6 Reasons to Share Financial Information with Your Employees

These days, more and more companies are practicing what’s known as “open book management.” Literally, that means employers are opening their financial books to employees.

That’s crazy, you say? While you won’t want to disclose every bit of financial information, such as individual employee salaries, opening the books (revenue, profit, projected sales) to everyone at the company can yield positive results.

As it stands now, most private companies practice some form of closed-book management. A 2012 survey of chief financial officers at private U.S. companies found that just 7 percent of those businesses provided regular updates on quarterly and annual financial performance.

“Private companies are not obligated to publicly issue financial results, but providing at least some indication to employees of how the organization is faring could ease any uncertainties that may exist,” said Paul McDonald, a senior executive director with Robert Half Management Resources, which commissioned the survey.

Here are six ways that open-book management can benefit your company:

1. It improves accountability

As Michael Bench, chief financial officer and co-owner of Jake’s Finer Foods Inc., said at a conference sponsored by the International Foodservice Distributors Association: “Accountability drives results.”

“In other words,” the association says on its website, “if you don’t set expectations and have a way to measure their achievement, you can’t hold employees accountable.”

2. It boosts sales

Yes, being transparent with your financial information can lift up your finances.

A study by the National Center for Employee Ownership found that companies that revealed financial information to their employees saw a 1 percent to 2 percent sales bump over what usually would have been expected.

3. It fosters understanding

With key financial data at their disposal, employees will get a firmer grip on how your business operates. Furthermore, they’ll have a better handle on corporate finances in general — which may, in the long run, help spawn future entrepreneurs.

4. It empowers employees

If employees spot something in the financials that needs to be addressed, they’ll feel more enabled to take action.

5. It makes everyone a stakeholder

Opening the books allows everyone to collectively celebrate successes and fix problems.

“By entrusting employees with vital information about the organization’s financial and operational health, business leaders send a message that they consider every worker to be a valued partner and stakeholder in their organizations,” Anne Claire Broughton of the SJF Institute and Jessica Thomas of the University of North Carolina’s Kenan-Flagler Business School wrote in a white paper on open-book management.

6. It increases job satisfaction and performance

Sharing financial details with employees can build trust, leading to a happier, more productive workforce.

“Research shows employees who believe they are trusted by their managers and CEOs can better see the big picture and tend to be more loyal and productive, or in other words, more engaged,” according to Broughton and Thomas’ white paper.