At some point, every business operator will be faced with the question, “How much financial information should I share with my staff?” There are different schools of thought on this topic leading to different conclusions. My experience has been that more disclosure is better, and there are long-term benefits to working toward full disclosure.
Some Rationalizations
There are several common reasons why managers rationalize not sharing financial information with employees.
“It’s none of their business.” This one barely deserves a response and is probably a symptom of deeper issues. Of course, it’s their business. Your employees depend on your company – and their jobs – for their livelihood. They likely devote half (or more) of their awake time to your business. If you don’t think your employees are working toward your business goals, that deserves immediate attention.
“They don’t really care.” On the surface, this may have some truth to it, particularly if you haven’t shared financial information in the past. Perhaps your employees only care about what’s in their paychecks, which again, is a symptom of a deeper issue. In this case, it may be a lack of education, which leads to the next excuse…
“They won’t understand it, anyway.” Your employees may not be accountants, but they should still understand the key performance indicators of your business. With a little more education, they can understand “the bottom line.” In addition to leading to more engaged employees who will share your goals, it will lead to more mature employees who will more likely develop into your future leaders.
More Rationalizations
“If they know how much money we’re making, they’ll think we’re not paying them enough.” This one’s easy. Whatever profit you’re making, your employees think you’re making more. End of story. And chances are, regardless of their perceptions of your profitability, they don’t think you’re paying them enough. That’s human nature, but it’s easier to manage those feelings with openness and trust.
“If they know how much money we’re losing, they’ll jump ship.” Employees rarely respond in this manner. Most of us tend to be eternal optimists as long as we’re getting paid biweekly. Once again, education and trust are the glue that will keep your staff intact.
Answering the question, “How much financial information should I share with my staff?” is not as simple as just handing out your financial statements. It’s a culture change that requires openness, education, and the building of trust over time. And if you want to maximize your financial results, your efforts will be rewarded by having everyone working toward the same goals.
Dan Weiss, founder and President of Counterpart CFO, leads a team of flexible, part-time CFOs specializing in nonprofits. To read more from Dan, follow him on LinkedIn or subscribe to his blog at www.counterpartCFO.com.