Magazine article Management Review

When Money Talks; Employee Empowerment Can Only Go So Far. If Employees Are Going to Think like Owners, They Need to Know and Understand the Same Financial Information Owners Have Access To

Magazine article Management Review

When Money Talks; Employee Empowerment Can Only Go So Far. If Employees Are Going to Think like Owners, They Need to Know and Understand the Same Financial Information Owners Have Access To

Article excerpt

First companies wanted employees to be team players. Now even that's not good enough: Employees are being directed to think like owners. But how do mere mortal employees think like owners when they don't know what owners know?

The answer is so obvious it is simple. Let employees in on the secrets that have been heretofore unknown - the company's financial reports. It's the opposite of, "What you don't know can't hurt you." instead, what employees do know can make a difference.

"People who have an ownership in the business from an emotional and informational perspective are going to be people with an understanding of what the business is and why and how they can improve," says Jim Shaffer, a principal with Towers Perrin and the leader of its change management/communication management practice.

In a sense, there's nothing magical - or even difficult - about opening the books to the whole corporation. It could be as easy as posting the information on bulletin boards in centrally located areas such as lobbies, conference rooms and cafeterias. Higher-tech companies have used almost every medium, including communicating through internal television stations.

Of course, some privately owned companies - which are not required to produce annual reports - don't give their employees any information. But for companies that do want to open their books, the best place to start the communication process is during new employee orientation. That way an employee gets a course in business, not just in general, but also in particular business. "There should be a hefty education about the balance sheet, products and services and how they contribute to the mix of the business," explains Shaffer. "Include income statements, the categories where spending is the highest, as well as the categories broken down by different elements," he adds.

Support from the Top

The success of pushing down financial information depends, like any other major corporate initiative, on the support of top management. The leadership of the organization must be committed to telling the truth. Equally as important is training managers to understand why this is important, especially for those command-and-control type managers who believe financially wise employees usurp their power. Training should also include how to deliver financial information in a credible manner.

Similarly, the leadership must determine the limits of disclosure. Some companies restrict the amount of information they give to their employees; others, like Amtrak and Springfield Remanufacturing Corporation, think nothing is off-limits. Exceptions include legal and SEC-regulated information.

Shaffer admits he is biased toward full disclosure. "Companies [that open their books! do much better on the bottom line. People who understand the information will be the ones who can deliver the higher productivity and lower costs," he says. "They will understand how they fit in the organization and will work better as a team."

That means discussing the numbers over the long term - not just day-to-day fluctuations. Shaffer suggests pointing out cockpit gauges or numbers that have the biggest impact. "If those are communicated on a regular basis, as well as what can be done to influence those numbers, that will influence stock prices says Shaffer.

There's an inherent risk in opening the books, however, which is that employee morale may plummet when the information presented isn't up to par. In fact, there's no surefire way to determine how employees will react. But experts predict that for the most part employees who understand the situation and believe they have the power to make changes will fare better. The inclination to become angry and bitter is magnified if employees don't believe they have the tools to help prevent a bad situation from worsening.

* NUTS AND BOLTS *

Globe Metallurigical's story is not an unusual one. …

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