This guest post comes to us from Jon Medeiros, Director of Finance and Operations at Ovia Health. Jon is also a father, husband, listener, reader, and occasionally a writer. You can find him on LinkedIn and Twitter for random thoughts about work, life, and finance.
One of the many hot-button topics in “startup world” is transparency. As the director of finance & operations at a 65-employee startup, I run into the issue of transparency on a weekly, and sometimes daily, basis. What is the appropriate level of detail for the financials in our board deck? Should we talk about cash burn with the entire company? How transparent can we be around missing, or exceeding, our goals? What if someone asks what their stock options are worth, or the valuation of the company, or who our biggest investors are? These are all questions I’ve heard, or thought about, since joining Ovia Health nearly 2 years ago.
Learning to Embrace Transparency
Coming from a large, privately-held financial institution that is notoriously secretive, having to address these questions was unfamiliar territory for me. And the whole idea of adjusting one’s message, depending on who you’re talking to, (e.g. a board member or your CEO, versus a junior employee,) was something that would require both learning and flexibility on my part.
Being in finance at a startup is a unique position: you’re most likely one of maybe three or four individuals who possess a level of knowledge about the company that ranges from every possible financial detail, to individuals’ salaries, to the capitalization table. It can be an uncomfortable position, one that requires an extreme level of ethics and integrity, and it’s something I have taken seriously since day one. In doing so, I tend to be overly conservative when it comes to transparency. However, at the end of the day, the degree of transparency within an organization is a decision that only the CEO can make. And as the finance leader, I need to work closely with the CEO to ensure we are sharing the appropriate messages with the appropriate audience at all times.
How to Implement More Transparency
Below are some best practices and examples of transparency that I’ve come across in my time at a startup, as well as key questions startup leaders should ask themselves when thinking about transparency.
Know your audience
There is a wide range of stakeholders at any organization. One day you could be meeting with several of your direct reports, another day you’re presenting to the entire company or meeting with a potential investor. And within each of these groups are even more granular subsets: sales leaders vs. heads of product or technology; early investors vs. more recent investors; and so on. Each of these groups has different expectations of what information they require of you as a CEO, CFO, etc. This can be challenging to navigate, but simply knowing your audience and recognizing these differences is the first step. If you don’t do this from the get-go, your stakeholders may not get the information they need from you, which potentially kills the mission of being adequately transparent.
Be truthful, but tailor your message
Once you’ve acknowledged who your audience is, the next step is to tailor your message accordingly. Let’s walk through an example of this. Say in 2017 your company generated $5 million in revenue versus a goal of $5.5 million, and this represented an increase of 75% year-over-year. When presenting to your board of directors, you will likely have to point out that even though you grew revenue at a very nice clip in 2017, you came up a bit short of your full-year goal. You may want to share some reasons for this gap and your plan to address any risks going forward. However, when meeting with a potential investor, it may not make sense to refer to your $5 million in revenue in the context of missing your number by ~10%. Rather, you’d likely focus on the year-over-year growth and how much you’re expecting to grow next year. The results aren’t any different, but the message is tailored to your audience.
Prepare for more questions
There will almost always be follow up questions, especially when delivering a message to a broad group of people with varying skill sets and knowledge. For example, if you’re presenting quarterly results to all of your employees and covering things like monthly recurring revenue, bookings vs. goal, or total company expenses, folks who are less familiar with these concepts may want to dig deeper with you to make sure they’re understanding the message. Or you may have employees who are newer to the organization and don’t have a full picture of the context of these results. With board members or potential investors, their level of expertise will most certainly lead to additional questions about your business results to ensure they have a full picture. By preparing for this ahead of time, you’ll lower the risk of being caught off guard when the questions inevitably arise.
Leveraging Transparency to Motivate the Team
Transparency within an organization can be a powerful tool. Employees appreciate having knowledge of how the company is doing and seeing how their work each day can push the company forward, in the form of more revenue, more users, or more innovation. The flip side is that when things aren’t going well, you certainly don’t want to scare off your best and brightest employees. Be open with them on how things are going, and if the message isn’t overly positive, talk about how the leadership team is working to improve results. And talk about how your stakeholders can work harder or smarter to right the ship – this should leave your audience feeling empowered and motivated.
Startups are always going to have their ups and downs, and people typically expect this when they get involved with one. In my mind, the worst thing that can happen is having a group of stakeholders caught off guard if the train goes off the tracks and there wasn’t the right level of transparency at the company. A little bit of information goes a long way in helping people navigate situations – good or bad – in the best possible way.
Key questions to consider
- How much detail should I be providing? In general, broader groups of people should require less detail in the messaging. For example, you may keep a presentation on revenue results at a high level for your entire company but will need to dig much deeper with your senior team.
- Is this the correct format for delivering the message? Being transparent can be more or less effective depending on the mode of communication. Think about whether a message should be delivered through e-mail, Slack, in person, or through some other channel.
- How can I get better at being transparent within my organization? Don’t be afraid to ask for feedback from your audience. Ask folks if they think you conveyed the right level of detail, or how you can better tailor your message next time. In my mind, this is the best way to improve the culture of transparency.