CPA Practice Advisor - 22

THE STAFFING & HR ADVISOR
How Financial Transparency Can Level Up
Business for Private Companies

HOW MUCH FINANCIAL information do you share with your employees, and should you
be sharing more? These are important questions, but up until a few years ago, few private
companies were asking them. After all, the SEC doesn't typically require businesses that
are privately owned to disclose financial results to the public, including their employees.
If financial transparency was raised at all within these companies, it was more likely to
be about the risks than the opportunities.
Today, the reverse may be true.
In a recent Robert Half survey, 88%
of CFOs revealed that their organization shares financials with at least
some employees. That's a striking
31-point increase from a similar
survey conducted in 2016. Employees
are enthused about transparency,
too, with 82% claiming to be interested in their company's financial
performance.

WHY IS FINANCIAL
TRANSPARENCY
IMPORTANT?
One case for financial transparency
is that if everyone else is doing it, so
should you. And there's little doubt
that employees and job seekers are
gravitating towards firms that share
data such as earnings forecasts with
their staff. But the case for opening
your books to workers goes beyond
recruiting new staff. Transparency,
among other things:
■ Motivates employees - Open
sharing of information helps workers
see how their roles mesh with the
company's broader mission and
strategy, creating a culture in which
they are partners in a business's

MAY 2020 ■

success. When employees know
"how we're doing" as a organization
on a macro level, they can more
easily see on their level how they
can contribute toward better and
better results. It gives them more
reason to want their company to
succeed because they have a clearer
part in it.
■ Builds trust - Even companies
in favor of t ransparenc y may
worry about how their employees
will interpret the data. What if
a disappointing quarter causes
panic, or an encouraging one fosters
complacency? These are genuine
risks, but the rewards of transparency are real too. Sharing financials
sends a powerful message that
you have faith in your employees'
good judgement and ability to see
the bigger picture. Trusting staff
to discretely handle data they
receive prompts them to trust their
employer in return.
■ Fosters new ideas - Managers
asking workers for good ideas is
nothing new, whether it's about
trimming waste or streamlining
the workflow on the shop floor. But
it's hard for employees to pitch in
effectively if they lack the underlying data that drives decisions. If you
give workers the vague outline of a
problem, don't expect more than
the vague outline of a solution. But
if you give them hard numbers - a
set of disappointing sales figures,
say - you may prompt them to
start tracking these metrics and

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brainstorm ways to make them
move in the right direction.
■ Improves customer relations -
How many times have you been
frustrated with employees who
replied, "That's not my job" or "I
don't know anything about that"
in response to a customer query?
Before putting this down to poor
attitude, consider how the same
workers might handle the situation
if they felt like partners in the
company's overall mission, rather
than cogs in a larger wheel.
■ Helps your bottom line - There's a
reason more companies are opening
t heir books to employees: it's
good for business. Giving staff the
information they need to track each
dollar spent improves your chances
of cutting costs and boosting profits.

TIPS FOR SHARING
INFORMATION
Companies are right to be wary of
revealing too much, too soon, if only
because few employees want to be
bombarded with raw financial data.
So you need to carefully prep your
sharing strategy, including creating
a context around financial data
workers can understand. Here are
some ideas:
■ Decide what to share. You don't
have to give them a list of every
single financial detail. This could
overwhelm employees without a
financial background. Be selective
in what information is revealed,
and who it's revealed to. This will

PAUL McDONALD

Senior Executive Director
Robert Half
paul.mcdonald@cpapracticeadvisor.com

obv iously var y from company
to company. One useful tip is to
identify subjects employees are
commonly misinformed about and
use transparency to correct the
record. For example, if your workers
only hear the headline figure for
last year's profits, they may assume
the company is f lush with cash.
Educating them in what's being
reinvested, or used to pay down debt,
will give them a proper context for
the company's strategy.
■ Stick to a schedule. Come up with
a frequency (quarterly, twice a year,
annually) for employee updates
and let staff know in advance
when and how they can expect to
receive them. Don't shy away from
transparency if the news isn't as
good as you were hoping for.
■ Speak plain English. Not everyone
can read a spreadsheet, and financial
jargon can sound like ancient Greek
even to well-educated people. Define
important ter ms or acronyms,
explain vital data in layperson's
terms and even consider offering
some financial literacy training if
needed.
■ Invite a dialog. Ensure staff you are
available to answer questions and
address concerns they may have.
Making financial transparency a
priority is a challenge for any business, requiring both management
and staff to step outside their comfort
zones. But if you provide regular,
well-explained data, you may soon be
wondering why you ever did things
differently. ■

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