In 1995, Steve and Diane Warren, co-owners of Katzinger's Delicatessen, in Columbus, Ohio, attended a seminar on open-book management, a system that involves teaching employees about a company's financials and sharing the rewards with them when the company's performance improves. Sounds like a good policy, right? But the Warrens found it difficult to implement.
As soon as he got back from the seminar, Steve Warren shared the financials of his company with Katzinger's managers. Despite his opening the company's books, Warren saw food costs -- which he wanted to keep below 35% of sales -- continue to grow. He realized he would have to tinker with the typical open-book strategy. "The restaurant business is different," he says. "Some of our workers are young kids who aren't so responsible because they don't have a mortgage to pay. Plus, turnover is pretty high."
Rather than focusing on the company's big financial picture, the Warrens decided they would present a short-term, simple goal that could energize their young, mobile workforce. In August 1996, they made a proposal to their employees -- help us reduce food costs, and we'll split the savings with you. There were only two rules: Don't sacrifice food quality or portion size, and make sure that customers get the service they require.
It worked. "Our costs got in line immediately, and consistency improved," Steve Warren says. At the end of a year, Katzinger's had indeed reduced its food costs to below 35% of sales, saving $30,000 in the process. Steve and Diane Warren happily distributed $15,000 of that to their 45-member staff and began cooking up a new game aimed at increasing sales. By 1998, Katzinger's revenues stood at $2 million.