How entrepreneurs can show financial transparency in crises

  • Cate Luzio is the Founder and CEO of Luminary, a coworking space and professional network for women.
  • When the COVID-19 pandemic hit, Luzio gave workers a choice between layoffs, furloughs or cut wages.
  • Her leadership provides founders with an example of difficult decisions during a financial crisis.
  • This article is part of Talent Insider, a series of expert advice designed to help small business owners overcome a range of hiring challenges.

In April 2020, with a heavy heart, Cate Luzio signed up for her company’s Zoom Monday meeting with a tough proposition for her employees.

As COVID-19 was spreading across the United States, Luminary members had called for pause or cancellation of their memberships in the women’s coworking space and network.

Between March and April, the company lost about 80% of its revenue, Luzio told Insider. Her landlord deferred her rent, and within weeks her team transitioned their in-person community events to digital programs. But with 11 employees on the payroll, business was still at risk.

During the April Zoom meeting, the founder told her full-time employees that she needed to make some cuts. She gave employees three choices: they could be fired and file for unemployment, they could be furloughed and return to work once the company recovered, or they could take a 20% pay cut.

Luzio urged her team to take time to think, but the workers decided unanimously within minutes: everyone opted for the pay cut, telling their boss they were going nowhere. It was an electrifying moment.

“It showed me how much they care about the company and the community,” she said. “Despite the financial challenges, they wanted to continue.”

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

Today, other challenging circumstances could force founders to make the difficult decisions of cutting salaries or staff: inflation, rising interest rates and layoffs are early signs another recession is brewing, experts say.

Luzio and her team spoke to Insider about the pivotal moment in Luminary’s business. So she planned ahead and used her leadership skills to reassure employees despite the uncertainty.

Employees value transparency and solidarity

Erica Lerner stands in front of a glowing tree

Erica Lerner is Luminary’s Chief Operating Officer.

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Before the April meeting, Luzio and her Chief Operating Officer, Erica Lerner, reviewed the company’s finances to prepare for the worst. “I wanted to make transparent where we stand financially,” said Luzio.

As founders head for another period of economic uncertainty, Luzio advises them to make the tough decisions as early as possible. And knowing the financial status of your business is critical to making those quick decisions.

“You have to understand your numbers, and your expenses are the biggest part,” she said. “That saved Luminary.”

But the pandemic also showed that leaders wouldn’t always have all the answers, which Lerner had to come to terms with. “Finally accepting that insecurity and admitting, ‘I just don’t know,’ was a real challenge,” she said.

Kelsey Gonsalves was one of the staff members on the April 2020 conference call, and seeing this level of transparency from leadership gave her a sense of security in the face of so much instability.

“Back then the number didn’t really matter,” Gonsalves said, referring to her pay cut. “I was just so grateful to be part of this team and to continue having a job during the pandemic.”

Gonsalves said that during her three years with the company, Luzio’s courage and ability to show weaknesses has fostered a work environment where employees feel mutually supportive.

“It also gives us all a sense of bravery,” she said. “I’ve never hesitated to step up and say I’m really struggling and I need help with that. And you will get them from the team.”

Investment in a pipeline

Kelsey Gonsalves is standing against a wall, hand on hip

Kelsey Gonsalves is a Fellow and Program Director at Luminary.

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Ultimately, Luzio wants her employees to feel invested in her. While many of the working staff have stayed with the company, some have moved on to Fidelity, Deloitte and Estée Lauder.

“For me, it’s all about investing in the pipeline,” she said, adding that she wanted employees to gain skills that they can take anywhere. “I want them to have equal ownership of what that definition of success is, and that doesn’t mean staying with Luminary forever.”

In return, the Luminary team has been invested and engaged in their work, Lerner added. She said she wasn’t surprised by the team’s decision to weather the pandemic because she had faith in his camaraderie.

“Even though we were weighed down by world realities and uncertainty, we were still a team and had faith that the company would get through this unknown stretch of time,” she said.

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