Private-company financials often shielded from employees

BY JACK HAGEL

Employees at publicly traded companies have an advantage when it comes to understanding the financial health of their companies. After all, public companies are just that: public. And they release detailed financial results each quarter for the world to see.

Employees at private companies, however, aren’t as plugged in. Indeed, 76% of U.S. private-company CFOs say their companies do not give quarterly or annual financial updates to all staff, according to a new survey by Robert Half Management Resources.

When the staffing firm posed the question to 1,300 CFOs at U.S. private companies with 20 or more employees – “Does your company provide employees with regular updates on the company’s quarterly and annual financial performance?” – 17% said they share data with select employees, and just 7% said they share those details with all employees.

It is understandable why executives might want to keep corporate cards close to the vest. Disclosing too much intelligence could put a private company at a competitive disadvantage.

But sharing information with employees has its benefits, said Paul McDonald, a senior executive director with Robert Half.

“Choosing a few basic metrics to share can help staff develop a better understanding of the business and the challenges it faces, and build stronger team focus,” McDonald said in a statement. It can also clear up uncertainties about the direction of the business.

Organizations that are proactive about offering insight into what is driving performance are more likely to create stronger staff engagement, McDonald said. “The more employees at all levels understand how their roles fit into the big picture, the more invested they’ll be in their work,” he said.

And many executives recognize transparency as a critical driver of growth, according to Rebooting Business: Valuing the Human Dimension, a CGMA report issued in January. According to the report, 87% of CEOs view transparency as an opportunity and 13% view it as a threat. To be sure, panelists during a round table that discussed the report acknowledged that there is a balance between openness and protecting commercially sensitive information.

Sharing information about goals with employees has been pivotal at Rolls-Royce, according to Roger Tomlinson, finance director for business partnering at the luxury carmaker. During the past 20 years, Rolls-Royce has worked to become more open with its employees in an effort to get them to embrace its business strategies.

“That way, the business starts to prosper because the people involved get brought together and are able to contribute a lot better,” Tomlinson said during the panel.

Robert Half offers three tips for giving employees more insight on business performance:

  1. Provide context: Share business trends and put them in perspective. If revenues increased during the previous quarter, explain why. Show employees how their daily work contributes to company growth.
  2. Do not withhold bad news: Withholding not-so-good news could prompt employees to jump to conclusions. Consider sharing information that could rally the team to turn things around.
  3. Foster an ownership mentality: Encourage staff to adjust their priorities given the company’s overall business situation. Invite their input on process improvements, cost-cutting, and new revenue sources. Reward ideas that lead to improved efficiency and growth.

Jack Hagel ( jhagel@aicpa.org ) is the JofA editorial director.

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