corporations to small businesses, open book management
(OBM) delivers results that take companies that
are struggling or merely surviving … to thriving.
In theory, OBM sounds like a business owner’s
worst nightmare because the thought of sharing
the financials can leave them feeling a little,
well, exposed. Beyond vulnerability, however,
is a road populated with incredible numbers of
courageous companies who opened the details of
the company to employees.
Perhaps the most
well-known OBM success story is Springfield Remanufacturing
Corporation (SRC), a division of Navistar. Before
OBM, the company was a long-standing, money-losing
division. After the OBM injection, company revenues
exploded to $100 million. Small companies reap
the rewards, too. Accounting firms report increases
of 60 percent or more the year following OBM implementation.
Some staffing firms have shown a sales gain of
almost 80 percent in just one year. In short,
But how does
Simply stated, open
book management places the responsibility of the
company’s success on every person in the organization.
From the janitor to the president, all are focused
on increasing profits. The company’s goals become
each employee’s goals, who realize that building
a better system, maximizing productivity, reducing
defects, cutting costs and increasing efficiency
not only is good for business, but also good for
The basics of
– If employees don’t understand the way their
behaviors affect the bottom line, they can’t make
smarter choices for the company. The first step
to OBM is to “open the books” to all employees.
Some companies choose to post scoreboards in the
break room, others post financial information
on the company intranet, and both meet at “all-hands”
meetings to ensure everyone is on the same page.
Accountability – OBM makes every employee
accountable for the company’s success. Whether
an employee is a forklift operator, administrative
assistant or CEO, each person is expected to first
be a business person looking out for the financial
well-being of the company. Owners and executives
build in accountability by teaching employees
how they can increase the bottom line.
Incentive – The ‘What’s in it for me factor?’
is strong in most business settings, but in OBM
it is a critical element of success. Employees
learn very quickly they get a piece of the pie
when the company meets or exceeds set goals. More
often than not, OBM offers higher-than-expected
results. Company owners are only too happy to
share the increased profits.
performance consultants realize it is not enough
to show people how OBM works. The key to lasting
success is developing the desire to make it work.
Employee motivation comes from understanding that
each person has a chance to make a difference.
It’s a shift to empowerment instead of management.
Owners and managers move from telling employees
what not to do or how to do a task, to actually
sharing with employees what they want the outcome
to be. This empowers employees to be part of the
solution. And all too often, those working closest
to the process offer insights that lead to greater
efficiency, increased cost savings and/or profitability.
Sign Me Up
So, you want to
try OBM? You may be wondering how to actually
implement open book management. There are four
Information – This goes back to unveiling
the critical data needed to improve the bottom
line. For a manufacturer, you may want to take
a look at pieces manufactured per hour and explain
how a small increase impacts the bottom line.
If you are in a business where your returns are
higher than industry average, discuss the reason
with employees. Remember: it’s not enough to simply
say what needs to be improved, and ask employees
to do it or find ways to do it. Employees need
to understand how their division or group’s numbers
impact the company’s profitability. The more they
understand their personal contribution, the more
likely they will stick with the program.
– Entrepreneurs seem to be born with a business
gene. They tend to have a knack for company basics.
On the other hand, most employees have no idea
how the business operates or what matters affect
profits. Today, many college graduates don’t understand
how a business works. What if you could teach
every employee to think like an owner? You can.
Teaching employees the “game” of business brings
company issues to life, and ignites the entrepreneurial
spark inherent in all of us. Employees go from
thinking the owner is taking home all the dough,
to questioning wasteful practices and implementing
Your People – If you think business owners
squirm at the thought of turning over the financials,
they get equally as nervous at the idea of turning
over power to employees. Many management philosophies
went the way of the dinosaur because they didn’t
work when applied. OBM isn’t lip service. Company
leaders must enable people to make decisions that
affect their group or department, and be willing
to accept the consequences of those employees’
decisions. Experience shows us that people learn
quickly and often make smart decisions. To do
otherwise would adversely affect their personal
pocketbook. Now who would do that?
Make it Personal
– Profit sharing plans have been around for years,
but they aren’t like true open book management
since employees know very little about how their
actual actions impacted the bottom line. Just
like any astute business owner, employees start
the year with a goal or target. They can monitor
their group’s or department’s success – or failure
– on a weekly, monthly, quarterly or annual basis,
and know right where they stand at any given moment.
Knowing the bonus ahead of time has an incredible
effect on motivation. If employees know their
share of the pie is 10 percent of profits and
they can see profits steadily increasing all year,
they know the payoff is worth the extra effort.
OBM makes your
business your employees’ business. The results
can be awe inspiring, but it takes courage to
try something new. Those who have done it say
it has transformed their businesses. Those who
haven’t don’t know what they are missing. To learn
more about how an auto dealership turned OBM into
cash, see this month’s Performance Advantage success
story. And if you want to put the power of OBM
to work for your organization, give us a call.