Share the Love (and Your Finances)
Photo by Nguyễn Phúc on Unsplash
Open Financials
The next few months are gearing up to be expensive.
We could be referring to the slew of Holidays coming up, inflation, or rising rental costs, but we’re talking about the budgetary costs of the new year. 2023 is just around the corner, and with the new fiscal year just beginning or ending for most nonprofits, financials are probably on the brain.
As your organizations prepare, Mission Capital would like to share a shift in thinking that we have begun to explore and are trying to implement. Are you ready? It’s called financial transparency.
Calm down. We have long been on the financial transparency train.
Financial transparency, in its base form, means timely, meaningful, and reliable disclosures about a company's financial performance. It is not new. In fact, it is legally required for a nonprofit to disclose certain financials.
However, at Mission Capital, Elly and Casey, our awesome financial duo, are extending that definition to include everyone in the organization, from marketing to event planning. According to Tanya Hall’s INC article:
“In theory, at least, a company that shares financial data with all employees has a workforce that better understands how their work contributes to the bottom line, and also understands why certain decisions are being made at the executive level (for example, why a non-essential business trip is not approved during lean times).”
There are pros and cons to this addition to traditional thinking. Let’s go through them:
Planning that Reflects your Values
Financial transparency is one tool to create an equitable, more open working environment. Discussing budget reports, your compensation philosophy, or why some programs are funded more than others with staff can prove your internal commitment to transparency and accountability.
Take for example this situation. Say that your well-loved director of programming is retiring at the end of the fiscal season. When colleagues ask that person why they chose this time to leave, the director quips that “Oh, they can’t afford me anymore.” It could be a joke. It could be a reference to a conversation the other person doesn’t remember. Or, it could be true in a sense.
That one comment, unsubstantiated, could send several other employees spiraling into dread that the new fiscal year spells some budgetary cuts- and thus their loss of jobs. This situation is hypothetical, but all too common.
If the rest of the staff has no clue what the budget of the organization is, they make their own assumptions based on rumor and hearsay, leading to a lack of trust, feelings of instability, or toxic competitiveness in a team that would otherwise run well.
There’s another reason financial transparency makes a difference in group dynamics. It makes people feel as if they, too, are responsible for every aspect of the organization.
After all, in the words of Pat Summitt;
"Responsibility equals accountability equals ownership. And a sense of ownership is the most powerful weapon a team or organization can have."
It makes sense. Fostering an environment where employees feel a sense of ownership in their organization can help with a whole host of other things: including productivity, staff retention, and increased participation. It is a psychological fact as old as time: creation is always a team sport.
However, we’d be amiss if we didn’t also acknowledge the sharper end of the sword. You’ve probably already thought of this. What about the bad times? Anyone who has dealt with money in any capacity knows that is a fickle resource. Sometimes funds dip or an organization goes over budget or loses some sources of income.
It doesn’t pay to create a panic or sense of doom in an organization, especially for those who may not be as familiar with the normal tides of financials.
If your nonprofit doesn’t collect as much in grant funds this month, does that mean you’ll need to lay off some staff? Does it mean some projects that were pending must be refused?
These are valid questions, and financial transparency comes with the risk of causing some distress when not everything goes according to plan.
That feeds into another potential fallback of increasing financial discussions, which is that not everyone starts out on the same page.
How much financial knowledge does the receptionist have? What about the outreach specialist? If you use words like depreciation or accrual, everyone might nod, but does everyone really know what that means? Does everyone in your organization know how to read a net worth graph, or calculate assets?
Probably not.
So, there might be some training associated with this tactic, or at least a fundamental course on understanding how money works when one is calculating for an organization and not the monthly grocery run.
Adaptive Strategies
Ask any architect how the magic happens, and they’ll tell you that a single gas station required many hands.
The power of diverse minds working on a single problem can produce incredible results. If the financial safety and sustainability are in the hands of one or three people, the less likely it is to be fair and adaptive.
The increasing prices of today’s world mean that budgeting for change is more crucial than ever. Financial transparency can help with that because you have exposed your financial situation to other great minds.
Since financials are truly the one area that affects every department, providing your staff with that knowledge allows them to plan accordingly, or give helpful feedback. Talk about working together across departments!
Once again, including everyone in the day-to-day operations besides their roles has the benefit of giving them a greater sense of ownership, that deep human satisfaction of knowing yes, I helped make this.
That asserted, the dreadful but unavoidable outcome of sharing info is that sometimes there’s disagreement about what to do with that info. You ever watch three toddlers try to share crayons? It can get tense quickly. Crayons can be broken. Friendships and peaceful cohabitation were destroyed.
Is it probable that the grown employees of a nonprofit will start throwing things? No. However, even reasonable, and productive disagreements can stretch the process out. Where before, it may have taken weeks, discussions about finances can elongate that process to months or even years.
All good things to those who wait, yes, but we live in a rather fast-paced world, so perhaps patience is best understood in moderation.
Do You
Once again, the next few months are sure to be expensive.
As your organizations prepare for the new challenges (and successes!) of 2023, we thought it would be selfish not to share the pros and cons of a journey we ourselves are cautiously pursuing.
Internal financial transparency is a shift in thinking that, like many equity-driven approaches, has its advantages and challenges. We can’t exactly claim that we’ve explored every aspect that this policy has to offer, so it would be hypocritical to lord it as a perfect method.
However, it is such a thought-provoking and well-liked strategy that we had to share some resources for those of you who would like to try it!
Happy Fall and good luck out there!