Why is Public Financial Information Kept Private from Employees?

Everyone in business should understand how financial success is measured and how they, individually, make an impact.

A Fortune 100 company we work with held a two-day class recently to teach various mid-level managers the foundational elements of finance. The class focused on how to read financial statements and then, using their own public GAAP 10K statements, how to read, analyze and understand the story that their numbers are telling.

Because the participants all came from one division of the company (and because the company is so big), we wanted to include data that has a "line of sight" to the participants, that is, data that relates to what they do — or at the very least, is about their unit. That data also is available publicly in the 10K.

We were told, however, that we were not to include any of that public data in the training manual, and furthermore not to share the information verbally with the participants. Crazy as it sounds, they did not want public data shared in the class.

Most leaders we work with enthusiastically agree with our approach to use their own data to ensure that their employees, managers and leaders have an opportunity to learn not only the basics of finance, but also how their particular company and the divisions measure success: their key numbers, their statements, their results. Yes, we can teach the basics of a generic income statement or balance sheet, but the learning really hits home when employees have an opportunity to apply the concepts to their own company. With their own information, they can understand how their decisions impact the income statement, see how cash is being used with the cash flow statement, know where to focus to meet the company's financial goals, and understand the meaning of the most recent financial results. (In a private company the difficulty is clear, and we work with those companies to find a solution that keeps information confidential but provides a learning opportunity.)

In the case of the Fortune 100 company above, we held the class without the division's data, using only the company-wide data and financials. The feedback we received was positive, but, not surprisingly, the comments indicated that we should have included information about the participants' division, as that would have made the program more relevant to how they can focus on the company's success.

To truly have an impact, employees, managers and leaders need to both understand financial data and have access to the real numbers that their performance affects.

How open is your company with its financial data? Do you think it should be more or less open?

by Karen Berman and Joe Knight