The Open-Book Revolution

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Open-book management by itself isn't enough to turn a company around. Frey says he still needed a better product strategy and better marketing as well as better people management. No company can succeed without good leaders, adequate financial resources, and the ability to deliver a combination of price and value that appeals to customers.

But open-book management -- "lightning in a bottle" -- changes the essential logic of how people work together. No longer are those at the top trying to haul everyone else along. Everyone pulls in the same direction -- because all can see where they're going.

How to Implement It
There isn't any cookbook-style recipe for open-book management. "It's more a philosophy than a how-to-do-it, step-by-step program," says Ronnie Miller, a plant manager at Pace Industries' Cast-Tech Division, in Monroe City, Mo. Still, if you put all the open-book practitioners into a room and asked them what they do, I think they'd come up with four precepts -- four steps you have to take before open-book management can work.

Step One
Get the Information Out There
Tell employees not only what they need to know to do their jobs effectively but how the division or the company as a whole is doing.

Every company has some pivotal operational numbers: On-time shipments. Customer returns. Most managers understand that employees have to see and track those numbers if they're going to affect them. Operational numbers alone, though, won't get anybody to think like an owner. Employees may keep a wary eye on the charts. But they're likely to feel as much resentment -- "Big Brother is watching us" -- as motivation. People aren't lab rats; if they don't understand why they're supposed to lower the defect rate or take those calls faster, they soon figure it isn't worth the trouble.

Open-book management is about the why -- and in a business, the why is told by the financials. So along with the operational figures, show people the income statement, the cash-flow statement, and the balance sheet.

Will they understand those documents? Not until you explain them, a subject we'll take up later. But numbers alone send a powerful message, even if they don't yet make sense. Everybody is a part of the company. Everybody sees the same information.

Then too, chances are good that employees will readily understand some financial figures -- the ones that are most important to your business.

· At Commercial Casework, a Fremont, Calif., furnishings and cabinetry company, the crucial number is variances on each job. So CEO Bill Palmer posts "Job Cost, Over and Under" up on the lunchroom wall. No one needs an M.B.A. to know which direction is good.

· At Acumen International, the personnel-assessment company, employees keep a hawkeye on the company's weekly cash. "What hits everybody's gut? How much money we have in the bank," says one manager.

· At Sprint's Government Systems Division -- it has operations in Kansas City, Mo., and Herndon, Va. -- revenues per employee is one of several critical financial gauges. "It's one way of looking at how well the organization is doing," explains Rick Smith, director of services for state and major local government. Again, no M.B.A. required.

How do you get the information out there? Put up scoreboards. Distribute it at meetings. Or avail yourself -- this is the information age -- of any number of high-tech methods.

When you walk into the lunchroom at Manco, for example, the first things that catch your eye are the big charts on the wall. The charts tally yesterday's sales, year-to-date revenues and expenses, year-to-date profits, return on operating assets, and a dozen other key numbers, each compared with figures from the budget and from the previous year.

And at Wednesday-afternoon managers' meetings at Foldcraft, a manufacturer of institutional seating in Kenyon, Minn., every manager reports the week's numbers and projections. Every number goes into the computer as it's reported, creating an income statement on the spot. "Then our cost accountant takes the disk out and has copies run," explains company president Chuck Mayhew. "In half an hour everybody has a copy. They take it back to their units and review it in their staff meetings."

As noted, this is the information age. Anderson & Associates, an engineering firm in Blacksburg, Va., puts its financials on its computer network. Herman Miller, the big furniture maker based in Zeeland, Mich., distributes videos detailing and explaining the company's numbers. Commercial Casework always has some of its employees out on job sites. They can't come to meetings, so Bill Palmer's brother Tom calls them on their cellular phones and walks them through the company's weekly income statement.

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