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How transparent should startups be with all employees regarding revenue, profitability and key business performance metrics?

Answers

Ken Stumder
Title: Finance Director / Controller
Company: Ken Stumder, CPA
(Finance Director / Controller, Ken Stumder, CPA) |

I think you should be as transparent as possible. How do you create alignment between employees and the company's strategy if they are oblivious to the performance metrics which signify success or failure? Obviously you can be selective in terms of what data to release for competitive reasons. Perhaps you wouldn't speak to profitability directly if you are growth stage and have no profit to speak of yet, but growth, client successes, top line revenue (depends), etc. I think can be shared.

I cannot stomach work environments which use the old "mushroom" style of management (we all know the old adage). Instead, envision a field of sunflowers all stretching toward the sun and cultivate that sort of workplace!

Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

I disagree. Profitability and revenues should be held close to the vest. As a start-up, your performance is usually inconsistent, marked by large swings. Key Business Performance Metrics, excluding financial information, could be distributed.

If you have investors, you risk the financial information leaking out, if you distribute to employees. If you wish to distribute financial information, the earliest should be quarterly - first to your investors, and a week later to your employees.

Ken Stumder
Title: Finance Director / Controller
Company: Ken Stumder, CPA
(Finance Director / Controller, Ken Stumder, CPA) |

Regis - it sounds like you do agree with sharing *some* information. I agree with the risks you mention.

I personally believe sharing information - selectively - is a must. I would even rank it as imperative to creating a cohesive, empowered workforce with a culture that "buys-in" to whatever your company goals are.

Topic Expert
Simon Westbrook
Title: CFO
Company: Aargo Inc.
( CFO, Aargo Inc.) |

Some performance metrics are very obvious in start up companies without needing access to the financials, for example, declining product shipments, inventory build up, calls or visits from third parties complaining that their bills havnt been paid, layoffs, etc.

Im not sure that detailed financial information is appropriate across the board, but I believe it pays to be honest with employees about the general situation and cash difficulties, if any. They can set their expectations, and even plan whether to look for more secure employment based on their own judgment. In general, I have experienced loyalty when you give a realistic view of the prospects.

Topic Expert
Jaime Campbell
Title: Chief Financial Officer
Company: Tier One Services, LLC
(Chief Financial Officer, Tier One Services, LLC) |

It depends on (1) what your endgame is, and (2) the employees.

When I was working in a public accounting firm, we received the KPIs for the entire team, including the partners, which gave us a chance to see how we were doing month-over month as well as against the others. Competition can be invigorating!

We also received a copy of the financials, which bolstered a sense of security, that the firm was financially healthy. Of course, as CPAs, we knew how to interpret the numbers, and we could be trusted not to share confidential information with outside parties.

Rudy Moeller
Title: Vice President, Client Services
Company: Alliance Cost Containment
(Vice President, Client Services, Alliance Cost Containment) |

Everyone on the team needs to have KPIs and have their performance against them updated on a regular basis; that sort of feedback is critical for personal growth and improvement. Revenue and profitability should be shared selectively, perhaps on a quarterly basis, if staff compensation is tied to bonuses based on profitability. I've found that sharing details enhances the sense of teamwork and shared mission. It also tends to help the team rally when times are tight because they are being treated as respected partners in the venture.

Andrew Williams
Title: Controller
Company: KECdesign, LLC
(Controller, KECdesign, LLC) |

I have worked for a half dozen fast growing startups in the past, (manufacturing and distribution) and think it is important to celebrate the big mile stones that will come in a successful startup. I agree with Simon that the majority of your employees have a good idea of how the company is doing and just need some validation from you that we are winning. You do not have to give them complete access to the financials, tailor the KPIs to your audience.

Some of the things we have celebrated are record month in shipments or gross margin dollars, the first month and year you are profitable, when your employee count hits milestones. Employees will be more committed to their jobs if they can see that they are having an impact. Don’t wait till the end of the year to celebrate your victories.

Topic Expert
Michael Bateman
Title: Principal
Company: The Bateman Company
(Principal, The Bateman Company) |

The mantra that made Tandem Computers an overnight success was "Hire outstanding people, Clear direction and Independent decision making." To make this work, the CEO and management must constantly share strategy, goals, the business model, status (including financial data - P&L, KPIs, et al) and evangelize company philosophy. Outstanding people at all levels, all sharing in the success of the company (stock options, professional success, etc.), with this depth of understanding can now be entrusted to make decisions without always having to constantly seek approval. Having the luxury of delegating decision making down in the organization provides huge benefits: while competitor sales reps are waiting for approvals, you reps can close deals; all departments are able to perform faster/better; employees, when trusted in this manner, are extremely grateful, motivated and loyal -- everyone is responsible for success and/or failure, not just the CEO and/or management. Building a great company is a team effort.

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