Using transparency to get through the recession

Kevin Wilhelm

Like many companies, the financial times we’ve been living in for the past year and a half have tested the values and business model of my consulting company. When firms began looking for any way to cut costs, we saw client after client lay off employees, cut travel and advertising budgets to the core, and for many, cancel or delay their sustainability efforts. As a consulting business, we were suddenly viewed as an extra expense, much in the same way as other service based businesses were at the time.

All of this put tremendous pressure on our own company’s bottom-line, and like most CEOs, I was desperate for any way to save money or create new client and revenue opportunities. I decided that one way to do this and to minimize employee anxiety would be to become completely transparent and engage them about our financial forecasts for the year. While conventional wisdom told me to hunker down and hold the company’s financials close to my vest, I decided to fall back on our sustainability values and open up my books to every employee in my company

I never considered this option before. In fact, although I had read case studies of other organizations doing this, I had never known anyone who had personal experience with this level of transparency. But with revenues declining and the feeling that my employees would benefit by having more information about the economic uncertainty, I figured that I had little to lose and much to gain. So on March 1, 2009, I decided to go for it and be 100 percent transparent about every financial and day-to-day transaction within the company.

The first step was to implement “open book” financials. I facilitated an honest and frank discussion about what the recession and financial crisis could mean to our industry and more specifically our company. From there, my employees and I dissected the entire budget and revenue forecasts line by line. We examined every aspect of the organization and I quickly found that by trusting my employees with the financials, we immediately started brainstorming ways to save money, get new clients and improve our process efficiency. More importantly, this new level of transparency led to increased morale, a better financial understanding for my employees and stronger employee buy-in.

Better financial understanding

Up until this time I was solely in charge of the financials as the CEO of a small and growing business.  From time to time my employees would make budget requests for things that would enable them to do their jobs better such as new software, conference registrations and the like, but with little budget available I was forced to say no. What I found by opening our company  books was that my employees began to have a much better understanding of the reasons behind these decisions. Instead of just me just saying “No,” together we’d decide together, “Let’s hold off on that for the next few months.”In fact, in many cases it was my employees themselves who mentioned shifting some expenses into the future and cancelling others.

Improved morale

If you think back to late 2008 and early 2009, there was still an incredible feeling of anxiety in all aspects of the economy. Companies were shedding jobs faster than any time in the past 50 years and no one was sure when things were going to bottom out. None of this was good for morale and it was directly affecting employee productivity at many firms, but not ours. My employees told me that they felt more even secure about their jobs since they had a detailed understanding of our company’s strategy and financial plan. “It was really reassuring because I never had to wonder if I was about to be laid off when the boss asked to have a one-on-one meeting with me,” senior consultant Anne DeMelle said. “I knew exactly where we stood financially." Transparency allowed my employees to keep being excited to come to work, to keep smiling and laughing, and most importantly, to focus on getting the job done. 

Enhanced buy-in

One of the greatest intangible benefits of our transparency policy is that our employees have an increased interest and renewed dedication to our strategy for success. Prior to the crisis, employees who didn’t have business development and cash flow in their job description didn’t really pay too much attention to these aspects of the business. However, our financial transparency motivated them all to find new revenue and client opportunities. They now felt more engaged, empowered and part of the solution. “The transparency fostered trust and showed confidence in us as individuals,” Ruth Lee, a consultant, said. “All of this helped us better understand our roles and led to an even greater sense that we are all in this together.” 

Overcoming my hesitation and fear

I have to admit that none of this was easy. The idea of opening up my books scared me to death. In many ways, at the beginning of the financial crisis I was acting in the same fashion as the paranoid CFO, afraid of everyone seeing the true financial picture and creating anxiety amongst my employees. In fact the opposite turned out to be true.  Showing my employees everything enabled them to offer up ideas and solutions of their own. Instituting our open book policy was a leap of faith that resulted in one of the achievements that I’m most proud of with my firm. Like many of you reading this, we’ve weathered the storm and are back in growth mode. So for organizations looking for a no cost, sustainable way to increase productivity, morale and profitability at the same time, consider being transparent with your employees. It certainly paid off in our case and I’m sure it will in yours.

Kevin Wilhelm is the CEO of Sustainable Business Consulting and the recent author of “Return on Sustainability: How Business Can Increase Profitability & Address Climate Change in an Uncertain Economy.”