The Open-Book Revolution

By now the game-playing group includes some sizable organizations: Allstate's business-insurance unit, Sprint's Government Systems Division, Amoco Canada, and even -- as of last year -- the giant ZCCM copper mine in Zambia, a 50,000-employee enterprise that is the economic mainstay of that struggling African nation. It also includes plenty of small everyday companies, as you can discover by visiting SRC's Springfield neighbors. Walk into the Pontiac-Cadillac dealership or into a local building-supplies store. Talk to the guy who runs the area's fastest-growing commercial-cleaning service or to the brothers who own a heating-systems manufacturer. Open-book partisans, all.

Nearly all the open-book companies can boast some startling business accomplishments. SRC transformed itself from a small, money-losing division of International Harvester (now Navistar) into a moneymaking miniconglomerate with revenues near $100 million. The sales of Mid-States Technical, a staffing company headquartered in Davenport, Iowa, rose 79% in the two years after CEO Steve Wilson adopted the new approach; profits nearly tripled. Kacey Fine Furniture, in Denver, saw return on assets jump from the 1%-to-2% range all the way to 9% -- an astonishing figure for a retailer in a traditionally low-margin business.

Not surprisingly, the practitioners tend to wax evangelical about the management model behind the numbers. Kacey's Leslie Fishbein pronounces open-book management "the key to our competitive advantage in the marketplace." Others credit it with changing employee attitudes, with building trust, and even with reducing stress. Outside observers don't disagree. Chris Lee -- managing editor of Training, a magazine for corporate-human-resources professionals -- visited several open-book companies last year and came away dazzled. Open-book management, she wrote admiringly, is "some sort of lightning in a bottle."

Granted, we've heard big claims before, especially from the TQMers and the reengineers and all those other mavens of modern management. But the practitioners of open-book management argue -- convincingly, I have to say -- that they have something the other approaches don't. Open-book management not only gets people to act differently but gets them to think differently. It changes -- fundamentally -- the link between the employee and the company. Yet you don't have to rip up your whole organizational chart and send everyone to some faraway training institute just to get started.

Another thing: open-book management comes with a built-in self-regulator that ought to still the hearts of owners who fear letting go -- who worry that empowered employees will make stupid decisions and send the business south. The most important checks and balances -- the numbers -- are part of the system. If somebody makes a bad decision, its effects on the bottom line are right up where everybody can see them -- and react accordingly.

There is no standard set of rules for implementing open-book management. But there are a few basic principles and, by now, a lot of people who have experience putting those principles to work in companies.

In the next few pages, I'll share some of their experiences with you. And I'll sketch out a blueprint for action that might just transform your business, too.

What is Open-Book Management?
Open-book management is a way of running a company that gets everyone to focus on helping the business make money. Nothing more, nothing less.

It throws out the old approach to management, in which bosses run the show and employees do what they're told -- or what they can get away with. It takes those trendy new management ideas -- empowerment, TQM, teams, and so on -- and gives them a business logic. In an open-book company, employees understand why they're being called upon to solve problems, cut costs, reduce defects, and give the customer better service. And they have a reason to do so.

If you could tear apart an open-book company and compare it with a conventional business, you'd see three essential differences.

· Every employee sees -- and learns to understand -- the company's financials, along with all the other numbers that are critical to tracking the business's performance. That's why it's called "open book." The numbers are up on the wall, in the handouts, on the computer network. Training courses and regular meetings teach everybody what they mean. So employees know whether they're making money. They know how much. They know why.

· Employees learn that, whatever else they do, part of their job is to move those numbers in the right direction. They may be salespeople or software designers, machine operators or telephone operators, engineers or stock assistants. They are also part of the business and are accountable to one another for their unit's performance.

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