How business owners can show financial transparency during crises

• Cate Luzio, the CEO and founder of Luminary is a coworking space for women and a professional network.
• Luzio allowed workers to choose between furloughs, layoffs, and pay cuts when the COVID-19 epidemic hit.
• Her leadership shows founders how to make tough decisions in times of financial crisis.
• This article is part Talent InsiderA series of expert advice for small business owners to address a variety of challenges in hiring.

April 2020 Cate LuzioWith a heavy heart, she logged onto the Monday Zoom meeting of her company with a difficult proposition for her employees.

As COVID-19 spread rapidly across the US Luminary members had called in to cancel or pause memberships to the women’s network and coworking space.

Luzio said that between March and April, the company lost around 80% of their revenue. Her landlord deferred her rent. Within weeks, her team had been hired. The company has moved its in-person community events online. The business was still at risk with 11 employees.

During the Zoom meeting, the founder stated to her full-time staff that she would have to make cuts. The founder offered employees three options. They could be laid off, apply for unemployment, furloughed and then return to their jobs after the company recovers, or they could receive a 20% pay cut.

Luzio encouraged her team members to reflect, but they quickly decided to vote unanimously. Within minutes, everyone voted for the pay cut and informed their boss that they were not going anywhere. It was a moment of inspiration.

She said, “That was a sign of how much they care about the company” and that it showed her how deeply she felt for the community. “Despite financial difficulties, they wanted to keep moving forward.”

By September 2020, all employees — many of whom are still on the team — returned to their regular salaries, and the company has added 11 positions since, Luzio said.

Today, founders might be forced to cut salaries and staff due to a new set of challenges. Another recession is possibleExperts agree.

Insider spoke with Luzio, her team and about the pivotal moment that Luminary was in. Here’s how she planned ahead, and used her leadership abilities to reassure employees, despite the uncertainty.

Employees value transparency, solidarity and fairness

Luzio and Erica Lerner (her chief operating officer), reviewed the company’s finances prior to the April meeting. Prepare for the worst. Luzio stated that he wanted to be transparent about our financial situation.

Luzio recommends that founders make tough decisions as soon as they can, as they face another period of economic uncertainty. It is important to know the financial health of your business before making any quick decisions.

She said, “You need to understand your numbers. Your expenses are the largest part.” That’s what saved Luminary.

Lerner had learned to be comfortable with the fact that leaders might not always have the right answers. She stated that it was difficult to accept uncertainty and admit she didn’t know the answer.

Kelsey Gonsalves worked on the April 2020 conference call. She felt secure because of the transparency of leadership.

Gonsalves said that the pay cut she received at the time was “not really important” at the time. “I was so grateful to be part of that team, and to continue my job during the pandemic.”

Gonsalves claimed that Luzio’s bravery, as well as her ability to show weakness, had helped create a work environment where employees feel supported.

She said, “Through this, all of us get an ounce of bravery as well.” “I’ve never been afraid to say that I’m struggling and I need help. It will be given to you by the team.

Investing in a Pipeline

Luzio wants to make her employees feel valued and invested in. While many of the workers who were on the call have stayed with the company, some have moved on to roles at Fidelity, Deloitte, and Estée Lauder.

She stated that “for me, that’s all it’s about investing in the pipeline,” and that employees should be able to take any skill anywhere. “I want them to be able to define success for themselves, but that doesn’t necessarily mean that they stay at Luminary forever.

Lerner said that Luminary’s team was invested in their work and has shown commitment to it. She stated that she was not surprised by the team’s decision, as she believed in their camaraderie.

“Even though our team was beaten down by uncertainty and the realities of the world, we believed in the company’s ability to get through this difficult stretch of time,” she stated.