While need to know is a critical filter in an organisation’s flow of information, transparency and sharing information—beyond, and irrespective of what employees must know to do their job—can often be an effective way to drive earnings, and get everybody in the company to feel like stakeholders. Being upfront about the company’s finances, in particular, can help foster employee buy-in for your business mission as well as day-to-day decisions. Management author John Case called this “open-book management”, and suggested that when done well, it both engages and challenges staff to move the numbers in the right direction. 

Many companies—bred on a hierarchy of information needs­­ might be reluctant. But, Case believes keeping employees in the dark on how the company is faring really serves no good purpose. First, staff can feel alienated from long-term planning and growth. And, worse, they are forced to make assumptions—both good and bad —about the organisation’s financial wellbeing. If business isn’t good, this could lead top performers into believing not-so-favourable grapevine buzz, and even seeking work elsewhere. As music entrepreneur and marketing whiz Jim Long put it, “…no one wants to play in a game where you don’t know the score.” So, share the score and see your workers transform into star employees. Read on to learn how to present numbers without intimidating staff. 

Establish Guidelines

Identify content: The biggest challenge in sharing financial information with employees is to decide what behind-the-scenes data to share with each segment of workers. According to Dipak Ashar, CFO Partner at Wealth Tree Consulting, a firm offering Virtual CFO services, “Insights of the company performance must be shared keeping in mind employee seniority. Broadly three tiers can be differentiated for this purpose—unionised staff, managerial cadre and top management.”

For unionised staff and workers, it’s important to explain the key reasons for performing better or worse than the last period alongside a message to the team to enhance performance. Details of major events and milestones that depict strength and stability can be conveyed. 

 Managerial cadres must additionally be presented company results by financial performance ratios (margins by division, employee, branch, plant and other operating ratios) for each strategic business unit. Sharing performance indicators of close competitors from publicly available information can help identify learnings for the future. The top management should ideally be privy to in-depth comparative (with previous period) performance reviews and budget discussions held at Board meetings. 

Define classified information: While it is a good practice to share financial information, management must refrain from disclosing top secrets even if employees ask for these details. Defining what data constitutes classified information helps prevent lapses in protecting restricted files.

“Details of commercial contracts, agreements with confidentiality clauses and other sensitive data should not be shared with employees,” says Jaiprakash J Desai, CEO, Metro Shoes. Best financial practices also dictate that private information such as individual salaries should never be made public.

Create policies: Framing policies to consistently share specific financial information can help manage situations where employees ask questions that are best left unanswered. There may be a possibility of the information leaking out to competitors or compromising company prospects. Or, the company may be subject to restrictions on sharing information about ongoing projects and developments. Policy provisions would make it easier for management to withstand such requests.

Employees holding stock options might be an exception to that rule. Jayant Tewari, who runs an outsourced CFO services firm, explains, “As a rule, summary financial statements should be made available in the internal employee domain if the aggregate ESOP is more than 15 per cent of the company stock. Information (apart from legally confidential items) cannot be denied, in fairness, to any ESOP holder with more than 1 per cent share.”

Present Well

Include appropriate data: Many companies nowadays accrue profits from arbitrage. For example, businesses offering outsourced services earn by ensuring that their transaction costs are lower than their competitors. Consequently, sharing financials with senior employees can have far-reaching consequences. Information should ideally help employees become aware about the causal connection between employee input, compensation, sales and profits. 

G C Jayaprakash, Asia Pacific Regional Practice Leader-Technology, Stanton Chase explains it as “helping employees work backwards from the profit figures they hear about, and understanding exactly what costs reduce sales into profits.” This awareness helps employees follow the action, keep the score and make genuine contributions to drive profits. Senior staffers, when engaged well, are more invested in improving operational efficiency. “An appreciation of pressures on profitability and costs is the best way to prepare the ranks for a cost-cutting exercise,” adds Tewari.

Include data that provides the intended recipient a clear “line of sight” to achieve this. One way is to break down an average net sale of Rs 1000 into each line item, and show much is left over in pretax and after-tax profits. Here, employee compensations must be highlighted. 

Timing is crucial when it comes to sharing financial information. For employees, it’s demoralising to hear about major happenings from external sources."

Format information: Apart from identifying what to tell employees, the information must be communicated well to make a big impact. According to Ashar, “Financials are best imparted by speech and presentations made by the CEO/ CFO team. Circulars listing raw financials are a no-no as they can be misused and wrongly interpreted.”“Words chosen to communicate a message are extremely important. While good news is easily shared, bad news must be handled well to make sure the information is not demoralising or counter-productive. “Communiqués must be technically correct and keep the flag flying, that is, keep employee morale high,” cautions Tewari.

Present the data in a simple summary format so even employees who don’t have a head for numbers can make sense of it. Visuals like bar graphs and pie-charts help simplify the message and avoid sharing exact digits.

Time it right: Timing is crucial when it comes to sharing financial information. For employees, it’s demoralising to hear about major happenings from external sources. Companies should share updates regularly, and maybe have bigger presentations on special days or occasions.Tewari says, “There isn’t a one-size fits all solution. The frequency, method and scope of financials shared depend on the managements’ transparency,  philosophy and scale of operations.”

For example, Metro Shoes sends out a a monthly newsletter to all employees. “Presenting overall and category-wise monthly (and cumulative) sales works well for us,” says Desai. Staff is also kept abreast of indicators like sales per employee, conversion rates, new store and product launches, employee innovations and awards received. “We also use the newsletter to recognise top performers.”  

Engage Employees

Engaging employees better is the ultimate aim of sharing financial information. But that isn’t enough. More aware employees will be keen to use their knowledge, says Stanton Chase’s Jayprakash. “If then their inputs are not asked for, or not acted upon, it could adversely impact their morale.” There is no greater let down than being informed but having no opportunity to make a difference.

Giving informed senior employees an expanded work scope and a direct stake in the company’s success is a good way to encourage better performance and greater involvement with the business. Staff can be made stakeholders by tying bonus pay to sales figures. 

Remember—getting employees invovled in company financials takes time. But it’s worth the effort. A team that doesn’t understand how finances work can’t help your business make money.