What Happens When Your Do and Don’t Share Financial Performance Information

What Happens When Your Do and Don’t Share Financial Performance Information

Many of today’s AE firms still cling to traditional, closed-book management practices, often justifying it with excuses that simply don’t hold up under scrutiny. At least these firms are honest about not sharing information. The real frustration comes from firms that boast about being progressive, claiming, “Oh, we’ve been practicing open-book management for years.” But when I dig deeper and hear their version of “open-book management,” it’s clear they’re not even close to the real thing. 

But what if you truly flipped the script and shared financial and operational information with everyone in your firm, allowing them to contribute to the firm’s success? I’ll tell you what. A motivated workforce with clear direction, aligned goals, and improved performance. And it’s not just a theory. I’ve observed it more times than I can count.

The power of open-book management

At its core, open-book management is about transparency, which means sharing the firm’s financial performance, project profitability, and long-term goals with employees so they understand how their work directly impacts the company’s success. It’s about empowering your team to make decisions with a full understanding of how those decisions affect the firm’s bottom line.

And it’s not just about boosting profits. It’s about creating a culture of trust and ownership. When employees understand how the firm operates and see the impact of their decisions, they’re more likely to stay engaged, motivated, and loyal. They’re no longer just working for the company—they’re investing in it.

The dark side of not sharing information

Now, let’s look at the other side of the coin—what happens when firms don’t share information?

I once worked with a small firm that kept its financial data under lock and key. When I began working with this seemingly thriving company, no one but the partners knew the firm’s financial situation, and employees often had no idea how the company was doing. Every year, they received vague feedback during performance reviews, and bonuses were inconsistent. Over time, employees became disillusioned and frustrated, believing the partners were pocketing most of the profits.

The truth? The firm had been struggling with razor-thin margins for years, and the partners had been cutting their own pay to keep the business afloat. But without transparency, employees had no way of knowing this. The result? Talented staff members left, seeking firms where they felt more included and appreciated. Morale plummeted, and the firm found itself on the brink of collapse. It was a turn-around situation, and the firm turned it around—with the help of open-book management.

The danger of closed-book management is that without information, employees fill in the gaps with their own assumptions, and that can breed mistrust, disengagement, and high turnover. The team becomes less invested in the company’s future because they don’t understand where it’s headed.

Why not sharing information can work (in certain circumstances)

It’s important to note that not every firm needs to open the financial floodgates all at once. In fact, there are instances where not sharing information can be beneficial—at least temporarily.

Consider a firm navigating a potential acquisition. Sharing too much, too soon might create unnecessary panic among employees who may assume they’re all going to lose their jobs. Or imagine a situation where a firm is undergoing a leadership transition. There’s a delicate balance between maintaining transparency and controlling the narrative, ensuring that information is shared in a way that provides clarity, not confusion.

The dangers of closed-book management

That said, the key word here is temporarily. When firms consistently withhold information, it erodes trust and disengages employees. Lack of transparency can lead to:

1. Reduced productivity. When employees don’t know how the company is performing, they can’t align their efforts with the company’s goals. They may work hard on the wrong things, leading to wasted time and resources.
2. Increased turnover. Employees who feel left in the dark are more likely to leave for firms where they feel valued and included.
3. Stunted growth. When employees don’t understand how their performance impacts the firm’s bottom line, they won’t push as hard to meet goals, and opportunities for growth can be missed.

What to share (and when)

So, what should you actually share with your team? It’s not about dumping a spreadsheet of financials on everyone’s desk. The goal is to provide clear, digestible information that helps employees understand the firm’s financial health and how they can contribute to its success.

Here’s a breakdown of what you might share:

1. Profitability metrics. Project profitability, revenue per employee, and gross margins.
2. Key financials. Revenue, operating expenses, and net income.
3. Project performance. Highlight which projects are performing well and which are struggling.
4. Strategic goals. Share the firm’s long-term vision, including growth plans, client targets, and service line expansions.

Phased plan for easing into open-book management

For firms not used to sharing any information, diving headfirst into open-book management can feel overwhelming. A phased approach can help ease the transition. Consider the following:

1. Phase 1: Share high-level metrics. Start with broad, easy-to-understand metrics. These measures could include annual revenue, company-wide profit margins, and high-level strategic goals. Schedule quarterly all-hands meetings to review these metrics with staff.
2. Phase 2: Drill down into project-specific metrics. Once employees are comfortable with high-level financials, begin sharing project-level profitability and performance. Show how each department contributes to the firm’s overall financial health.
3. Phase 3: Engage teams in decision-making. Finally, get employees involved in the decision-making process. Share more detailed financial information with key staff, such as department heads, and involve them in setting budgets, reviewing expenses, and identifying opportunities for improvement.

Best practices for sharing information

Sharing financials should be done thoughtfully and strategically. Here are some best practices:

1. Frequency. Share information at least quarterly, with monthly updates on specific project metrics. Consistency is key—you want employees to feel connected to the firm’s ongoing performance.
2. Methodology. Use visuals and graphs to explain financial performance. Many employees won’t be comfortable with financial jargon, so making the data digestible is crucial. Tools such as dashboards or scorecards can help employees track their contributions to the firm’s success in real-time.
3. Context. Numbers on their own can be confusing or misleading. Always provide context for the data you’re sharing. For example, if project profitability is down, explain why and what can be done to improve it.

Open-book management isn’t just about sharing numbers. It’s about fostering a culture of trust, engagement, and ownership. By giving employees access to the right information, AE firms can unlock their full potential, aligning efforts across the organization and driving toward shared goals.

For those firms that still keep their books closed, the risks are clear—lower morale, higher turnover, and stunted growth. But by taking a phased approach to open-book management and sharing the right information at the right time, you can create a workforce that’s motivated, informed, and ready to help your firm succeed.

So, is it time to open the books? You bet.

To reach Mark Goodale, call or text 508.254.3914 or send an email to [email protected].