In 2011, sales were as flat as rolled-out dough at Achatz Handmade Pie Co. So co-founder Wendy Achatz called her six store managers into the Chesterfield, Michigan, main office to figure out why. But her team was flummoxed by the lack of growth -- and, worse, surprised. "We're working hard," one manager said. "What do our sales mean, anyway?"
That sparked a realization for increase sales the most in one month.Achatz: Instead of understanding how their work could boost the bottom line, her employees saw the income statement as a black box. So Achatz set out to change that, sharing details and offering $100 to whoever could
It's one of the best investments she's made in her company. When the group reconvened, one store's sales had jumped 25 percent; another's had grown 23 percent. Achatz's managers tried everything: walking along the road with signs, talking up preorders, and running promos in stores. "It was like watching magic happen," she says.
While teaching employees how to interpret financial info is nothing new, there's been a recent surge in entrepreneurs tackling financial literacy. University of Michigan professor Wayne Baker, who includes open-book finance in his curriculum, says he's seen increased interest in the past few years. "Company leaders are searching for tools that generate more worker engagement, and thus productivity and profits," he says. "Helping employees understand the financials really works." Consider adding these steps to your employee training program:
Paint the big picture
Some startup founders have even created classes to boost their employees' financial literacy. Take Tracy Young, co-founder and CEO of San Francisco startup PlanGrid, which makes construction software. Early last year, during an all-hands meeting, she looked out at the crowd of 230 employees and realized many had tuned out her updates on financial stats. So she and her CFO launched a 45-minute Finance 101 crash course -- breaking down a dozen metrics and explaining what each means conceptually, how it's calculated, where the company stands, and what growth could look like. They launched a second course for managers who want to wade even deeper into the numbers. Since then, Young's noticed more heightened interest -- and pointed questions -- during all-hands meetings. "Who cares if our support team knows the gross margin number if they don't understand why it's important," she says.
Make the financial more personal
At WP Engine, a Web hosting service in Austin, CEO Heather Brunner ends each financial workshop for new hires with the same question: Do you see how your role can affect these numbers? "We teach the KPIs" -- key performance indicators -- "but also the context of how each department and each role impacts the KPI," she says. This came in handy during a prolonged service outage starting in 2014: While the engineering team worked to untangle the technical issues, other departments rushed to help, pitching in with customer support calls and rescheduling other projects. Their shared understanding of the company's financials generated "this pervasive sense of having one another's backs," says Brunner. Meanwhile, Achatz Handmade Pie Co. has implemented monthly finance workshops for managers of its pie shops -- which saw a 5 percent sales bump in 2015 and an 18 percent jump in profits. That's a sweet ending by any measure.
The 411 on Finance 101
Founders share some hard-won lessons on getting financial knowledge to stick:
Hit the highlights
"A lot of entrepreneurs think more is more, so they want to share 20 key metrics, but no employee can follow all those," says Joe Knight, co-author of Financial Intelligence and co-founder of the Business Literacy Institute. He suggests picking a maximum of three metrics that you share on a weekly or monthly basis. "There's no one-size-fits-all solution," he says. "Pick two or three that drive your business and employees can focus."
Repeat, repeat, repeat
Financial basics might be front and center during a new hire's orientation -- but if that's the only time that person engages with the numbers, nothing will stick. At ice cream manufacturer Rhino Foods, in Burlington, Vermont, monthly town hall meetings include a refresher on every financial metric. "If you're not somebody who comes from a financial background, it may take a couple of times for it to really sink in," says co-founder Ted Castle. "Spend the time and repeat it often enough that employees can really get it, or what's the point?"
Incentivize your "students"
Want to really motivate employees to absorb how certain performance indicators impact the bottom line? Fuel their study habits with cold, hard cash. Rhino Foods has a bonus program for employees who improve metrics in safety, quality, and customer service. At Achatz Handmade Pie Co., store managers have a profit-sharing model, which rewards managers with payments of up to $6,000. "The beauty is that no one's really asked for a raise in the past three years," says co-founder Wendy Achatz. "They know they can make it themselves if they run their stores well."
When Rhino Foods had just 30 employees, Castle could intuitively gauge how much financial info was sinking in. But as the staff ballooned to 130 people, many of them nonnative English speakers, he saw that an informal gut check wasn't going to cut it. "You should be constantly asking questions to figure out if they understand," he says. "If you honestly listen, you'll hear if they don't get it."