Springfield Remanufacturing Corporation (SRC) is well-known for high-involvement business planning structure.
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Open-Book Management on Safari
For the last two years, we have been implementing open-book management in a small community craft center near Kruger National Park in South Africa. Fifteen years ago, I implemented open-book management in a highway construction and materials company in St. Louis, Missouri. Even though the businesses, cultures, education level and many other things are vastly different, I have noticed some similarities between the two in ideas that work well with people on opposite sides of the planet.
The Great Game approach to management is a practical science of observing what actually gets results. Through a long process of trial and error, I have discovered some universal commonalities in human behavior, despite residing on different continents.
1. Friendly competition is a powerful motivator.
In both situations, we have worked very hard to create a positive, optimistic culture. I believe people work better when they are happy and challenged. With that as a foundation, our weekly huddles are an interesting place to watch interactions. Whether reporting on an overhead cost or a sales number, people do not like to report a bad number in front of their friends and co-workers. I believe this helps drive behavior in a positive direction; sometimes it means to work harder and sometimes it means problem solving. It is difficult to ignore something or sweep it under the rug when you have to face the team every week. This creates accountability that doesn’t have to come from a supervisor. I think the joking about a bad number or cheering for a good number is a powerful motivator. I am a big fan of cheering, but I think both shape behavior.
2. Annual budgeting and goal setting has an amazing, almost eerie, power to drive results.
Where you are is only relevant if you know where you should be. This has been our rule with budgeting. We set annual sales targets for the company as a whole and for smaller divisions to act as a guide to the business. Our day-to-day performance is judged relative to where the budget says we should be. This creates guidance for management decisions.
I am a strong advocate of the “catch ball” approach to budgeting with the management team and those at the ground level setting numbers together through series of back-and-forth proposals. This process is good for both sides to see the problem more completely and, if done correctly, the process transfers ownership of the numbers from the management team to those on the ground. We track cumulative sales budget against actual sales in both operations. It is always amazing to watch how close the sales actual number tracks to the sales budget as the year unfolds. The human mind can be very powerful when it wants to achieve something. Consciously and subconsciously, it will bend behavior towards what it can visualize.
3. Week-by-week management makes numbers relevant.
Something really works with the weekly cycle for huddle meetings. It is short enough for stuff to happen, but not too long that you forget everything. We manage our weekly huddle meeting so the main sales numbers are broken down into smaller departments, each represented by one of our members. They report what happened last week, and where they should be this week according to the budget. The week-by-week numbers can be erratic, so we also look at year-to-date or cumulative budget against actual year-to-date. It is much easier to spot trends on the cumulative numbers and it tends to iron out the weekly fluctuations.
It is in these week-by-week discussions where management can take place. Every number has a story and creates hundreds of questions. If the number is good, what’s working? Why? Can we go bigger? Can we do this somewhere else? If the number is not good, was the budget wrong? Did we miss something? Is it just random variation? How can we help? I think this is another example of a keen insight in human behavior. A small slice of the big budget, plus a short time frame, plus personal accountability, plus a positive work environment leads to solving problems and making thousands of tiny adjustments. By themselves they're not very impressive, but when added together are very effective. Like a large school of fish dodging a predator.
4. People like to win.
People like to compete and they like to win. This has been the basic motivation for all sports and games across cultures and throughout the history of mankind. In my old company in the U.S., our monthly accounting statements were 60-to-90 days old at their best. By excelling at being both boring and irrelevant, I think the traditional approach to accounting has removed the excitement of winning from the vast majority of employees. This is a tragedy. How would it change a basketball game if they told you the score after the game? It would destroy the game. It’s not fun, it’s not interesting and coaching is irrelevant.
All of these observations apply the same way to a business. The weekly huddle, combined with some weekly measure on how you are doing towards a larger goal, creates the same emotional connection in a business as a current score with your favorite sport. You have to be engaged in the game. Open-book management adds to the fun and its small, easily observed, relevant pieces of information makes all the difference. Thousands of small decisions made at the right time are amazingly powerful.
5. The ability to learn and play The Great Game successfully is not dependent on education level.
Education level is not a measure of intelligence or experience. We have worked with a wide variety of education levels on both sides, including people with PHDs, DVMs, Masters, Bachelors, high school, grade school and almost no school. It doesn’t seem to matter. The concepts of The Great Game are fairly easy and the math is not that hard. One of our very best performers on the U.S. side started as a secretary with only a high school level of education. She was excellent on sales targets, overhead budgets and relentless on tracking down accounting mysteries. Her great affinity for numbers was unexpected and completely overlooked before we started playing The Great Game. She is a manager of one of our plants now. I wonder if she would still be a secretary under the old approach?
In Africa, most of our members have not finished grade school. They are doing a great job of learning and playing. In several instances, they have shown great initiative. They seem to be gaining confidence each day. The lack of education does slow the speed of implementation. You definitely have to shore up some of the education deficiencies. When we wanted to teach income statements, we realized we had to back up and teach how to read a bank statement and how to work a calculator.
6. Transparency and fairness are fundamental.
Nobody likes to work in a system that they feel is rigged against them. People have to believe the numbers. None of this works if the team does not trust what they see. In both cases, we had to work hard to rebuild years of not knowing or not believing what management was telling them. I think three things can contribute to fixing this problem.
- First, get your hands dirty. By this I mean get everyone on the team involved in looking at numbers and tracking them in the first person. People have much more confidence in a number they have investigated themselves.
- Second, track it down to the last paper. Track a number to the last invoice, receipt, or deposit slip. If you follow a long paper trail, it is highly instructive and will allow you to completely verify a number.
- Finally, conduct lots and lots of training on the financial tools, income statement, balance sheet, direct costs, overhead, etc. It helps build a fundamental framework for the team and it removes the mystery of the numbers.
All of these ideas are basic common sense. None of them are particularly powerful by themselves, but in combination, they work together to reinforce each other into a system that is truly magical.
To learn more about the Great Game success story in this small African village, join Mark McCullough at the 25th Annual Gathering of Games, where he will present an educational session on the topic. The Gathering of Games takes place September 6-8, 2017 in Dallas, Texas. To learn more about the conference or to register, click the button below.