Your employees are probably worried about money right now. COVID-19 and the resulting economic slowdown may have them wondering: Will there be layoffs? What about pay cuts? Is there a chance the company will close? What happens if the economy doesn’t rebound quickly?
“Worrying about the financial state of the company can either motivate an employee to help turn things around or send them into withdrawal and panic,” says Sandra Duhé, PhD, professor and chair of the corporate communication and public affairs department at Southern Methodist University.
One way to tamp down panic and employee rumors is to open up about the company’s financial health. If you’ve never done this before, it may seem intimidating and rife with possible downsides. But in reality, research shows that employees prefer transparency when it comes to company finances. Recent research from Robert Half found that 82 percent of employees are interested in receiving company financial information — and that was before COVID-19.
In particularly high-stress situations, honesty can go a long way toward keeping team members feeling secure, says Joe Knight, partner and senior consultant with the Business Literacy Institute and author of Financial Intelligence.
“It’s always better to know how bad it is, than to not know at all,” he says. “When you know how bad it is, and you can come up with strategies for solutions, you can involve your employees in those strategies. Problems get solved much quicker when you include your whole team in the process of surviving through a tough time.”
When it comes to talking about the company’s financial health, though, both how and what you share matter.
Interpret as Much as You Share
Sharing financial info requires walking a tightrope. Skew too optimistic, and you risk eroding your team’s trust, but too much doom and gloom might panic people even more. Paul Argenti, professor of corporate communication at the Tuck School of Business at Dartmouth, suggests a middle ground.
Simply handing employees a truncated P&L statement and assuming their curiosity is sated is a misstep. They need leaders to not only share information but interpret what it means for the near- and long-term future of the team.
“Being honest is not the same thing as being blunt,” Argenti says. “You can let people know the reality of the situation but you should still provide hope.” In other words, if sales are down, go ahead and say so. But pair that with your plan for strengthening sales or a note about your confidence in long-term rebounds.
Be wary of trying to predict the future, says Argenti. The word “unprecedented” is being used a lot now with good reason, and all employers should be honest about the limits to their foresight. “Your statements need to be based on data, as much information as you have in front of you, and tempered with lots of ‘based on what we know today,’ language,” Argenti says.
When settling on which financial info to share, make sure your CFO is using metrics that the team can easily grasp. “Most financial people think that people understand more about finance and accounting than they really do,” says Knight. For most employees, less is more, when it comes to metrics. Consider sharing your operating profit or margin against revenue — and explaining clearly why those numbers matter, he says. Let them know you’ll be sharing updates regularly, and follow through on that cadence.
As team members begin to grow accustomed to these numbers — either through a weekly email or an all-hands meeting — they’ll be able to watch them move up or down over time, giving them an idea of normal fluctuations and a baseline for understanding any sudden changes.
If your company already shares metrics with the team, help recontextualize those numbers. While year-over-year comparisons might make the most sense normally, for example, now might be the time to highlight month-to-month changes as well.
To give employees a sense of empowerment, have each supervisor share department metrics and how those relate to their smaller teams, suggests Duhé. Stock prices, for example, aren’t likely to mean much to an employee’s day-to-day tasks. Production costs, on the other hand, might feel more relatable.
“Focus proactive financial communication on those areas where employees can make a difference,” Duhé says. “They can work together to track their team’s progress in moving the needle.”
Fight the Money-Talk Taboo
Financial conversations can sometimes feel off-limits in a corporate setting. But let team members know that it’s OK to ask questions and that you’ll be sharing what insights you can, says Duhé.
“Financial communication should be a dialogue,” she says.
Consider setting aside time for questions during any companywide meetings, or ask people to submit questions so that you can create an FAQ on your internal site. Encourage individual managers to keep their office doors open for questions that employees may be uncomfortable asking in front of the whole team. Employees may have questions about how financial decisions may affect their personal bottom lines — and managers should be equipped to handle these concerns.
Encouraging an open dialogue about financials will help employees feel more comfortable speaking up about anything they are worried about or don’t understand. In turn, you’ll get a better read on team morale and will be equipped to ease anxieties and avoid miscommunication, says Argenti.
“People are worried, and anything a company can do to alleviate that stress not only builds confidence and trust, but provides some much needed relief,” he says.
Foster a Team Mentality
“When employees don’t understand the reasoning behind something, it really destroys your culture and creates an ‘us versus them’ attitude,” Knight says.
But when employees are given greater transparency into the financial health of the company, any highs and lows — whether that’s year-end bonuses or a temporary halt to 401(k) matching — will be seen as more practical than personal.
Sharing honest financial information also means your employees will begin to feel what Knight calls “psychic ownership.” They’ll identify more strongly with the business and take a bigger stake in its big-picture success.
“Always explain that you are basing your decision on information about the business, that you hope that it will survive long term, and that you want what is best for the company and everyone in it,” Argenti says. “If you can get them to see it as their company, you have done your job well.”
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