Be Transparent with Your Employees and Notice the Gains in Productivity

by | Apr 21, 2021 | Company Culture, Leadership

Your employees feel significantly less anxiety about their jobs if they work at companies that are open and transparent about the firm’s finances, including budgets and profits.

This is especially true if you have less than a dozen employees. That’s because your company may be more vulnerable than an established small business, which may be generating a profit, or at least has investors who are ready to step in if there is a downturn in the business.

A recent study emanating out of the U.K. confirmed my belief. It noted that the benefits of being more transparent are that workers felt more secure in their jobs, more committed to their employers and—most interestingly—said they had better relationships with their managers.

Hui Zheng, lead author of the study and associate professor of sociology at The Ohio State University, suggested that the link between greater transparency and lower job distress was strong and constant even after accounting for a variety of other factors, including hours worked, income rank within the firm, gender, race, and academic qualifications.

“Transparency in disclosing financial information may substantially reduce job distress, particularly by smoothing relationships between workers and managers,” Zheng said.

The researchers used a unique data set with measures that are generally not available for workplaces in the United States or elsewhere, which allowed them to uncover the link between how companies communicate about their finances and worker stress. The data came from the Worker and Employment Relation Study and included 15,747 workers from about 2,500 workplaces throughout Britain.

Job-related distress was measured by asking workers how often in the past few weeks that their job had made them feel tense, depressed, worried, gloomy, uneasy, and miserable. They rated this on a five-point scale from “all of the time” to “never.”

Workers rated how well managers at their workplace did at keeping employees informed about financial matters, including budget or profits. Workers rated this on a five-point scale from “very good” to “very poor.”

Zheng added that it was remarkable how powerful financial transparency was at reducing job distress, even after considering other factors known to impact stress.

“Workers at companies with the highest levels of financial transparency had stress level scores about 15 percent lower than workers at companies with the lowest levels of transparency,” he said. “That was a bigger effect on stress than gender or income.”

Workers reported feeling more commitment to their company and feeling more secure in their jobs when they worked at firms that revealed more about their finances. But those effects were relatively small compared to how transparency was linked to improved relationships with managers, according to the study.

“Even though financial transparency is about disclosing budgets, profits, or other financial matters, the way it reduces job distress is not mainly about the money. It is about the relationships, especially with managers,” said study co-author Vincent Roscigno, professor of sociology at Ohio State.

Such practices will serve the company well and make your job as the entrepreneur a whole lot easier in the long run.