There's more to open-book management than simply opening the books. Owners find that confusion and mistrust persist even after they begin sharing financials with workers.
But a little imagination can bring the numbers to life. At Foldcraft Furniture, in Kenyon, Minn., chocolate-chip cookies made the information more palatable. "I was looking for a simple analogy," says chief operating officer Chuck Mayhew, "when I picked up a bag of chocolate chips with a cookie recipe on the back." Mayhew explained to employees how the cookie ingredients were like the workers' furniture-making materials and the baking directions were equivalent to their production routings. Then he invented a hypothetical cookie company. The group figured the cost of one cookie and marked it up for profit, then did the same for 5,000 cookies. They considered baking oatmeal cookies instead -- they were cheaper, but with lower margins. Mayhew asked what would happen if the purchasing department found cheaper flour. And what if the line made cookies faster? Then he applied the same ideas to Foldcraft's balance sheet and income statement.
In another lesson Mayhew demonstrated how equity grows with profit. The company reinforces that concept with a profit-sharing program and an employee stock ownership plan.
The lessons were voluntary; employees came on their lunch break. (Each class ran for six sessions.) About 100 of the 270 employees turned up, tempted in part by the chocolate-chip cookies -- homemade, not hypothetical -- that Mayhew supplied.* * *