Many employers are reluctant to share financial information with their teams, arguing that employees don’t need to know everything. However, there are compelling reasons why sharing at least some financial information can be beneficial. In reality, greater transparency may very well work in your favor.

Accurate Understanding of Company Performance - Research has shown that employees often overestimate the profitability of their companies. When asked about the percentage of sales that translates into profit, responses typically range from 30% to 50%. However, the reality is, that most companies operate with significantly lower profit margins, and some even operate in the single digits. By sharing financial information, you give your team a clearer picture of the company’s actual performance, dispelling misconceptions and fostering a more accurate understanding.

Motivational Impact - Profit serves as the scorecard for any business. Just as playing a game without knowing the score can dampen motivation, withholding financial information from employees can hinder their ability to gauge the impact of their efforts. When employees “know the score,” they can directly correlate their contributions to the company’s success. This knowledge empowers them, boosts motivation, and encourages them to make informed decisions that positively impact the bottom line. 

How much should you share? - The level of transparency will vary from company to company; some will share sales targets, and some will share gross profits.

It's important to recognize the benefits of sharing at least some financial information with your team. You will create a more engaged and motivated workforce by giving employees a realistic understanding of company performance, empowering them with the game score, building trust, and encouraging innovation. Ultimately, sharing financial information contributes to a stronger, more unified team that actively works towards the company’s success.