Why Teaching Employees Your Company Financials Is A Winning Formula

In many businesses, a wide gulf exists between ownership and the workforce, a disconnect that can leave employees feeling undervalued and wanting to leave.

 The high cost of replacing them means it’s important to find ways to retain the best performers, and studies show that transparency and education from the top can be a solution — boosting employee engagement and motivation. 

 And one way to achieve that transparency is to open the company’s financial books to employees and teach them the business.

 Too often in business, we fail to show the players on our own team the big picture — the overall score of the game. We tend to try to manage from the sidelines, focusing on individual performance. Why not teach them what winning means in business?

 But opening the books may be the first time in the employees’ lives they feel they’re being treated as adults. This type of financial transparency builds trust and mutual respect. Teaching employees the business involves them in making a difference, so as a business leader, you need to get comfortable with opening things up. 

 Many business owners are hesitant to open the books to their employees. One of their concerns is giving employees access to salary information, but that isn’t advisable.

Opening your books does not mean sharing every detail. On the other hand, if people see how much the company is making and that makes them want more, that’s what you want as a business owner.

 Here is a breakdown of how to open the books for employees and the benefits of doing so.

 Bridge the gap between perception and reality. The perception among employees that the owner is focused on self-wealth can be changed by teaching employees how hard it is for most companies to make money. Many people would be surprised to know how little even large companies make in profit from every dollar of sales. Research shows the median bottom line in companies in 212 industries across the U.S. is 6.5 cents on every dollar of sales. But the average employee thinks their company makes six times that.

 Break it down for them. Once you show your employees how hard it is to make money, sketch out a simplified income statement for your business, showing your revenue streams and all your expenses. Draw a dollar bill and show them how little the company keeps out of every dollar.

 Bring the marketplace to your people. An owner can provide a clearer perspective to the employees by sharing how and what other companies in the industry are doing. Do your homework, and find out about your competition. If your employees know how they stack up against the field, most will respond to your appeal to move the needle. Your transparency has made them feel valued.

 Make teaching financials interesting. The strategy is to create a business of business people. But remember, you’re trying to educate your people about your business, not create a bunch of CPAs. Share, teach, and involve them in the numbers they can impact. Your people rarely need to know about debits and credits or how to do an adjusting entry. But they may very well need to know how production efficiency is calculated and why receivable days matter. 

Teaching the business helps everybody begin to understand what they can do, both individually and as a team, to influence bottom line financial results.

The purpose of opening the books is to boost the employees’ confidence in understanding the numbers and in the company itself. 

Then and only then will they begin to make a connection to the numbers that measure their performance and talk intelligently about improving the business.    

Rich Armstrong (www.greatgame.com) is president of The Great Game of Business Inc., and co-author of “Get In The Game: How To Create Rapid Financial Results And Lasting Cultural Change.” Steve Baker is VP of The Great Game of Business Inc., and co-author of “Get In The Game.”