At AVL, our clients range from the secretive in which only the owner and the accountant know the financial results of the company, to a fully transparent holocracy in which all of the financials are fully available to every team member, and everything in between.
From Phocas to this LinkedIn post from our friend Dan Konigsburg, CEO at Campminder, there has been a lot of thought leadership published lately on the value of transparency.
So why do so many CEOs, Founders, and Owners hold the financials to themselves or only the leadership team? It could all come down to fear…
- that employees will finally ‘see the truth’ and jump ship!
- that employees will see how much the owner is earning, thereby creating a division or animosity (or revolt) between the owner and the team.
- that employees will take unfair advantage of this information to ‘game the system’.
- of committing to a goal and falling short in front of the team.
- of judgment or embarrassment around setting goals or publishing numbers that lack accuracy, detail, or require changes. Additionally, it can feel embarrassing if you don’t know what metrics you should use – like a “we’re not quite ready to show you yet” mentality.
- that the team will misinterpret or won’t understand, which will make the effort unnecessary or even do more harm than good.
- that the effort will create more work for an already overworked finance & accounting team.
These fears are certainly real. However, if you’re a leader thinking about what might happen in your company, think about it from a different perspective. Think about a close colleague’s company instead. By taking the microscope off yourself, you could be less biased and more open-minded.
Now, shift back to your company and ask yourself, could the opposite of my fear be true? Might…
- your employees see the truth and be even more committed?
- employees see the company’s profitability and feel a greater sense of safety?
- the team use this information to make positive changes and improvements because they are now more informed about your company’s metrics?
- the falling short of goals, the need to change reporting, or the story “we don’t quite know what we’re doing” create a connection amongst the team to collaborate and connect?
- any gap of understanding financial reporting help bring to light areas of development for the team to learn, grow, and appreciate their employer’s investment in their development?
- the work for the accounting team actually be simplified because the need to track ‘who gets to see what’ versions of reports goes away?
So What’s Next? It takes courage to head down this path. There’s some vulnerability here for sure.
Start small. Start slow.
STEP 1
A. Identify 2-3 reports or metrics that you want to introduce more broadly. Perhaps there’s a company-wide scorecard that you can publish more broadly. Perhaps there’s more detail on the monthly financial reports that can be shared. Perhaps some monthly key reporting metrics can be shared.
B. Identify whether you can deliver more transparency across multiple reporting cadences. For example, what additional information can you share on a weekly, monthly, and quarterly basis?
STEP 2
Communicate! Inform the team of what changes are being made. Craft the message around the why. Communicate about the trust that you’re placing in the team. Repeat the message at least 7 times in the first 90 days of the change!
STEP 3
Be consistent. Invest time before rolling it out to try your best to keep the reporting in the same format, structure, and timing for the first 90 days. Allow the employees to get used to seeing the updated Scorecard every Monday morning. Or get the team to anticipate the monthly financial snapshot that’s emailed to them on 17th of every month.
STEP 4
Solicit feedback from the team. This will work differently depending on the company, but make it happen. And thank the team for the feedback to continue to make this process better for everyone.
