One Company's Budget: The 'Great Game' of Open-Book Management
BY Lauren Folino
An IT company's commitment to open-book management helps calm anxious employees while boosting revenue.
When Harlan Geiser, CEO of Bloomington, Illinois-based IT company Integrity Technology Solutions (ITS), first read Jack Stack's book, The Great Game of Business (GGOB), for a book club in the late 90s, he had no idea that the concept would later aid in restructuring his entire company. Though ITS had been successfully providing outsourced IT and consulting services to its customers since 1993, the recent economic downturn caused many of its clients to postpone technology decisions and become more cautious with their finances. By 2008, that conservatism was impacting the company's revenue growth and profit, not to mention client acquisition. With 30 anxious employees to consider, Geiser realized that the key to ITS's further success was open-book management: "We really needed everyone in the company to have an open line of sight in everything they do, and how that affects the success and the failure of company. The only way to do it is with open-book management." Here's a detailed look at what the business is spending on open-book management and how it affects other areas of the business such as payroll and marketing.
2009 (Before GGOB)
2009 (After GGOB)
GGOB AS A PERCENTAGE OF REVENUE
BUDGET BREAKDOWN OF ELEMENTS AFFECTED BY GGOB
In 2009, Geiser's two main goals were increasing revenue growth and profit, while retaining key staff that had become anxious because of the recession. His answer to these goals was to implement open-book management, a management style that allows employees to receive all the information they need (including revenue, profit, cost of goods, cash flow and expenses) to help them do their jobs effectively while also helping them understand how the company is performing. By providing this information, employees begin to feel more like partners rather than hired hands, and they can make better decisions. This concept was made popular by Jack Stack and his team at SRC Holdings, a Springfield, Missouri-based company that teaches other companies these management techniques.'¨'¨
Since the company was not using open-book management in 2008, every area of the company required new budgeting. So far in 2009, the GGOB investment has amounted to $30,000, which includes: sending four employees to a two-day seminar offered by the GGOB with coaching from GGOB President Rich Armstrong ($2,000); employee attendance at the Gathering of the Games conference, which provides learning sessions and networking opportunities ($1,600); implementation strategy and assistance from the GGOB ($6,300); on-going financial training and coaching ($24,000); and providing financial literacy training on an on-going basis to the entire staff, and training ITS's management on anticipating company costs. '¨ '¨
In accordance with the GGOB, employees were asked to provide suggestions on how ITS might cut expenses, rather than having cuts made by the executive level without employee input. Employees made suggestions, such as: switching from paper to electronic invoices to save on paper, postage and time; reducing company lunches from every Tuesday to once per month; and, adjusting the temperature on office thermostats. The end result was an $11,000 reduction in planned expenses per month. According to Geiser, employees are still providing beneficial suggestions on more efficient and lower-cost alternatives.
In 2009, the company's accounting staff was reduced from two employees to one, and the employee compensation plan was cut by about 10 percent. Before the GGOB, employees worked without being able to receive a stake in the profit of the company's success, but after the GGOB was implemented, employees began receiving a contribution-based commission of company profit, which provided more incentive for individual success. Geiser said, "It's probably better described as goal sharing – if we achieve a goal, [they] all get a portion of it," allowing hard-working employees to recover their 10 percent pay cut and potentially earn even more. '¨ '¨
This area of the company was the most dramatically affected by implementing the GGOB. Geiser said, "In the past, we hired outside marketing firms. Now that times are leaner, we had to cut back on that. But, we don't plan to do it forever." For the moment, the company relies on employee-based marketing tactics, which include cold-calling prospects, encouraging repeat business, and attending community events to get the word out about ITS. Employees keep daily logs of what they do to help contribute to company promotion, and that information is openly shared throughout the company to generate new ideas and potential clients. '¨'¨
Commitment to Goals
Geiser said because of the GGOB, ITS has improved company revenue, employee morale has increased, and the company now sets short-term, monthly financial goals, which are more attainable than annual goals. And, after six consecutive under-performing quarters, ITS is meeting and exceeding its profit objectives since implementing the open-book management system.