Labor/management relations were strained at Cin-Made when Bob Frey and his partner purchased the Cincinnati-based company in 1984. The situation deteriorated further when Frey won a 12.5% wage decrease from employees. He felt he needed the decrease, but, not surprisingly, employee morale plummeted. In order for his business -- which at the time made paper tubes and paper canisters -- to succeed, Frey realized he needed the cooperation of his workforce. One way he hoped to accomplish this was by opening channels of communication.
Frey instituted open-book management, a system that teaches employees about the financial performance of their company so that they understand how the business makes money. But that's not all. In an open-book management system, employees are given a stake in the success of the business. For example, Frey introduced a profit sharing program that, by the late 1980s, accounted for about 25% of employees' compensation. Finally, employees are encouraged to find ways to improve the company's performance.
"In effect, open-book management teaches people to quit thinking of themselves as hired hands (with all that implies), and to start realizing that they are businesspeople (with all that implies)," writes John Case, author of Open-Book Management: The Coming Business Revolution (HarperBusiness, 1996). "Their job security, their chances for advancement, their hopes for the future all depend not on the whims of some boss or department head but on the company's success in the marketplace and each person's contribution to it."
At Cin-Made, open-book management changed employees' adversarial attitude toward management. The process was very slow at first. Over time, however, hourly workers at the company began taking on new responsibilities; today they have a say in areas such as Cin-Made's hiring process and safety program. The company has grown, too. In 1995, Frey says Cin-Made had 40 employees and about $3 million in sales; in 1998 it had about 100 employees and sales of about $8.5 million. And, with less labor-management conflict, Frey finds that work has become enjoyable.
Implementing change can be easier in a company in which employees and management see themselves as part of the same team. By the mid 1990s, Frey recounts, Cin-Made had few prospects for growth in its existing business, so employees and management alike voted to reinvent the company. "If you're going to have long-term career potential, this is something we must do," Frey remembers telling employees before the transition.
That change -- which has meant launching new divisions with new products -- has complicated open-book management a little, because entering new markets has temporarily hurt the company's profitability. During the transition, Frey is offering employees a guarantee of a portion of their normal profit sharing income. He has also started a quarterly incentive program based on improving particular areas of the company's performance. That way, employees will continue to focus on helping the business run better.