Learning to manage by sharing information is simpler than that. Company builders who've tried it in their own businesses point out that information sharing can begin step-by-step. The process is as flexible and as varied as the companies that try it. Open-book management can -- and, once undertaken, will -- evolve.
Looking for a first step? Here are some options.
DEMYSTIFY STRATEGY
Tell employees where you want to go
Last year Solar Press Inc., a $45-million direct-mail company in Naperville, Ill., took its business plan to the shop floor. In a one-day, off-site affair called Brain Day, the company confessed its yearly and long-range plans to its full-time employees.
During a two-hour morning session, managers reviewed the coming year's sales projections, production goals, and personnel plans and equipment needs. They disclosed when new products would hit the market and how big those markets were. They even delivered the tough news about plans to discontinue certain product lines or consolidate operations.
Discussing department head counts was "sensitive," chief financial officer Joe Hudetz admits, and a few employees worried about losing their jobs, but "you don't get many sour grapes when ou're honest and tell them up-front." Fair warning allowed people to transfer or train for new positions in the company.
Once employees were given a glimpse of where the company was headed, they could concentrate on their own departments. During the afternoon of Brain Day, each department met to plan for the year. "It gave me a chance to think about the portion of the plan that involves me," says Sue Smith, a scheduling manager. "That way we could avoid some mistakes in advance."
According to Smith, prior warning about the company's European expansion plans allowed her department to install more timely and accurate shipping systems. "We'll have fewer weighing errors and delays shipping overseas," she says.
The payoff for the company? "Everything came in on target," Hudetz says. Sales increased 18%. Solar added almost 100 people and opened a new plant in Missouri. "With that kind of growth, there was no way we could have met the goals without everyone knowing what the game plan was."
REPORT JOB PROFITABILITY
Let employees know how they're doing
In a monthly newsletter, Karl A. A. Reuther, CEO of Reuther Mold & Manufacturing Co., in Cuyahoga Falls, Ohio, posts descriptions of the company's operating profits on jobs of more than $4,000. In some cases, Reuther publishes the hourly income and the break-even for each job; workers can see whether the jobs they worked on made money. They watch those reports closely, Reuther says, and in some cases, don't hesitate to dispute the numbers he prints.
In one case an accounting error led Reuther to conclude that the company had lost money on a $50,000 job. "It looked very bad. The numbers suggested we hadn't even recovered our labor costs." But the employee who had worked on the job begged to differ. "He told me either you didn't quote the job right or your numbers are all wrong," Reuther recalls. "We had to have made money on that job," the worker insisted. When Reuther checked the figures, he found out the man's calculations were right. It had been a very profitable job. The practice of posting the numbers had made productivity a point of pride and peer pressure in the company. It also helped the P&L. "I gladly retracted the statement in the following newsletter," Reuther says.
EXPLAIN COMPANY PERFORMANCE
Annotate and distribute your financials
Every business keeps a score -- it's called the profit-and-loss statement -- so why shouldn't every member of the team know it?" So says Cecil Ursprung, president and CEO of Reflexite Corp., a privately held reflective-materials maker in New Britain, Conn.
Since 1984 Reflexite has been publishing annotated annual and quarterly income statements for its 170 U.S. employees. Disclosing financials is a rare gesture for any private business, but explaining them is virtually unheard of -- even among companies that are public. At Reflexite, Ursprung uses a simple tool to teach machine operators, assemblers, and shippers the mechanics of a financial statement: he provides a glossary.
Reflexite's reports annotate the blizzard of numbers that appear on a financial statement with straightforward definitions. For example, a note in the margin tells what the cost of sales represents and how it is calculated. Additional annotations distinguish gross profit from operating income and net income. On the balance sheet, even such inscrutables as depreciation are spelled out.
"They need to know whether we're winning or losing," Ursprung says. "Why would you tell 5% of the team what the score was and not the other 95%?"
POST DEPARTMENT REVENUES
Help teams compete and cooperate
Measuring up is no private affair at Environmental Compliance Services Inc. (ECS), in Exton, Pa. By posting the revenues produced in each department, CEO Bill Kronenberg III says he opens up each profit center's performance to companywide scrutiny.
Every month managers in six departments at the environmental insurance firm chart actual gross sales, compare them with the budget, then post the information on boards for all to see.
The result, says Kronenberg, is not only more competition but more cooperation among teams.
Last year, when ECS's retail insurance unit hit a slump, several other departments -- which had been tracking the downturn on Kronenberg's boards -- came to the rescue. The underwriting group, ahead 40%, jumped in to provide new leads. Marketing helped make some cold calls. Thanks to the push, the retail shop came in 7% ahead in a flat market.
"It pays us dividends," Kronenberg says. "I don't have to watch as closely. I used to track the budget almost daily. Now I do it once weekly, and I don't even need to, really. They're watching those boards more closely than I ever would have expected."
-- Anne Murphy
