As I look back on my career, I am now surprised at how little financial information was shared about the performance of the companies that I worked at before starting Kipsu. I was rarely privy to the revenues of the business and I never knew what the P&L —the balance of the expenses related to the business — looked like.
Why, you ask?
- Compensation. Some business leaders are worried about putting compensation information in the hands of their employees. The P&L can make it much easier to surmise how much people make in an organization and for teams with big disparities it can be obvious. This can be especially true for businesses that operate as cash flow generators where the owner operators divide up the profit and take home a big check every year. Some lack of transparency is well-founded as some employees have an unrealistic understanding of their contribution or believe that they should be compensated well above fair market value.
- Maintain Employee “Happiness.” All businesses rely on a hierarchy where some people take on managerial roles and others are more directly connected to the work. For companies operating in more mature markets where the business is growing more slowly, those hierarchies tend to be static. These organizations need their people to stay happy and in their roles for longer windows of time. Hoarding information can be subliminally perceived by some leaders as a mechanism to keep employees productive in their roles as long as possible.
- Lack of Trust. Some leaders don’t trust their people with their financial information. They worry that it could end up in the wrong hands — competitors or customers — and come back to haunt them in that next big negotiation. They may also believe that less experienced employees don’t have the skills to properly evaluate the information and develop a false understanding of the business.
All of these reasons come back to control.
High-control environments can work for a short period of time but it can easily become a losing strategy if you are playing the long game. Businesses go through up cycles when things are going well and opportunity is abound and down cycles where the trust that team members have is paramount to maintaining engagement. Employees go through their own cycles, at times feeling motivated and engaged and at other times hanging on until the next challenging assignment comes up. Lack of trust can be a catalyst that unwinds those relationships in the down part of the cycle.
Since the start of Kipsu we have been committed to sharing how the company operates with the entire team. Everyone sees the board presentations, knows how much cash is in the bank on a weekly basis and sees the monthly financial close packages.
[SIDE NOTE: At Kipsu, we have a core value of Practice Stewardship. That means we expect each other to look out for the company before we ask what is in it for ourselves. If you don’t have that foundational value, this kind of transparency could be hard to implement.]
Why do we do this?
- Trust — It demonstrates that we believe our team members can handle our most sacred information. Through this we are making deposits to the trust bank account, which we may have to draw from in the future when there are moments of uncertainty. It also signals that we are fair in our allocation of compensation.
- Growth — We believe that everyone in our organization has the potential to become the CEO. As such, they need to learn how cash flows through our business, what metrics are important to drive the business, and, generally, how to “think like a CEO.” When are we doing well? When are things going sideways? Where is our achilles tendon? We find this vote of confidence to be very motivating for our team.
- Alignment — We hire top performers at Kipsu. Capable, high performers don’t like to be micromanaged. They just want to know the objectives and the guardrails and have the freedom to figure out how to get to the finish line. We find that when everyone understands what drives the business then we spend less time “backing up” to get everyone “on the same page,” and our people are equipped to run with the things for which they have responsibility.
- Looking Around Corners — As a technology company, we operate at a fast pace with rapidly emerging new entrants and a constant influx of new technologies that work to make us irrelevant. We need “all hands on deck” to identify our exposure points. Nothing makes me happier than when a team member asks to better understand the details behind our metrics or identifies something that we hadn’t thought of that might bite us in the ass.
- Retention — All of us want to be valued for what we do and know that we are in a place where we can fulfill on our potential. Our transparency signals to the team that we are expecting them to be literate in the things that it takes to have a position of greater responsibility.
- “Weathering the Storm” — Finally, the trust that’s needed to keep a crew together during the rough patches is built during the good times. Oftentimes, leaders become transparent when the “sh*t is hitting the fan,” which is often too late.
My advice: treat your employees like the business people they are. Expect them to act as adults with the information that you share and be plentiful in your sharing. And know that the trust that you demonstrate will pay dividends down the road. Otherwise, don’t be surprised if they jump ship to a company that does recognize them for their potential.
Christopher Smith is a Co-Founder and the CEO of Kipsu, which helps hoteliers, retailers and other high touch service leaders build amazing relationships with their customers using text messaging and other digital conversation channels. Chris is also a Co-Founder and the Co-Chair of Minnesota Comeback, an education reform network tackling the opportunity gap in Minneapolis. You can reach him at firstname.lastname@example.org.