Founders: Do Your Employees Know How Much Runway You Have? If Not, Wake Up
Too many companies think their employees can’t handle the truth.
There’s this idea that the ideal founder/CEO should only share a purely optimistic vision with their employees. Never mind that experts say we’ve entered a recession, or that more than 21,000 workers have been laid off this year alone. Employees need to keep their eyes on the prize, and the only way to do that is for founders to paint a rosy picture.
Not only is that dishonest, but it’s not how you get the most out of your employees.
Especially in a challenging market climate, founders have a duty to lead with transparency.
Now, there’s a fine line between transparency and over-sharing. Transparency does not mean sharing every nuanced detail. But it does mean giving employees an accurate understanding of the company’s position relative to market and industry forces. Used correctly, this information clarifies how employees can make an impact and gives them tangible reasons to want to.
How founders can lead with transparency:
1. Explain (in detail) how equity works. It’s amazing to me how few companies explain exactly how their equity packages work. Especially for startups, which tend to offer lower base salaries but bigger equity packages, it’s ethically necessary to make sure employees know what to expect.
Get in the weeds about key equity concepts: vesting, basis points, number of shares, how and when equity becomes cash. “If we sell for x, that’s y for you, administered over z schedule.” The murkier their understanding of equity is, the more confusion it will create. Equity transparency gives employees the security of knowledge; known quantities are much easier to digest than variables.
2. Regularly communicate the health of the business. Provide assessments of the market and industry climate, and share the forecasting/scenario planning that the leadership team is doing. Connect inputs to outputs: Describe your ideal growth trajectory, and list what needs to happen for it to materialize.
Then, draw a through-line from this ideal scenario to specific actions and outcomes at the organizational, team, and individual levels. When each employee has a robust understanding of the context, and can tie individual actions to business outcomes, they can take a more informed, motivated approach to daily work.
3. Illustrate the situation using 3 key performance indicators (KPIs). There’s a reason that writers dating back at least to Thomas Jefferson (“…life, liberty, and the pursuit of happiness”) rely on the rule of three. There’s a certain unity and completeness in lists of three concepts— especially when painting a picture of a business climate.
Pick three crucial KPIs on which to regularly update your team. For Upscribe, this includes a go-to-market figure (usually new money coming in), product information (more qualitative, innovation-focused), and a financial figure (spend and operations statistics). In essence, it’s: What are we selling? How are we selling it? And what are our business fundamentals from a cash flow perspective?
4. Share runway statistics. This one is a little controversial. Not all founders believe that it’s responsible for founders to share runway information with their teams. But especially in an environment like this, I think it’s much more irresponsible to be secretive about it.
If you share it the right way, runway info can function as a motivator. By this point, you’ll have painted a detailed picture about the space between the company’s ideal vision and current circumstances. Knowing the runway both gives employees a sense of urgency and shows them the real impact of creating savings, reducing waste, growing the pipeline—working more efficiently, whatever their function.
Whether in business, friendship, or romance, difficult moments make or break relationships. Keeping employees in the dark jeopardizes the trust that’s essential to high performance. If you haven’t already, now is the time to redouble your efforts around transparency, giving your employees all the information they need to help you thrive.