Companies with money problems

In the early part of my career I worked for small software development companies. These companies often had money problems. Several of the companies tried (unsuccessfully) to hide their money problems so the employees wouldn't get jobs elsewhere. It didn't work, IT people are quite bright and the warning signs were obvious. People resented being lied to left or stayed, depending on their whims. Almost all of these companies ultimately failed, only one survived.

One of the companies was very open about the money problems. They even went so far as providing the employees with their balance sheets each month so we could see how the company was doing. Nobody left and the company made it through that crisis. They failed later, but not for the same reasons.

It may just have been a coincidence that the company that was open about the problem survived while the majority of the others failed. But I certainly respected the management of the company that was open more the others and they retained their staff while the other companies lost the brightest of theirs. I think the main reason the company retained their staff was due to their openness.

On a related note, the companies that were trying to hide their money problems each switched from annual bonuses to profit sharing as soon as they knew their was a problem. Each announced the switch to profit sharing as being a great benefit to the employee while secretly knowing that their would be no profits to share. As a result of this any time a company I work for switches from annual bonuses to profit sharing I get an itch to move on. It doesn't always mean the company has money problems but for me it is a huge indicator.

To sum this all up - If you run a company and are having money problems tell your employees the truth. They will know the truth anyway and will resent your lying to them. Have some integrity and don't try tricks like switching to profit sharing so you can cheat your people out of the annual bonuses. Try the truth, you might be surprised.