The Case for Transparency
Nobody benefits from secrecy. It undermines employee trust and hurts your company. Alternatively, transparency has transformative positive effects when executed correctly. Here’s how it works!
Would you rather people just imagine how the company is doing?
When employees don’t have true information about company performance from ownership, they imagine how the company is performing and are usually way off.
I once worked with an interior specialty contractor with about $22 Million in revenue the year before engaging our consulting services. It was a good revenue year for them, but they lost immense gross profit through a combination of poor estimating and operational inefficiencies. As a result, the business essentially broke even on the bottom line with a net profit of $7,000. Frustrated employees wanted raises and bonuses for what they perceived to be a big year for the business, and the owner felt resentment that people wanted more when there was nothing left to go around. Rather than ignore employee requests for rewards or capitulate and write bonus checks from his personal account, I convinced the owner to break the veil of secrecy about company performance with his people. Seeing the real performance data really shook people up. They assumed the company was raking in millions of dollars and that the owner was a miser! We held impactful workshops to show every employee how they personally contributed to the bottom line in their role. Estimators showed a deeper commitment to accuracy, and operations staff embraced processes to drive efficiency. The next year there actually were millions (a couple, at least) of dollars to go around, bonuses flowed, and employee satisfaction soared.
The modern employee/employer relationship demands mutual trust and respect
The traditional command and control workplace featured employers who felt that, as long as the paychecks arrived on time, their obligation was met. Today, employees have many options for where to work, and a job search is just a click away. Employers must seek to forge more trusting relationships with employees today than ever before. People want to be treated like adults and trusted with the truth. They also value knowing that they are being treated fairly by the companies they work for. By communicating openly with employees about revenue and profitability, you are building trust that translates into longer tenured, more valuable employees.
More financial transparency requires more financial literacy education
When times are good, owners are afraid people will want more money. When times are tough, owners are embarrassed by their poor numbers. Financially literate employees understand the importance of financial health for the business and expect the business to be conservative when times are good, so jobs are protected when times are tough. Invite your people to participate in creating better business outcomes by showing them in real terms how their work has a monetary impact!
Teach financial literacy to your employees. Ensure your people in every role understand how their daily work contributes to business health metrics. Share the metrics that matter with your people. The more you want to share, the more you must teach, but the better the results for the company.
The Spark Notes:
News flash: Keeping secrets from your people undermines trust.
Being financially transparent with your people builds trust and enhances team performance.
To benefit from transparency, you must train people how to understand the numbers as you share them.
