As an entrepreneur running a small business, one of the most impactful decisions that I've made is to practice "open book management." This means that I literally open my company's financial books to my employees.
Now some of you may think this business practice is crazy. Of course, I don't disclose every bit of financial information (such as employee salaries), but I've found that regularly sharing powerful company financial information such as our revenue, profit, and projected sales can yield positive results for my team.
Now some of you may think this business practice is crazy. Of course, I don't disclose every bit of financial information (such as employee salaries), but I've found that regularly sharing powerful company financial information such as our revenue, profit, and projected sales can yield positive results for my team.
Every other month, I make it a point to sit down with my employees and review the financial health of our company. In this meeting, we go over our total sales, sales by service category, sales versus expenses, profit and loss, cash on hand, and our objectives for the next few months. By doing this, I'm revealing a lot of information about my company that most employees would consider to be confidential.
Now, before I go further with this, let me stop you right there and tell you that I only recommend this business practice for smaller organizations (15 employees or less). This is because the big value in being transparent with your company's financial information is that you're giving your employees an opportunity to ask questions. When you're dealing with a team of more than 15 people, it can be difficult to make sure that you're addressing everyone's questions in regards to your company's financials.
Because I'm open and transparent with my company's financial information, my employees have a very clear understanding of where we've been, where are currently are, and where we're headed. They see where we're making investments, what's affecting expenses, what made for a good or bad month, and how much cash we have available.
When sharing this financial information, I always make it a point to put things into perspective. For example, if we have $30,000 in cash on hand, that means we have X months of emergency expenses. By putting the company's financial information into context for my team, I've found that they're better able to understand the collective vision for the future of the company.
By allowing your employees to ask questions about the financial state of your business, you can build a tremendous amount of goodwill with your employees. While many businesses choose to leave their employees in the dark with their financial dealings, they run the risk of having team members chat amongst themselves about assumptions that may be untrue. However, when you're transparent with your company's financial information, you can help put rumors to rest and encourage your team to share in your corporate vision.
I personally have found that reviewing the financial health of my company with my employees on a regular basis has helped to foster a "store ownership" culture within my company. No, I'm not referring to having my employees open up retail locations. Instead, what I mean with the concept of store ownership is that my employees feel like my company is truly their own business.
I firmly believe that I have been able to develop employees that take great pride in our company simply by opening up the financial books to them. By being exposed to this financial information, my employees have a better understanding of the value that each new sale brings to our business and are also more committed to our strategies to reduce costs in order to maximize profits.
Being open with my employees about our company's financial information has also proven to be a very powerful way to engage my team. You'll likely find that when employees are in tune with your company's financial health, they become real players. They'll understand the rules of the game, act, and then watch to see if their actions had a positive or negative result on the numbers. And, if they win the game, they'll know that they played a key role in getting there.
When you take an open book management approach to your company's financials, you'll not only have more engaged employees, but also a team that cares about accountability and taking responsibility. Your employees may even begin spotting opportunities that typically only a business owner would think of. This store ownership mindset can help you to cultivate a team of loyal employees that have your company's best interests at heart.
As you can see, so much can be gained by taking an open-book approach and regularly sharing the financial health of your company with your employees. While it might not be an ideal strategy for your business based on factors such as corporate culture or employee size, the idea of being open and transparent about the financials of your company is certainly worthwhile to consider.
Sure, sharing your company's financial information with employees can be a scary thought, especially when there's a bad month. However, understand that doing so can create a healthy environment for discussion, ideas, and questions.
Now, before I go further with this, let me stop you right there and tell you that I only recommend this business practice for smaller organizations (15 employees or less). This is because the big value in being transparent with your company's financial information is that you're giving your employees an opportunity to ask questions. When you're dealing with a team of more than 15 people, it can be difficult to make sure that you're addressing everyone's questions in regards to your company's financials.
Because I'm open and transparent with my company's financial information, my employees have a very clear understanding of where we've been, where are currently are, and where we're headed. They see where we're making investments, what's affecting expenses, what made for a good or bad month, and how much cash we have available.
When sharing this financial information, I always make it a point to put things into perspective. For example, if we have $30,000 in cash on hand, that means we have X months of emergency expenses. By putting the company's financial information into context for my team, I've found that they're better able to understand the collective vision for the future of the company.
By allowing your employees to ask questions about the financial state of your business, you can build a tremendous amount of goodwill with your employees. While many businesses choose to leave their employees in the dark with their financial dealings, they run the risk of having team members chat amongst themselves about assumptions that may be untrue. However, when you're transparent with your company's financial information, you can help put rumors to rest and encourage your team to share in your corporate vision.
I personally have found that reviewing the financial health of my company with my employees on a regular basis has helped to foster a "store ownership" culture within my company. No, I'm not referring to having my employees open up retail locations. Instead, what I mean with the concept of store ownership is that my employees feel like my company is truly their own business.
I firmly believe that I have been able to develop employees that take great pride in our company simply by opening up the financial books to them. By being exposed to this financial information, my employees have a better understanding of the value that each new sale brings to our business and are also more committed to our strategies to reduce costs in order to maximize profits.
Being open with my employees about our company's financial information has also proven to be a very powerful way to engage my team. You'll likely find that when employees are in tune with your company's financial health, they become real players. They'll understand the rules of the game, act, and then watch to see if their actions had a positive or negative result on the numbers. And, if they win the game, they'll know that they played a key role in getting there.
When you take an open book management approach to your company's financials, you'll not only have more engaged employees, but also a team that cares about accountability and taking responsibility. Your employees may even begin spotting opportunities that typically only a business owner would think of. This store ownership mindset can help you to cultivate a team of loyal employees that have your company's best interests at heart.
As you can see, so much can be gained by taking an open-book approach and regularly sharing the financial health of your company with your employees. While it might not be an ideal strategy for your business based on factors such as corporate culture or employee size, the idea of being open and transparent about the financials of your company is certainly worthwhile to consider.
Sure, sharing your company's financial information with employees can be a scary thought, especially when there's a bad month. However, understand that doing so can create a healthy environment for discussion, ideas, and questions.