When Andrew Levine opened his PR firm's books, employees seemed bored. So he asked them to make the financial presentations instead.
At a monthly staff meeting this past June, Maria Mantz nibbled her pen top and shuffled the spreadsheets in her lap, anxiously awaiting her turn at the podium. Mantz had good reason to be nervous. She hadn't taken a math class in years, and she'd worked at Development Counsellors International--a New York City public relations firm that represents dozens of cities, states, and countries--for only five months. And she was just 23. But she was about to present the monthly financial report for the company.
Mantz's anxiety seemed to abate as she stood before about 30 of her colleagues and began. "Several accounts had quite an increase in May," she said, asking her audience to refer to the revenue table in their handouts. She gestured to a large flip board. "Does anyone know what the five clients listed on this page have in common?" she asked. "They're all performance-based accounts," yelled out account exec Malcolm Griffiths, referring to clients whose fees are based on results. "Right," Mantz replied, handing him a gift card for Cosi, a nearby sandwich shop. "In fact, 20% of our billings for May came from performance-based accounts. Is this a good thing or a bad thing?"
As the group debated the matter, Andrew Levine, DCI's president, sat smiling in the second row, pleased with what he was hearing. Levine's goal is for each of DCI's employees--from receptionists to tech support staffers--to become financially savvy. So each month, a different staffer is appointed CFO for a day, responsible for leading DCI's monthly finance meeting. The CFO of the day goes through a breakdown of the company's sales and expenses for the previous month, pointing out irregularities and trends, taking questions from staffers, and sparking conversations about everything from cost-cutting to contract negotiations. At the end of the report, the acting CFO unveils the bottom line and reveals if the company met its profit goal for the month. Each time DCI's accumulated profit hits another $100,000 increment during the course of the year, 30% is distributed among employees along with their next paychecks.
DCI, which had nearly $4.3 million in revenue last year, began the CFO-of-the-day program in 1996 and the company has been profitable ever since, Levine says. What's more, employees stick around a lot longer now--an average of five years compared with two-and-a-half years in the mid-1990s. Customers stick around too; the length of the average client relationship has doubled, to about four-and-a-half years. "Nobody wants to see a zero next to their client in the income column," Levine says.
It took a while for the open-book approach to take hold. In 1994, Levine took the helm of DCI from his father, Ted, who founded the company in 1960. Eager to try out a more open management style, he added a financial segment to DCI's monthly staff meetings. But employees seemed bored. "Most of our staffers either failed math or were poor at math, and here I was talking about statistics and ratios," Levine says. During one staff meeting, he asked his employees how to calculate a profit. Only one employee, receptionist Sergio Barrios, knew the answer. "It was mind-boggling," Levine says.
Then Barrios's knack for figures gave Levine an idea: What if he required employees to present the financial reports themselves? They'd have to learn at least the basics, he reasoned. So for the next staff meeting, Levine appointed his receptionist CFO of the day--and was pleased to see the reactions in the room during the presentation. Unlike Levine, Barrios was new to accounting and explained things in a way that any layperson could understand. "They figured, 'Gosh, if our receptionist can get this, so can I," Levine says.
Since then, the approach has helped transform the most unlikely staffers into finance whizzes. At first Mantz, who recently graduated from Penn State with a degree in advertising and public relations, dreaded the idea of being CFO. "The first time I saw the numbers, it was a little nerve-wracking," Mantz says. But after several months of seeing her colleagues make sense of complex financial details, she began to see that it wasn't as hard as it looked. By the time she was selected to be CFO in June, she was ready.
A day before the June staff meeting, Mantz spent an hour going over May's figures with Levine and DCI's controller, Carrie Nepo. Nepo pointed out large increases and decreases in revenue and expenses, Mantz asked questions, and the three talked about trends that could provide good fodder for discussion. Armed with four spreadsheets, Mantz spent another hour reviewing the numbers on her own and deciding which points to emphasize. The next morning, she practiced in front of Nepo and Levine before making her presentation that afternoon. "It's a good way to learn how things add up," she says. For instance, she's now more conscious of expenses related to entertaining clients. "I understand things much better now that I've done it," she says.
Employees are more likely to care about revenue and expenses if they have a stake in the profits; Levine believes DCI's profit-sharing program is integral to its success with open-book management. Simplicity is also key. For instance, Levine originally based profit-sharing payouts on profit margins, which proved too tricky for many of his fledgling CFOs to understand. Today he uses the analogy of a bucket being filled with sand; each time DCI's profits reach the brim, staffers get a check. When compiling spreadsheets for the CFO of the day, Levine and Nepo also focus on the basics--income, expenses, and profit.
There's a reason the CFO of the day meets with the CFO for only one day before the meeting: Otherwise, he or she would obsess over the presentation for an entire month. As far as Mantz is concerned, it was worth the extra effort and nerves. "I'm a new, young employee," she says. "And I'm being trained not only as a PR executive but also as a business executive."
Hitting the Books
DCI turns mathematically challenged staffers into CFOs by:
Requiring them to present monthly financial reports
Teaching them to spot trends and anomalies in the numbers
Focusing on accounting basics
Check out the Great Game of Business website (greatgame.com) to read more tales of open-book management and sign up for a free newsletter full of tips from businesses owners and other experts.