I am wondering how often companies report to the staff the state of the financial position of the company, if at all. I work at a nonprofit and find it very challenging to communicate to our staff the status of our financial position. Most of the staff do not understand financial information, the promises to give and other revenue patterns of giving. Currently we address our staff quarterly and report the financial information. Yes, the information is received with blank stares. I have tried to teach the financial statements to the staff and break it down to basics using examples they would understand. I asked my
Communicating financial information to the staff
Answers
At the nonprofit I worked in, I reported the financial status regularly and initially, I got a lot of blank stares and sometimes awkward questions. I learned that it is important to distill the message to the interests of the audience, or answer WIIFM? (What's In It For Me?) After figuring that out, I was able to provide informative and lively presentations and got good feedback from staff.
Most employees are interested that:
1 - the organization is doing well (or what challenges is it facing)
2 - they will have a job tomorrow
3 - the liklihood of wage increases
Everything else, including details of how the business works, will not go over well in a meeting with a broad constituency. Those topics should be reserved for meetings with specific stakeholder groups where those topics are more important.
It is a choice made by the Board or Founder or CEO. It depends on or compliments the culture of the company. There has been a trend at startups to be very very transparent. And yes, this includes salaries of everyone (there are pros and cons..and not for every company)
At startups, there's usually an all hands meeting either every month or quarter where employees can ask the C-Suite ANY question to include the company's financial condition.
My experience has been (with the exception of non-profits where the financials were presented to membership, but sometimes in a non-direct method) is that only senior or key personnel were told and then sometimes only top line numbers.
Again, as Emerson said it's up to Ownership, and is a two-edged sword. Bad news can cause a "run on the bank", while good news precipitates multiple request for raises that in turn cause bad feelings when they are turned down.
There are two issues here: What information should you share? And how?
For the first issue, "Open Book
For the second issue, a page of line charts offers a communication method that's easy for most people to understand. In fact, I've seen dashboards like that taped to the walls of company lunchrooms.
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Although I have worked with Executive teams that loathed sharing financial information with the staff for various reason (many already listed herein), I find it helpful and empowering for the staff to have a general idea to either validate what they are feeling about company performance or to rebut their feelings.
I like using the line chart tactic; however, I remove the numbers before publishing - that way the employees don't have to worry about whether it's millions or thousands: they just see a visual presentation of performance. From that graphic representation, employees will know if they need to buckle down and perform better or stay the course on their current activity levels.
My experience in both the public and the private sector has been like Wayne's: Financial information has only been provided internally on a "need to know" basis.
I think this is a very short sided approach. We are the finance department not the Secret Police. All departments sharing agency wide what they are doing that is important to the business is tantamount to team building and just good business practice.
I agree with the OP's auditors that many staff have difficulty understanding financial information. But I absolutely disagree with their answer of not sharing because of that.
What happens when there is a lack of information within an organization is that the void will be filled by other means and not with the actual information which often leads to more distress and distrust than sharing actual bad news with staff. A vacuum exists just waiting for something to fill it which is often false, exaggerated and outright wrong.
The rumor mill can destroy morale. The truth may create some anxiety but, it is better than the alternative. Besides, the truth is just as likely to be good news anyway. And that is only positive.
The other distinction is public vs. private company. I think updates should be given to employees, employers owe it to their employees at any company. Now back to the real world.
I have had great transparency at an Association and at a start-up. I was also fortunate to have transparency at another company, but I must note this was a public company, so there was no reason to "hide anything". It is worth it to explain the financial information as it out there for all employees to interpret and share gossip based on how they interpret it.
At private for profit companies I have always heard the financial information is top secret, and that is a shame. Transparency breeds loyalty which is rare in today's world of job hopping. If people understand what is going on, why, and how they fit in then they will be more engaged and productive (in theory).
Excellent feedback provided already. The only thing I will add is similar to what John says that repetition is key. The more you continue to share and educate they will begin to understand. You also don't have to share the entire P&L, just high level key areas that they may have a direct control over may be a good start. I always tried to shy away from terms like Revenue, Debits and Credits too.