Posted on Feb 29, 2012 @[email protected]

Don’t Keep Your Employees In The Dark

Companies tend to be resistant to the idea of letting their employees see important financial information and predictions.  Even Fortune 100 companies don’t like their managers or employees to see current revenues, costs and figures even if these numbers will eventually be published for everyone to see in the company’s annual 10-K report.

The decision to keep employees and managers in the dark is a grave mistake, one that will likely have a negative financial affect on your company.  Most companies only allow the top executives to see important financial information but this widespread mistake should be corrected.

If you don’t let lower level managers and employees see crucial financial data they are not going to know critical facts.  It is important for employees to know if their company’s profits are increasing or declining; if their particular department is doing well; if cash is abundant or if times are tight and last but not least how their company is doing in comparison to their competitors.  Your employees will need to adjust their behavior depending on how the company is doing.  If finances are good they’ll be more comfortable taking the necessary risks to propel your business forward, if finances are tight they’ll be incentivized to work even harder and to play it safe.  Employees know that if their company does well their job security increases as does their opportunities within their company.

Sharing important financial information with your employees also helps to ensure that your employees feel trusted.  It is a gesture that shows them that you feel that they an important part of the business, which they are.  Statistics indicate that companies who are open about their finances have better retention rates and commitment to the company grows.

It is understandable that the thought of sharing such sensitive information may make you uncomfortable.  A certain amount of discretion should remain in place, it remains unwise to share employee salary rates or other such private information.  You do however need to show how profits are doing as compared to previous years.  It is also important that your sales team knows its profit target.  Knowing their operating costs and how much they need to gain in revenue is important to them delivering satisfactory results.

While some executives fear that employees will abuse this information history has shown that this fear is completely misplaced.  When you trust somebody with important data they are likely to respect and appreciate that trust.  Small companies can especially benefit from sharing this information as employees are more likely to see a direct connection between their efforts and the financial success of the company and will thus be able to more easily modify their efforts in order to modify the financial gains of the company.

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