Keeping Score

By Tom Sherwin Open Book Basics In today's ever-changing and increasingly complex global marketplace, the competition for skilled employees is as keen as that for customers. Today's CEO must provide high-quality products or services in a timely manner, with excellent customer support while simultaneously creating a work environment that is attractive to today's highly mobile workforce. Fortunately, there is Open-Book Management. In a survey conducted by Ernst & Young, 59 percent of workers said they would be more motivated if they knew how their jobs helped the company make money; 77 percent of the managers agreed. As the name implies, companies that practice Open-Book Management provide employees with the education and training to understand the company's financials and then gradually opens the company's books to the employees. A critical step in the process is helping the employees connect personal performance execution to financial outcomes. Typically, some portion of everyone's income is tied to the company's financial success. Open-Book Management can turn your employees from hired hands into business people. What it is Open-Book Management is an organization-wide educational undertaking leading to performance enhancement. An analogy is how much better a sports team will perform if it knows what the score of the game is and how much time is left to play. Turn the scoreboard off and the team's performance is likely to suffer. Turn it on and the team knows what the coach knows. In a study conducted by the National Center for Employee Ownership, comparable company analysis demonstrated companies practicing Open-Book Management outperformed industry peers. Open-Book Management begins by teaching financial literacy. It is sad to say that today's educational institutions no longer consider financial literacy to be part of a fundamental high school education. Thus, some employers find employees not only do not know how to balance a checkbook, but they are completely unfamiliar with such basics as a household budget. Not surprisingly, we begin by teaching those two things: how to balance a checkbook and calculate a household budget. That financial literacy foundation affords an opportunity to make associations between the employee's personal finances and the company's finances. Employees intuitively see the connections between their rent and company rent, their utilities and company utilities, etc. When they know the numbers, they understand how their effort at work makes the numbers go up and down, and the rest takes care of itself. As John Case says in "The Open Book Experience: Lessons from Over 100 Companies Who Successfully Transformed Themselves," "Really the only way for a company to boost performance consistently over the long term is to have employees who work enthusiastically and effectively and who take responsibility for their own work." Of course, such a team cannot win if it doesn't know the score, e.g., the numbers. How it works Careful consideration should go into developing an Open-Book style for your company that will provide both motivation and procedures for maximizing profitability. Specifically, you will want to consider the timing and sequence for introducing Open-Book Management into your company and the tools and guidance you will need in teaching business literacy to all of your employees. Careful consideration should be given to devising methods for sharing a stake in the outcome, especially for the implications of overachievement as many companies find they have an untapped store of creative energy released when Open-Book Management is introduced. Just to be clear, you need not be employee-owned to get the most out of Open-Book Management though many ESOP companies do practice Open-Book Management. There are many companies who practice Open-Book Management. Gaining first-hand knowledge from them of what works and what you will want to avoid is sound practice. You will have the opportunity to learn from other's experiences, the good and the bad. To help determine if Open-Book Management is viable for a company, consideration should be given to identifying resources that might help determine if Open-Book Management makes sense in a particular situation. The answer is not always yes. Open-Book Management requires a real shift in the mind-set of everyone, but especially that of the CEO and the managers. What we have seen, though, is the company that educates its workers on how their jobs can influence corporate profitability will find itself with a very potent workforce.