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.
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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.
· Employees have a direct stake in the company's success. If the business is profitable, they get a cut of the action. If it's not, they don't.
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). 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.
Those are the bare bones. The stories of open-book management flesh things out; they show how the principles are implemented in real situations. Bob Frey told one such tale not long ago in the august Harvard Business Review.
Frey and a partner had bought Cin-Made in 1984. The little Cincinnati company was not what you'd call high tech: it made mailing tubes and other cardboard-and-metal containers on antiquated machinery. Nor was it a model of progressive labor relations. The previous owner, seeing profits dwindling to the vanishing point, had told her unionized workforce she couldn't afford the generous contract she had signed two years earlier. The response: Tough luck. No givebacks.
Not that Frey helped much when he took over. He stood around with a stopwatch, timing employees' moves. He once declared that the work looked like something a moron could do. By noon that day, he remembers, all the employees on the shop floor "had heard that I thought they were mentally retarded."
A few months later the contract expired. Frey said he'd have to have hefty wage cuts. The union went out on strike.
Frey and his partner tried to keep the factory going. That caused no end of mirth on the picket line. The obvious joke made the rounds: "Now there really was a moron running the machines." Before long, though, the strikers got scared. When Frey threatened to hire permanent replacements, the union advised its members to return.
So Frey had won the battle -- a 12.5% wage cut. But the war was raging as furiously as ever. The disgruntled workers "stuck to their job descriptions like glue," he recalls. They filed grievances at the drop of a hat. Peeved, Frey quit buying dinner for those working overtime, ending a long tradition. Morale plunged.
At some point, says Frey, he wised up.
The constant skirmishing and bickering were making him miserable. If they didn't stop, his business would be in jeopardy. He began to see that the company really needed the loyalty and cooperation of its employees. He began planning a change.
