If you’re looking for a great way to build employee trust and engagement levels, you may want to consider incorporating an open-book leadership strategy. Open-book leadership is the sharing of business financial information with employees. No, you do not have to share employee salaries, but most of the other numbers on the profit and loss statement and the balance sheet are fair game.
Think about it – your employees probably believe that your company and leadership team are making gazillions of dollars every year. They see the orders come through for tens of thousands or perhaps millions of dollars, and they think all that cash is going into the pockets of the company’s owners. Employees only hear about company finances when times are tough and cutbacks need to happen. By sharing the real story of your financial situation in good times and bad, you’ll be helping to close the gap between leadership and the workforce.
While many leaders feel that sharing the organization’s accurate financial picture, especially in difficult times, may scare employees off, it actually has the opposite effect. Open-book management gives employees more of an ownership mindset. It eliminates their misperceptions and encourages them to take a more active role in increasing corporate productivity and profits. After all, your employees know their job better than you do. Why not give them opportunities to spot small fixes that can add up to big money over the long term?
Two main components are necessary for a successful open-book program: leadership transparency and financial literacy education. Leaders must be willing to let their employees glimpse the organization’s inner workings, but the employees need to understand the numbers they are seeing.
Financial literacy means that employees have a basic understanding of how an organization earns money and turns a profit. It helps them understand how their job ties into the company’s mission and profits. Employees don’t need an accounting degree, nor do they need to understand every aspect of a balance sheet or account ledger. They should simply have a basic understanding of the numbers that most closely impact their job function or their department. When employees start to see a direct correlation between their work and the company’s bottom line, both engagement levels and profits begin to rise.
Offering financial literacy support to your employees builds trust and eliminates a prevalent fear for many people – not being able to read or understand business numbers. When you give employees financial education, you give them the information they need in a way that makes sense to them. You are providing them the tools and resources they need to make the best decisions for their department, the company, and their personal lives as well.
To get maximum buy-in from employees and encourage their willingness to gain financial literacy, you may want to consider an incentive such as a profit-sharing program on a quarterly or yearly basis. By focusing on a few key performance indicators (KPIs), you’ll inspire your team to improve those baseline numbers, knowing that the company will reward them for doing so.
Using gamification is another excellent way to promote your financial literacy initiatives. Ask employees how much they think the company is spending on insurance, gas for company vehicles, vacation pay, maintenance and equipment repair. Hold a contest to see which department meets or exceeds their target KPIs, using scorecards, electronic charts, and whiteboards to track daily progress.
When company leaders treat their employees like owners, those employees can comprehend the challenges ahead, and they have the information they need to come up with solutions. Even better, open-book leadership gives employees a stake in the outcome.
Here are three benefits of open book leadership:
Employees feel you trust them. Financial transparency builds mutual respect. Empowered, informed employees can make recommendations that can fix real problems. When employees feel they have a say in the company’s direction, they are more likely to work harder and smarter.
It bridges the gap. When you show your employees how hard it is to profit in business, they may be more willing to help cut expenses or come up with ideas to make additional profit. It also reduces the risk of your employees leaving you to start a competing business; seeing your razor-thin margins may make them think twice about going out on their own.
It teaches them real-world finances. A transparent open-book management system gives team members the ability to understand how to manage their personal finances better and in turn lead a more secure and fulfilling life. Finances are the No. 1 stressor for most people. By taking that stress off the table for your employees, you allow them to better concentrate on the job at hand.
Giving your people insider information formerly reserved for company owners empowers everyone to take responsibility for their jobs. When employees understand the big picture, they gain a sense of pride and ownership. They know their work, and their decisions make a difference.
When there is a financial disconnect, it leaves your employees feeling undervalued, untrusted, and unmotivated to stay. By opening your books, you not only boost your employees’ knowledge of finances, but you also give them more confidence in understanding how the numbers work and what they can do to make a positive impact.
Lisa Ryan, CSP, helps organizations develop employee engagement strategies that keep their top talent from becoming someone else’s. Lisa is a Certified Speaking Professional and best-selling author of 10 books, including “Manufacturing Engagement: 98 Proven Strategies to Attract and Retain Your Industry’s Top Talent.” During her 20-plus-year sales career, Lisa spent 13 years in industrial distribution, including seven years in the welding industry – and yes, she does weld. Lisa is a proud Cleveland native and received her MBA from Cleveland State University.
Lisa Ryan | Grategy | www.LisaRyanSpeaks.com