Atomic Object is an employee-owned company. We practice open-book accounting as part of our cultural value of acting transparently. We believe employee ownership and open books accounting can reduce conflict of interest between ownership, governance, and employees. And, all these will help us become a 100-year-old company. As leaders, we have a responsibility to educate our employees who have a diverse mix of financial literacy. Here, I will cover why we believe financial education is important for our employees. I’ll also discuss what we do throughout their employment experience at Atomic, and how we’re trying to improve.
Why It’s Important
Helping people be more financially knowledgeable is altruistic in its own right, but we also have a goal of promoting the culture we want to have here. We aspire to a culture where we hire great people and trust them to make financial decisions on behalf of the organization. As a professional services agency, a few common considerations all Atomic employees face include:
- How are they spending time and how much of it is billed to a client?
- How are dollars spent on business expenses (e.g., meals, software, etc.) and what is reasonable when we don’t have detailed budgets for every potential scenario?
- What sort of professional development activities do they find valuable to the individual and our company?
When a person is responsible for making decisions like these but isn’t comfortable understanding the principles and trade-offs involved, it can corrode company culture. For example, say someone decides to expense a team meal and then is told they shouldn’t have done it and there’s no clear rule in place. They maybe feel punished for it, and it’s easy to feel resentful. Scenarios like this are a failure of leadership to educate people on what’s reasonable and valuable for the organization. When people feel trusted, empowered, and knowledgeable, they make smarter decisions and are more engaged.
What We Do (and Think You Should Too)
We have found what’s important to an individual changes throughout their career at Atomic.
- During the Hiring Process. We share a compensation report that lays out our pay and benefits package holistically before they receive an offer. We do this to ensure we’re in the ballpark of what a candidate is looking for, and to answer questions and share philosophy on comp.
- Onboarding. We focus on operational details, how to track time, and how to submit expenses.
- Continued Orientation (first year). We report financial details and explain some of our key financial performance indicators during quarterly meetings. We also offer an “Economics of AO” class to share more strategic reasoning behind how our company works, how we use the revenue we generate, what is a healthy margin for our business, and how our ownership and governance models operate.
- Ownership Offers. Employees are eligible to buy shares in our company a year into their employment, and after three to five years, they may receive a larger ownership offer. These are investment opportunities they may opt to take or not. Becoming a shareholder is not required. Ownership in a privately held LLC is new to most of our employees, so we explain in detail what it involves (expected returns, legal requirements, tax ramifications, financing options, etc).
The above items are specific to Atomic, but every company that relies on employees to make independent financial decisions should invest in employee financial education. We also recommend spreading the education/onboarding experiences throughout a new hire’s first year or two, since many details won’t make sense as a new employee. Or, the new hire will forget many details in the whirlwind of a new job.
Room for Improvement
A couple of years ago I had a meeting with the CEO of a local bank where employees can be owners of the business, the way employees of Atomic can. I discovered his bank had a similar approach to financing options for employee share purchases. I asked how they educated their staff on the financing options. Surely a bank must be great at this? His embarrassed answer was, “Well, we don’t really do a good job of that.” Like that executive, we have work to do. We need to help our people understand share pricing and the nuances of buying those shares outright vs. using company financing options.
We’re currently working to create educational materials explaining the math behind our valuation as a companion to the spreadsheet we make available quarterly. While we still have a long way to go, we’re making progress. I’d love to hear about how you have helped employees better understand financial details at your organizations in the comments.