I’M GOING TO BE straight with you. My goal is to convince you to implement the practice of Open Book Management in your company. What is Open Book Management, you ask? Simply put, businesses practicing this philosophy share all of their company’s financial information and other critical data with their employees (not including salaries). To be clear, the sharing of your company information will occur in both good and bad times and must be done with absolute consistency.
Let’s start with identifying some challenges. If you have never shared financial information with your employees, this may be a bit of an uncomfortable place for you to go. You may worry about the information being shared with people outside of your organization. Or you might feel like the financial details of your business are only for the use of owners and the management team. These can be legitimate concerns. But let me assure you, these concerns are really minor ones when you look at what this approach can accomplish in your business.
Providing your employees with complete transparency truly makes them feel like they’re an integral part of your company. The philosophy of Open Book Management is to make each employee feel like they have a stake in the outcome of the daily, weekly, monthly, quarterly, and annual financial results. As you establish a system that enables them to feel invested in the results of the company, you’ll change the way your employees approach their work and how they feel about their jobs.
To this end, we’ve always tried to tie a financial reward to the monthly, quarterly, and annual results. And those rewards are never arbitrary. Every employee has a full understanding of what’s at stake during the period of time designated. There’s a regular update of our progress that provides visibility to each employee. These results don’t necessarily need to be tied to net income or sales. They could be something entirely different, such as gross margins, cost of materials, labor, or anything that employees feel like they can directly influence on a regular basis.
The key is establishing a system that aligns performance with results and makes each team member accountable to their role in those performance metrics. As you’re able to do that you’ll find that your team members will feel like they’re part of an ongoing solution. They’ll look for ways to work smarter and more efficiently, and will hold other team members accountable.
When sharing your company’s financial results, the news won’t always be great. I’ve found that over the years – with plenty of occasions to share bad news – your employees’ reactions will not be what you might expect. Instead of being discouraged or even angry, employees will almost always have a desire to rally around the company and figure out how to make improvements. There becomes a sense of unity that permeates through your organization. Instead of just thinking this is the owners’ problem to solve, they’ll take the “we are all in this together” approach.
It might be a little scary to adopt this “share all” philosophy, but I can assure you the payoff is great. We’ve been practicing Open Book Management for more than 25 years and I wouldn’t change a thing. Motivating your employees to approach their daily tasks as if they were also owners of the company will undoubtedly yield long-term benefits to your business. I hope you’re willing to give it a try.