Open Book Management is a management style that enables employees to have greater access to financial and other information within the company. This allows them to make better decisions, take ownership of their work, achieve better results and even empower themselves by making decisions that benefit the organization as well as themselves personally.
What is Open Book Management (OBM)?
Open Book Management (OBM) refers to a management philosophy that promotes transparency, accountability, and collaboration. It helps employees make smarter decisions and feel more involved in both the company’s successes and challenges.
Why is OBM Necessary?
If you’re not doing open book management, you are likely leaving it to chance as to what employees really understand about the company’s performance. They might even think that their jobs are being threatened by changes in business strategy or priorities. This can lead to them taking action without understanding why they should do so and why those actions would benefit the company as a whole.
Open Book Management gives everyone at your company access to relevant financial and strategic information involving many aspects of running the business—from sales figures and expenses, to cash flow projections and business profitability forecasts—so everyone can see how well or poorly things are going for you as an owner/manager/employee alike!
Normally before I start any in-company employee training on the financials, I ask the employees to guess certain financial data. Things like revenue, margins, profits, how much tax has been paid, etc. The feedback is invariably very sobering as the guesses are so far off the actual figures.
Would you like to know how your business is tracking financially? Would you like to understand the business strategy or where the company is heading? Would you like to have an idea of what the company would look like 3 to 5 years from now? That’s a rhetorical question, and I can confirm that your employees would both benefit and like to know these answers as well.
The Advantages of OBM
- Employees feel valued. This is great for building engagement.
- Employees can make better decisions. (This comes as a surprise to many business owners: Most employees really do want to make better decisions for the company. And when they do they feel more satisfied with their work and the company.))
- Employees are more productive, happier, and innovative. (OBM supports treating your employees as mature adults, and less like children that demand protection and micro-management.)
- Employees are more engaged in their work because they have a heightened sense of ownership. This in turn inspires them to continually improve their work.
- Employees also tend to be loyal because they know that if something goes wrong at work then someone will take care of them (i.e., the boss). Because open-book management builds engagement, job satisfaction, productivity, and so to, does it improve loyalty towards the company?
How to be an Open Book Manager?
Be transparent about financial and strategic information.
Open Book Management is about being open with your employees about everything that impacts their work and how these affect the business performance. It’s not just about sharing the numbers. Employees need to understand how all aspects of their own work impact these numbers and what they can do to improve their own or their teams’ performance…
Share all relevant business data with employees and empower them to make decisions for the betterment of the company. This means sharing sales reports, revenue projections, budgeting sheets, etc. Then coach them through what they can do on a daily basis to impact their performance. – |For example, could they increase sales volume or reduce costs by reducing inventory levels, be less inclined to offer discounts, etc., whatever it may be! Encourage employees to share their ideas & suggestions as well; by doing so you will ensure improved overall efficiency at the workplace which translates into the better performance from staff members over time.
Steps to Create an Open Book Culture
- Create a culture of transparency.
- Ensure the employees are part of the decision-making processes that directly affect their own work, after all, they are the experts in their job functions.
- Trust your employees. Provide them with the necessary training so that you have confidence in their ability. If you lack confidence in their ability then you will never be able to build that trust..
- Give freedom to your employees to make decisions. Having regular toolbelt and one-on-one meetings will ensure that you have boundaries around this freedom.
- Create within your culture a mindset around continuous improvement. The employees who are at the ‘coal-face’ of your business are the ones in the best position to explore opportunities of how they could perform their work better. Examples of this could be faster, cheaper, or to a higher standard.
Share all your business data with employees and empower them to make decisions for the betterment of the company
To make your employees think like a boss, you will have to share relevant business data with them.
- Give them the freedom to make decisions on their own. Let them know that they are part of the company and that you trust them, even if they make errors on the route. As humans, we only retain a small percentage of the information that is told to us However, we are very good at retaining information that we conclude from our own insights. And insights form by merging our hindsight (past experiences) with our foresight (what we are aiming for.)
- Make sure that they understand the business goals and objectives, as well as what is expected of them in order for these objectives to be achieved by their team members or departments.
Stake in the Game
Consider offering them a ‘stake in the game’. This is a subject all on its own but is intrinsically linked to open book management. The salary or wage that you pay your employees should at least be market-related. This is both fair to you and to them.
It would be nice to believe that a market-related salary and a friendly culture would suffice to ensure the motivation of all your employees, but sadly it is usually not enough. Some of your employees may be self-motivated, but what we would like to do is to raise this self-motivation level in all employees, even the ones that are already self-motivated. We do this by linking some of the financial rewards gained through this extra effort back to all the employees.
We do this through profit-sharing schemes or virtual shareholding. But as a word of caution, these incentive methods do not work until you have mastered your open book management.
Open Book Management is the safe way to improve your company’s long-term financial performance. It’s simple in principle, yet deceptively difficult to truly master. Full implementation in a company will take months to years, as usually extensive training and upskilling are required, especially around financial literacy, business strategy, or even continuous improvement. The rewards are however significant as the company will position itself at a competitive advantage, and will improve employee (and business owner) satisfaction and its bottom-line results.
Author – Sean Foster helps business owners and professionals to grow their businesses, improve their bottom line profitability, and allow them to regain that often missing component, their work-life balance. He is both an entrepreneur and business owner myself that have years of real-world experience and service clients throughout New Zealand. https://www.seanfoster.co.nz/.