I have heard of many technology companies taking different approaches to sharing financial information with their employees. Throughout my career, I have worked at organizations that share no information, some that share limited information, and others, like Kurtosys that share all of their financial information. Being financially transparent can fundamentally change how a business operates.
This wasn’t always the case at Kurtosys. In the past, the approach to sharing insight was off. We produced management reports that provided little meaning. The employees were kept in the dark about the company’s financial health, and as a result, there wasn’t a basic understanding of how to translate financial performance into business process improvement. Most disappointing, we weren’t sharing how we were performing financially with our employees. How can you make changes if you don’t have visibility or insight into what needs to be improved?
Needless to say, thee information gap was noticed, and as a result, the finance team worked to develop financial reports that provided meaningful insights into the business and share them with our employees. Since we’ve now reached our goal, we can reflect on the experience. Looking back, there were three check points that helped us power through to the finish line — the goal of being financial transparent.
1. The creation of insightful financial reports for the Board, executive team and the employees
Our CEO and the Board understood that our financial reporting processes needed to be improved, and they made a change. Our team’s highest priority was to create and distribute a set of relevant financial reports to all of our employees. Our finance team quickly developed a set of reliable reports that provided key insights into how we were operating. These reports provided detailed profitability analysis by department, product, customer and project. It provided insight into how the business operated, and the company could make informed decisions. We empowered the Board, executive team and employees.
2. The development and implementation of an annual operating plan process
Once a set of reliable monthly financial and operational reports were created, we developed and implemented an annual operating plan process (AOP). Each member of the management team developed their departmental budgets and owned them. We shared how we were performing against plan with all of our employees. We empowered the management team to manage the business and created accountability as part of that process.
3. The education of employees on what the financial actually mean
We didn’t stop there, we educated our employees on how to review and interpret our financials, and we shared financial reports on a monthly basis.
The truth be told, sharing financial information can be scary for a management team. It identifies the points where you perform well, but it also highlights your mistakes and all of the areas where you need to improve. It can be a humbling experience. We empowered employees with the information they need to identify issues and make changes to the business.
Financial transparency means being honest about your performance even when it’s subpar
Conversely, what happens when cash gets tight (where it does at all tech companies)? At times, cash balances will appear to be impossibly low, and the same trust that you have placed in the hands of your employees, you ask for in return when you share your financial results. You ask that they have confidence in your ability to raise capital (it also helps to have an amazing group of investors). You ask for their trust in you to make the right decisions to manage the business. You ask for their help to manage the business responsibly and to identify ways to improve. You ask for your employees trust and you give your trust implicitly.
By providing this information, and albeit not perfect, we have increased employee engagement and trust. It is by having access to financial information that we have made some fundamental changes to how we operate our business, and our teams have responded in the following ways:
- Our infrastructure team has worked tirelessly to consolidate servers and eliminate costs.
- Our account management, sales and marketing teams are focused on what we can do to improve gross margin.
- Our engineering team actively seeks out ways to simplify our product and ease our implementation process.
- Our operations team is focused on operating more leanly and increasing customer satisfaction.
Ultimately, financial transparency has changed the way we manage our teams, and our company has gravitated.