Learn more about Jonathan Lowenhar at ETWadvisors.com.
Should I share that information with my team?
It’s a question I receive from my CEOs with great frequency. What is OK to share? What is useful to share? What might be damaging to share? Is there anything I’m legally not allowed to share?
There are many topics often seen as potentially too sensitive for a wider audience.
But how does the CEO decide?
Practice Utilitarian Ethics.
If sharing will promote greater team unity, share. If it will bring increased focus on objectives while eliminating distractions, share. If sharing will add anxiety, distraction, or unproductive conflict, don’t share. If sharing might land you in a lawsuit, (probably) don’t share.
But a lie of omission is still a lie, right?
Young CEOs confuse transparency with honesty all the time. Honesty is about being truthful, not deceptive. Intent matters a great deal. The newspaper test applies here. If you would be comfortable with your decision being on the front page, then you’ve probably been honest (if unclear what a newspaper is, please ask your parents).
Transparency meanwhile is about disclosure. There is nothing in the CEO’s job description that requires everything to be shared with the team. In fact, as your company matures, there will be topics you won’t be permitted to share.
Transparency is a virtue to which many young companies aspire. It helps promote a culture of harmony and empathy with a team that feels connected to a larger vision. But transparency just for transparency’s sake can be counter-productive.
Does it help everyone on a team to know each others’ salaries or equity grants? Would sharing the ambiguity of a fundraiser keep the team focused on what matters most? If the board is contemplating an acquisition offer, what value is gained by having the entire company in the loop?
Ultimately, each of these situations requires individual contemplation. As a useful framework, I recommend starting with a question, “What would serve the greater good?”
They were six months from fume; aka the day upon which they would run out of cash. They were growing in all sorts of positive ways — reputation, customers, and revenue. However, cash was growing short, and the CEO had just begun to fundraise.
The CEO’s question to me was simple, “How much should I tell the team and when?”
He was terribly conflicted. He had built a company of openness and trust. He wanted to stay true to those ideals. He ached to share the details of the company’s current cash position with the team but feared that anxiety and turnover might result.
We talked through what we might share and decided that sharing too much too soon might do more harm than good. The team was already motivated and clear on goals. Further, the team understood that the business was not yet profitable and required external capital to fuel growth. In the CEO’s mind, there was no use in leveraging the dwindling cash as a rallying cry.
We decided that the greater good would be served by finding a balance between minimizing distraction and failing to inform them if payroll was in danger. We chose to communicate that fundraising had begun and that we hoped to conclude within six months. We further agreed that should the company reach 90 days of the runway, we would more fully disclose our cash position.
The CEO felt good about the compromise. He was being honest and transparent while not stoking unnecessary fear.
P.S. Ultimately, the financing took longer than the CEO had hoped. With 90 days of capital remaining, he informed the team. He shared the status of the fundraise, the cash balance, and the plan going forward. So committed to the company vision and trusting of the CEO not a single employee chose to leave. Thirty days later, the CEO signed a term sheet to fund the business for another 18 months.