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 P&L and Balance Sheets are fair game.
Think about it, your employees probably believe that your company and leadership team are making gazillions of dollars each 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 close the gap that exists 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 has the opposite effect. Open book management gives employees more of an ownership mindset. It eliminates their misperceptions and encourages employees to take a more active role in increasing corporate productivity and profits. After all, your employees know their job better than you know their job. Why not give them opportunities to spot small fixes that can add up to big money over the long term.
Two main areas 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 also 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 necessarily need an accounting degree, nor do they need to understand every aspect of a balance sheet or account ledger. Instead, they should 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 teach employees financial education, you will 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 in their personal lives as well.
To get maximum buy-in from employees’ willingness to learn financial literacy, you may want to consider an incentive program 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 people like owners, employees can grasp 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 teach 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. When employees see your razor-thin margins, they may 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 to lead a more secure and fulfilling life. The number one stressor for most people is finances. By taking that stress off the table, your employees can 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 an impact positively.