- Although they are not obligated to do so, private companies can benefit from sharing financial information with their employees.
- Employees feel more engaged and empowered when they have access to company financial data.
- Companies should explain the information and offer context, so it is not overwhelming to employees.
A growing number of employers are no longer leaving their staff in the dark on the company's financial performance, new research finds.
A study from Robert Half Management Resources revealed that 56% of private organizations provide at least some employees with regular updates on the company's financial performance, up from 32% in 2012.
The research shows that one-quarter of employers share fiscal information with all their workers.
"Though not a requirement for private companies, providing insights on financial performance instills in employees a sense of ownership, which often leads to improved employee engagement and productivity," Tim Hird, executive director of Robert Half Management Resources, said in a statement.
Benefits of sharing financial information with employees
So-called "open-book management" offers several benefits. According to Allbusiness.com, the main benefits are:
- Accountability. By sharing the results, you are holding both the leadership and the employees accountable for the results of their efforts.
- Increased sales. Studies show boosts of 1-2% in companies that open their books to employees.
- Enhanced understanding. By sharing information, you help your employees understand how the company operates, and they become better workers and, potentially, future entrepreneurs.
- Empowers employees. Employees will be on the lookout for ways they can improve operations.
- Gives the sense of being a stakeholder. Employees who are trusted with vital financial information feel that they are part of the team.
- Increased job satisfaction and better performance. Employees who feel trusted and valued are more loyal and more engaged.
In a discussion of employee engagement in the Harvard Business Review, Bill Fotsch and John Case reviewed several examples of companies that shared their financial status with employees, and gave them a stake in the outcome. Fotsch and Case, experts in the theory of open-book management, describe the results as positive in every instance, with one CEO saying: "I don't have employees in my plant anymore. I have entrepreneurs who are looking to find ways to make more money."
Most of the employers surveyed believe employees want to learn more about how their company is faring financially. The study shows that nearly 60% of chief financial officers believe their workers are at least somewhat interested in hearing about their company's financial performance.
"Professionals want to work for organizations that are open with staff about the health of the business," Hird said. "Discuss opportunities and challenges facing the organization as it grows, and invite ideas to help the firm meet its goals."
To help employers who want to be more upfront about their financial status, Robert Half Management Resources offers several tips. The study was based on surveys of 2,100 CFOs from companies in more than 20 of the largest U.S. metropolitan areas.
- Decide what to share. You not only have to determine what details you are comfortable sharing, but you also want to know what employees want to hear about. If you are unsure about what and how much info to provide, consider reaching out to peers and consultants to learn what insights other companies are giving their employees.
- Create a schedule. If you are going to give financial updates, you should do so on a regular basis. Let employees know how often they should expect financial updates. It is important to stick to your schedule, even when you have to share bad news. If you don't hold discussions when the financial performance is down, you risk having employees draw their own conclusions on what is happening with the business.
- Show them their impact. When discussing financial performance, connect the dots for employees by showing them how their work is contributing to the company's bottom line. By doing so, you will give them more incentive to better align their work and ideas to the organization's goals.
- Explain the numbers. It's one thing to dump a bunch of financial details on your workers, but it's another to actually explain what they mean. In addition to a formal presentation on the fiscal data, have bosses be prepared to answer any follow-up questions their staff may have.
Additional tips on sharing financial information with employees
- Add some context. Some small business owners are hesitant to share detail with workers who may not be familiar with the data, out of concern that it may cause anxiety instead of providing comfort. In the Houston Chronicle Small Business blog, experts suggest framing the information in a way that makes sense to the audience. For example, "consider discussing profit per unit sale as opposed to departmental or company profits and explain how different costs impact the bottom line. Once employees have grasped one financial concept, introduce additional or more complex data."
- Omit salary data. It may be a distraction to include details on compensation, and you could end up causing dissension and drama, especially if individual information is discernible. Wayne Rivers, president of the Family Business Institute, says suggests summarizing salary information and focusing on the balance sheet. "To counteract employee misperception that a substantial portion of each sale is pure profit to the business, highlight the difference between gross and net margins, identify significant overheads and expenses and explain that you must set sums aside for taxation as well as future investment in the business."
- Keep it simple. Some employees may be entirely unfamiliar with financial jargon, but that doesn’t mean they don't want the information. Spell it out, and gradually increase the sophistication of the information as their knowledge base grows. The Great Game of Business suggests starting with basics, using common sense examples and bringing the numbers to life with relevant illustrations.