Money is a taboo topic for the majority of people – as it is for many privately-owned, small and medium-sized businesses. Leadership teams, of course, usually have access to most or all of their organization’s financials because they are decision-makers. But the rest of the employees, whether dozens or hundreds, are often in the dark when it comes to the numbers. This begs two questions. First, why do owners hesitate to share financial data? And, second, are there benefits to sharing financial information with employees?
Regarding the first question, owners can be reluctant to provide financial data to their employees because they assume there is no value in doing so. The reasoning is, “Information is available on a need-to-know basis, and the general employee base has no need to know.” They also, as the founder and owner, may feel that financial information is confidential; it is “theirs” and they prefer to keep it that way. Finally, owners may fear that access to financial numbers may lead to employees asking why they are not receiving higher salaries or bonuses.
However, keeping numbers behind closed doors can actually be a limiting factor for a company. Experience demonstrates that sharing appropriate financial information with employees based on their role to educate them on the health of the business brings big benefits.
This does not mean opening up the financial books to anyone and everyone in the company. Rather, it means the leadership team should shoulder the responsibility of carefully weighing which specific pieces of financial data should be shared with specific employee groups, taking into consideration the different roles and functions. For example, the sales and marketing teams might benefit from information that would be irrelevant for the manufacturing arm of the business, and vice versa. In like manner, supervisors might appropriately be provided with more financial detail than those they supervise.
The information selected for sharing should be communicated in a way that is readily understandable and that helps employees grasp what it means for the business and, if applicable, how they can contribute to improving the numbers. For instance, suppose a company needs to cut $100,000 in costs. It is important to let people know why the cost-cutting measures are being implemented and how much of the $100,000 target their department is responsible for.
Context is particularly important when it comes to financial data since most people are not accountants. Consequently, explaining the context around numbers and how financials work is vital. Take the scenario where a company wants to increase revenue from $2M to $5M. It is important for employees to know why this goal is in place and how the additional revenue will be used in the business. Otherwise, they might assume that the additional $3M will just go into the owner’s pocket or, conversely, that it is going to be divided up among all the employee pockets. Either misunderstanding will lead to dissatisfied employees!
In contrast, consider what happens if the $3M goal is explained within the context of building a new facility that will result in expanded business opportunities for both current employees and new hires. Instead of being encumbered with false expectations, employees can buy in to the goal because they know they will be able to take advantage of the opportunities it will bring.
Overall, when employees are regularly provided with appropriate financial information about the company in a financial scorecard, presentation, memo, or some other format, the business benefits because:
When employees have a better understanding of how the business operates, they are equipped to take more personal, intelligent, intentional ownership of their responsibilities.
When employees know that there are financial issues or that further expansion is desired, they can be spurred on to brainstorm new and creative ways to solve problems or stimulate growth.
When employees are trusted with appropriate financials, they feel honored and respected as part of the team. In response, they are motivated to work together for the good of the company.
What business does not want engaged, innovative team players? These three traits are key for success in business!
Sharing financial data well is a learning experience. Leaders need to identify what numbers are appropriate to share with different groups. Communicating those numbers so that people understand them and can connect with them may take several attempts to get right. It is also important to open the door to dialogue so that employees can come if they have questions about the numbers or ideas about how to improve the numbers.
Ultimately, providing the right financial information can help employees understand what a healthy business looks like, where the business is at today, and how they can help the business achieve greater success. That is a great reason to remove the money taboo in your company!