needs to grow and iterate, and a culture where people feel as emboldened to innovate as they do to ask for help. When it comes to performance, what you see is what you get. So, here's to keeping watermelons where they belong — at the company picnic.