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Wednesday, September 17, 2014

Question

Should key employees know everything about the business, such as cost of insurance, supplies, payroll, gas equipment, and so on? They are compensated in part by a % of profits. I think they need to know this information, but my partner believes such information is none of their business. They have signed a non-compete agreement and I don't think they can't manage effectively without this information. If they misuse the info, then they were the wrong person to begin with. What do you think?


Answer

Answer #1:
If you have management members responsible for controlling overhead and labor expenses, then they would need to know the details. After all, these items could be reconstructed by any knowledgeable manager.
I would, however, protect your customer list, monthly billing by account, and labor costs per account. Not all non-compete agreements are air tight.
Gary Clipperton
National Pro Clean Corp.
(719) 598-5112
www.nationalproclean.com

Answer #2:
There is no absolutely correct answer to this question. It is something you and your partner must arrive at together in order to keep harmony in the relationship.
However, the basic question to answer must be:
What does the key person actually need to know?
For example, would a key carpet cleaning technician need to know the details of payroll? While an awareness of truck mount operation costs and chemical supply expenses may be of value, does this person need to know everyone’s take home pay to do his or her job? Probably not, and so we could provide them information on management concerns on a need-to-know basis. Whatever is essential to their work performance should certainly be available to them, but knowledge of matters apart from their area of responsibility would remain with those in management who have immediate need for that information.
Speaking of payroll, who earns what is often a source of contention in a business. Allowing open access to everyone’s paycheck information is probably not a good business strategy.
Even knowledge of supply spending can be a problem. Many a good employee, upon learning that you just spent $500 on a vacuum cleaner for him to use to save time, will grouse about how he could have used a raise instead! Information on such expenses is not always placed in perspective and so the question remains, what does this person need to know to do the assigned job?
A bookkeeper obviously would need to know all the financial details to do the job. Does she need to know all of your hiring and training procedures? Not normally.
Since employees are compensated partly by a per cent of profits, that figure should be available to them, along with any details about things affecting profits in either positive or negative ways. This will allow them to contribute to profitability, which is good for all of you.
As co-owners, you may wish to keep some things between yourselves. Your salaries and return-on-investment may not be something you wish to share. Fine. That information is unnecessary to the performance of even key employees.
Lynn E. Krafft, ICAN/ATEX Associate Editor
lekrafft@juno.com