Embrace open-book management style

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Open book management is not a new concept, but most businesses executives are still hesitant to embrace it. That trend is changing, however, starting with top performing companies. 83 percent of the 2010 Top Small Company Workplaces honored by Inc. Magazine open their books to employees. Many have been inspired to do so by the positive results reported in The Great Game of Business by Jack Stack and by CEOs who have taken the risk to supply employees with financial data and critical performance information.

Open book management is more than just sharing the company’s financial statements each month with employees. It involves training, transparency, empowerment, focusing attention, and sharing in the success.

Focus attention on what matters. Open book management isn’t just about sharing numbers. It’s about sharing the right numbers. Most people — including executives — glaze over when you put an income statement and balance sheet in front of them, but wise managers know what numbers are the most critical and go right to them first. That is why a good transparency system shares the key numbers with employees — usually referred to as KPIs, or key performance indicators.

Teach employees how to interpret the numbers. Even the simplest and most fundamental financial concept such as net profit is confusing to most employees who have never been trained in finances. When I led a medium-size publishing company for over 20 years, I committed my time to teaching the employees every month in our all-hands meeting to learning a new aspect of how finances work and how to understand and interpret the key numbers. Sometimes I shared the teaching with my CFO, but I often taught the lessons myself so that financial concepts could be communicated in lay terms.

Open the books on both finances and performance. An adage that is familiar to many in the world of business is “What gets measured gets done.” A good set of KPIs is a combination of both financial and performance measurements that tell the most critical story of a company’s performance. KPIs should be developed for each department that measure what is important to their particular function. Out of that departmental set of KPIs, a smaller set of the most critical KPIs are chosen that are combined with other department numbers to become divisional KPIs. Finally selected divisional KPIs are combined to make up senior management’s company KPIs or dashboard.

Make the numbers fun. Most people are not in love with spreadsheets. They respond better to visual displays of financial and performance information, which is why USA Today’s front-page graphic of a key statistic one of the most viewed items in the newspaper. So make open book management fun by creating charts, graphs, posters, and bulletin boards that visually display the key numbers. Howard Brooks, CEO of the Energy Resource Center here in Colorado Springs, motivates his employees to care about their performance against goal by moving a paper football across a large football field displayed on a bulletin board. They all celebrate a touchdown together.

Empower employees to do something about the company’s performance. When employees understand various aspects of the company’s performance and their own roles in it, they can also be given the freedom to influence and share in the company’s success. No one wants their department to appear last in a list of performance comparisons. Challenge the staff to come up with ways to improve the company’s bottom line or key performance, and then let them see the results of their ideas.

Share the rewards. The proof of open book management is in the results, and good results need to be shared with those that produced them. Rewards don’t have to be just financial (although that does help). Consider giving a department a day off for improvement in a key number for that department, or a company party for success in improving a specific performance goal that will impact the entire company. People can learn to love numbers if they know the story behind the numbers, and share in the success.

Kent Wilson (PhD) is a business practitioner and leadership specialist. After running companies for 30 years, he now serves as an executive coach with Vistage International and the Nonprofit Leadership Exchange in Colorado Springs. He can be reached at kent.wilson@vistage.com.