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For years, we have battled with explaining to others how the concept of open-book management and The Great Game of Business are not one in the same. To sum it up quickly, The Great Game of Business is an operating system in which open-book management plays a critical role. GGOB companies practice a methodology that includes open-book practices; the difference is that GGOB companies employ three specific practices:
1) Teach people business (not just opening the books)
2) Empower people to take action; hold them accountable for their actions
3) Let people share in the companies chance for success…or risk of failure
This week, the New York Enterprise Report published an article by consultant Wendy Kaufman about her experience with open-book management. In her article, Kaufman offers four recommendations for sharing company financial information. We’ve summarized her suggestions below and added our take on how to take it a step further:
Kaufman: Release your salary. Allow employees to see how much, or how little you are actually making as the CEO. This shows your confidence in your own salary.
Our take: We always recommend that all individual salary information be kept confidential. We do this through lumping all employee salaries and benefits-including management-into one number. Many entrepreneurs are fearful that employees will revolt, complain, etc. if they see how much others (specifically upper management) make. The goal of GGOB is for employees to understand the health of the company, not the pocketbook of the CEO, so we choose not to direct the focus there.
Kaufman: Let employees know where they stand. Don’t let company problems, such as layoffs come as a surprise. Eliminate the type of fear and uncertainty that can limit potential by sharing all of the ups and downs in your company.
Our take: Don’t just show employees where the company stands financially by making financial information available; teach them how to read and understand the key company financial statements. Discussing the financials is a great start, but a majority of your employees do not have the level of financial and business literacy needed to truly understand what you are talking about. We recommend holding a frequent discussion about the numbers and employees impact on those numbers. This is really the only way they will learn the numbers and hold themselves accountable for them.
Kaufman: Explain how loss of client impacts employee status. Minimize the stress employees might feel when the company loses a client. Be straightforward with how the loss of a client will/will not affect them.
Our take: Companies who practice GGOB at a high-level will foresee and plan for the loss of a client. Great Game companies have employees participate in a bi-annual High-Involvement Planning process where they set (and agree to) the revenue plan for the year. Additionally, the Sales & Marketing team is charged with laying out a detailed contingency plan. With this in mind, if one client drops out of the pipeline, there is a contingency ready to be activated.
Kaufman: Manage employee expectations. Help employees understand what you can and cannot do for them in terms of things such as time off and compensation.
Our take: Educate, educate, educate. If you are successful in helping your employees gain a basic understanding for the overall company financials, they will start to understand how their individual actions can impact those numbers both positively and negatively. With a little additional explanation, they’ll gain an understanding for how the company manages individual costs such as healthcare, time off and bonuses. If your employees are concerned about their benefits, they are now armed with enough knowledge to make educated suggestions for improvement.
Overall, the author of this article saw a tremendous benefit in simply making financial information available and being willing to discuss it openly with employees. Our take is that educating those employees on the company numbers, empowering them to take action and rewarding them for their achievement will ultimately create a company culture that competitors can’t touch.
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