John Tozzi at Business Week offers a great suggestion in tough financial times. Open your books to your employees so they can understand the challenges you are facing. Open book management improves accountability for all in the business, enhances decision making by gaining insights from those involved in the day-to-day management, and builds a unity of purpose toward surviving the current economic times.
But open book management must be implemented carefully. From Business Week:
Business owners can’t change to open book systems overnight. First, they have to create a culture where employees want to be involved, and they need tp understand the numbers they’ll be measured on. “When a company is struggling, they do need to be careful how they present this to the employees. They want to lay out the reality, but in a careful way so they’re not just scaring people,” says Kent Forsland, founder and chairman of Designer Doors, an 80-employee, $17 million custom garage-door company in River Falls, Wisc.
Jeff- thanks for picking this up. Good point about the “unity of purpose” that I think could have been clearer in the story — CEOs I spoke to all reported intangible benefits to open book beyond improving financial performance.
While I think this concept promotes an idea that enhances the employer/employee relationship I also think in the long it could raise doubts amongst lower level employees.
I believe in times such as these that morale is an important factor in a company’s culture. However, would the employees necessarily understand the figures they would be looking at? Would it be worth the company’s time to explain the financials to all of their employees?
I guess it would all come down to cost-savings analysis and whether it actually would be beneficial to show employees financials. I agree that it could show unity but I believe it would be hard to avoid scaring employees if the numbers provided were not of the ideal scenario.
Jeff, thanks for a great article. I think Rich Sheridan’s comments at the end of the article sums up the power of Open Book Management very well. It’s not the job of the CEO to have all the answers. Unfortunately, that’s how many of us have been taught. But, nobody is smart enough to take on a crisis like this one all alone.
John, I agree you need to be careful when opening the books, but we should be sure not to use this as an excuse to wait until times are good to share the numbers. Don’t worry about scaring them… guess what they’re already scared. The unknown can create a huge distraction in the organization and if you don’t let your people know what’s really going on, they will certainly fill in the gaps for you. An open-book approach can drive out negative rumors and help eliminate the emotions and fear that comes with uncertainty. This is what makes OBM so powerful. It helps us take the emotions out of the decision making process. Emotions can cloud our judgment, but our numbers can put everything back in perspective and allow our people evaluate the situation themselves. Granted, a little education on the numbers will be needed. But, a little education can go a long way in these times. Open-Book Management has long been embraced by leaders with the courage to share practically everything—the good, the bad and the ugly. From our experience, transparency is what brings people together. It helps rally your people to face challenges like this head on.