There are risks and costs to a program of action.  But they are far less than the long-range risks and costs of comfortable inaction.                       ~John F. Kennedy    

Do you want to achieve dramatic results from your organization?  To win in the game of business, you have to share the score of the game with the players competing in the trenches and on the front line.  The score in the game of business is decided by profitability, and profitability is measured by examining financial statements.  Sharing financial information with employees to get better results may seem like a risk, but we believe the subsequent rewards make the "risk" worthwhile.  Open-Book Management (OBM) is one method by which company owners, leaders, and managers can implement to share the financial score of the game of business with employees.

Open-Book Management has proven its value to hundreds of companies, from small family-owned businesses to Fortune 500 corporations.  OBM works in all types of industries--construction, retail, health care, manufacturing, non-profit, and government.  No matter what the business entity, the results achieved through the OBM philosophy have produced similar successful results.

First things first.

All enduring successful organizations create and utilize a strategic business plan (if you do not have a strategic business plan for your company--one needs to be created--now).  Once a business plan is in place, it is critical that whatever results are being measured tie into the accomplishment of the goals of the business plan.  The ability of the people who are responsible to attain the outcomes of a company’s business plan is directly proportional to how well leaders communicate to employees and managers their impact on the profitability of the organization.

How should I involve our people?

A critical part of the communication process involves sharing the results of company finances with employees at every level of the organization.  John Case, author of the book Open-Book Management, The Coming Business Revolution, talks about the benefits of sharing key financial information with everyone in a business.  "Open-Book Management (OBM) is a way of running a company that gets everyone focused on helping the business make money.  It gets rid of the old approach to management, in which bosses run the show and employees do what they are told.  In an OBM company, employees understand why they are being called upon to solve problems and cut costs."  The key to the success of implementing OBM is to educate everyone within the organization on how to read and understand key financial statements.  Then, everyone within the company must be shown how their actions directly impact the company’s financial statements.

J.C. Dalton, in a article about OBM, states, "Open-Book Management means more than just opening financial statements to employees.  It means educating employees so they understand their contribution to the bottom line, involving them in decisions, and making them responsible for their areas of operation."

So what’s the difference in an OBM company?

There are three essential differences between an OBM company and a conventionally run company where financial information is held tight to the vest.  First, every employee in an OBM company sees, and learns to understand, the company’s financials.  They know whether or not their company is making money.  They know how much money is being made, and why.  And they have a pretty good idea what the future holds--all because they see the numbers that most companies show only to top management.

Second, employees assume that whatever else they do, part of their job is to move those numbers in the right direction.  They are part of the business, and they are accountable for their unit’s performance.  Each individual can only be successful if the organization is financially sound.

Third, employees have a direct stake in the company’s success.  If the busines is profitable, they get to share in the financial success.  If the business is not profitable, they don’t do as well financially either.  There seems to be consensus that employees working for companies practicing OBM behave as if they owned the company--they begin to treat the business as their own.  OBM teaches people to quit thinking of themselves merely as "hired hands" and to start realizing that they are business people too.  Their own employment and financial security is dependent upon the company’s success in the marketplace.

So what’s not to like?

Fear may keep some executives from sharing financial information with employees.  Some of the major issues that drive this fear are the following myths:  employees will want more money once they know the financials; the numbers will be misinterpreted; employees will tie up the finance department with endless questions; the data will be used against the company in union contracts; employees will share the financials with competitors, customers, or over the internet; executives will be exposed to greater criticism.

Your competitors probably already know most of your basic financials--they have the smae expenses you have, and they can figure out many of your numbers from their financial statements.  Most companies do have critical financial information that they do not want to get to their competitors.  Explain to the people who do have those critical numbers that they must keep them confidential.  A confidentiality agreement may be in order, as well.  Besides, it’s the people that make the competitive difference in most companies, not the actual financial information.

Jack Stack, president and CEO of Springfield Remanufacturing Company in Springfield, Missouri, has been a pioneer in building a business through measuring results, getting employees involved, and sharing financial data throughout the organization.  Mr. Stack, in his book The Great Game of Business, talks about some of the myths about getting employees involved in the financials of an organization.  Some of th myths are:  "Don’t tell people the truth--they’ll [try to find ways to destroy] you," "A manager’s job is to come up with the answers," and "Don’t let the employees worry about the big issues--just have them do ’their’ jobs."  The continued rapid rate of change demands that successful companies provide for financial openness just for their sheer survival.

It’s about leadership.

OBM sometimes fails because leaders are not comfortable answering the tough questions that their people were trained to ask.  Leaders must be confident in their abilities because they will be inviting criticisms and difficult-to-answer questions from their employees.  Leaders also underestimate the amount of time the OBM process takes to be implemented and successful.  Managers get impatient with the process, and so do the stakeholders.  It takes a confident leader to patiently promote and support OBM.

What can our people do?

Today’s business environment is constantly changing, and so are the problems being faced by businesses.  As employees begin to take on more financial responsibility, they can help identify and solve problems that were once reserved for top managers.  OBM can be successful if people are allowed to contribute.  Part of every employee’s job is to move the critical numbers in the right direction.

To be successful, companies that practice OBM must first be sure that employees and managers see, and understand, the financials.  All employees must have a direct stake in the success of their company which, in many cases, is in the form of compensation and job security.  Employees are motivated, informed, and excited about coming to work, because they know why and how their job affects the company’s bottom line.  They begin to think and act like owners.  Dan Foley, president of D. Foley Landscape says, "I had $9-per-hour guys asking questions like they were MBA’s.  Everyone in this business assumes that people are out there to work with their hands, but the power of Open-Book Management is that with every set of hands, you get a free brain.  We’re to the point where I bet 99 percent of our crew leaders could explain gross profit dollars if someone asked them what it was."

No guts, no glory.

It takes courage and a plan to implement Open-Book Management.  We believe that the advantages of implementing Open-Book Management far outweigh the potential disadvantages of not implementing Open-Book Management.  As business owners, leaders, and managers, it is certainly your decision as to what you choose to do.  If you choose to try nothing new, however, you are risking the long term success of your business through comfortable inaction.

For more information about Open-Book Management, go to www.greatgame.com.

This article is provided as general information and is not intended to substitute for legal or other professional advice.