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How Much Should a Company Tell Employees About Its Finances?

For years, companies shared their sensitive financial information with a select few executives. They believed keeping this data discreet would enhance the security of their operations and prevent employees from learning too much about the fiscal health of their employer. This mindset could be changing, and management teams are beginning to see the value in allowing workers to be more aware of how their firms are run, what kind of revenue they're bringing in and what the majority of corporate spending goes toward. 

This strategy, often known as open-book management, allows employees to have virtually unlimited access to company financial statements and records. Some organizations are sharing everything from sales numbers to financial planning information, investment details, salaries and bonuses. This can make workers more aware of the positions their employers are in and can pose a variety of benefits, if practiced correctly. 

Easier Than Ever to Share Information 
While years ago CFOs may have had to host meetings and hand out paperwork containing sensitive data in order to share information about a firm's finances with employees, technology has made those practices a thing of the past. It's increasingly easy for company leaders to share information with their workers, whether they grant them access to internal systems or send an email with updated notes. This not only allows finance chiefs to spend their time on other important tasks, it also mitigates the risk of physical documents containing financial data being lost or stolen. 

Just because sharing financial information is simpler and less time consuming, does that mean companies should try it? In today's world, information about large companies spreads quickly through news outlets and the internet, meaning if a firm fails to let its workers know it is experiencing hard times or is about to make record profits, they may very well find out through other channels. 

What are the Benefits of Open-Book Management? 
While some finance executives may think the idea of open-book management is inherently risky, the strategy can actually have a range of benefits for companies that employ the strategy correctly and trust their employees not to take advantage of the information. 

• Increased employee confidence and retention. Employees who aren't sure if their company will file for bankruptcy or fail to meet financial goals in the coming months may feel insecure in their positions and fail to perform as well as they otherwise could. Workers fearing the worst could spend time searching for new jobs, increasing turnover rates, lowering employee morale and forcing a company to exert more energy hiring and training new workers. This atmosphere of uncertainty isn't ideal for any workforce and it certainly doesn't do much to ensure workers will take their jobs seriously. 

• More worker engagement and stronger performance. When employees have access to business financial records, they can see exactly where a firm is - and isn't - making its goals and help figure out where things are going wrong. Upon seeing they didn't get their annual bonus because sales are down and prospects aren't turning into loyal clients, a team may be more motivated and work harder to ensure a company's success and guarantee their hard work will lead to a reward. 

• Furthering a commitment to social responsibility. Many companies are launching social responsibility initiatives that cover a vast array of programs. Some firms are committing to using green technology and curbing emissions, while others are investing in human capital in the local areas where they do business. Others may see allowing employees access to more information as part of their social responsibility program, as it can ease a worker's concerns about being laid off and allow businesses to be completely transparent with their teams. Many businesses may also see it as their responsibility to let employees know what's going on before news of a merger, bankruptcy or massive sale reaches the media and workers find out via the evening news.

Is an Open-Book Policy Right for Your Workplace? 
While open-book strategies are gaining ground in the business world, they may not be for every organization. Some companies may deal with too much confidential information to expose any data, while other organizations may be able to reveal just a bit without suffering the consequences. 

If you're thinking about making some financial information available to employees, there are several factors to consider. One is how sensitive the information is - a team may take a risk allowing workers to view investment information or create feelings of discomfort among employees by revealing their salary and bonus details, but it may not suffer any ill effects from showing sales numbers and conversion rates. 

A CFO also needs to consider if employees are trustworthy enough to handle such information and not compromise operational security or investments. Some organizations may only permit workers to access the information when they've been fully trained or meet certain employee performance guidelines. 

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