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Think Outside the Top Line: How Open-Book Management Helps Employees Understand the Bottom Line

Mar 24, 2015 by Mary Lewis 0 Comments

“We need to sell more stuff!”

“If only the sales team was on a plan, we would be hitting our profit numbers and making bonuses!”

Do you ever hear this chatter in your company? When our bottom line profits are not up to par, we all have a tendency to first focus on the top line. When in reality, there are all kinds of opportunities internally to boost profits. In most companies, additional profits are slipping through the cracks every day.

Open-book companies have many opportunities to teach their employees the income statement, especially if they actively nurture financial literacy. The Great Game of Business is a very active system of open-book managing that creates proven superior results; up to 11 percent improvement per year compared to a non-open book company, and up to 9 percent difference year over year compared to a “passive” open-book management style.

As a business leader, imagine how exciting it is when employees want to learn about the income statement and balance sheet. These employees are curious about the financials and how their actions impact the results. Not only does this feeling of engagement benefit the entire company, but it creates a consistency of behaviors across the board.

To develop that “buy-in” feeling, I find it helpful to think of my own experience at my local gym, which actually is very successful internationally, selling programs to 55,000 gyms worldwide. In 12 years of my membership, I always feel like it is my choice to get more fit, competent and stronger, and I know I will achieve this faster because of their offerings. The programs are varied, the timetables are frequent and recurring, every exercise is demonstrated, individual skill level is not highlighted in-group lessons, and instructors are very competent, professional and encouraging. My fitness, strength and sense of well-being has improved enormously, and I still attend 3–4 times a week because of its clear benefits.

The benefits of open-book management to a company are a similar sort of commitment to the financial fitness of their employees. If employees see that gaining financial knowledge will help them be more competent, they will find it enjoyable. As they begin to enjoy financial literacy, they will just keep getting better and will eventually “buy-in.”

Create Bottom-line Gurus

Using the gym example and examples from open-book companies, here is a 5-point plan to create those “bottom-line gurus”:

  1. Display and demonstrate. Take time and thought in displaying the complete income statement, so it is easy to read as one whole linear statement. One of my clients used a shower lining type material adhered to a wall of the staff break room. Include percentages and ratios (e. g. percentage of net profit, variable and fixed costs of sales).
  2. Instructors are competent. Encourage management and employees to learn the company’s financials from “rookie” to “instructor” level. They can lead training bites or the huddles with knowledge and confidence.
  3. Encourage improved financial literacy at regular meetings. Take time to listen, repeat and explain financials at the main huddle reiterating important financial ratios and their trends.
  4. Supplement regular training with developmental bites. Request “trainers” to run training bites including: what ifs - what if we charged more or sold more? Would this make much of a difference if we reduce expense?
  5. Share the impact and feel the results. Introduce a bonus plan driven by a transparent relationship to results. Consider establishing a bucket bonus plan where the bonus is measured each quarter.

If you can implement these five steps into your financial literacy training process, you’re sure to see a quick increase in employee engagement and understanding of company financials.

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Topics: Financial Literacy, Open-Book Management, Buy-In

Written by Mary Lewis
 

About The Great Game of Business

Our approach to running a company was developed to help close one of the biggest gaps in business: the gap between managers and employees. We call our open-book approach The Great Game of Business. What lies at the heart of The Game is a very simple proposition: The best, most efficient, most profitable way to operate a business is to give everybody in the company a voice in saying how the company is run and a stake in the outcome. Let us teach you how to develop a culture of ownership, where employees think, act and feel like owners.