Open book management (OBM), the practice of providing visibility of financials to the entire company, has been lauded as a tool to empower, engage, and inform employees at all levels to drive higher productivity and alignment. OBM intends to bring a level of transparency around company financials to every employee, not just the executive and sales teams.

The benefits of OBM lead back to alignment. In theory, at least, a company that shares financial data with all employees has a workforce that better understands how their work contributes to the bottom line, and also understands why certain decisions are being made at the executive level (for example, why a non-essential business trip is not approved during lean times). This works especially well if the workforce is aligned with a profit sharing program so that everyone understands, and benefits from, the impact of their efforts.

For all of its strengths, there are some risks in adopting OBM. Some organizations will opt to share all financial data (or may have no choice, like many public universities). Most will take a moderate approach and share performance metrics relative to key indicators like revenue, EBITDA, contract closes/sales, pipeline health, and so on. Providing context for your team to understand how to interpret this data and its importance to your company is key to avoiding OBM issues such as:

Confidentiality and Disclosure Conflicts

Even if employees agree to a confidentiality clause within a broader employment agreement, the open discussion around company financials may create some issues with sensitive information finding its way to competitors, the media, and other outside parties.

Chances are high that the disclosing employee won't even realize it when this info slips - it may just be a cocktail party conversation about how the company is doing. Regardless, to reinforce the importance of confidentiality, it's important to remind your team of the confidential nature of financial information, whether verbally and/or in writing, every time it's shared.

Flight Risk in Tough Times

Practicing OBM isn't seasonal - if you share financials in the good months, you must also share them in the bad months. Otherwise, you lose trust and your team will devise their own (negative) conclusions around the silence on financial metrics.

Naturally, falling short of goals can create panic across all staff levels. Everyone on your team is viewing the information you share through the lens of what it means for them. While you probably can't guarantee their jobs are safe, you can work to steer them towards focusing their energy on helping to grow the business or managing costs so they consider themselves to be a part of the solution instead of sitting ducks waiting to be let go in a downturn.

It's also important to proactively address what you're doing to right the ship so your team doesn't become disengaged in the absence of a path forward.

A Shift in the Tone Around Purpose

A potential risk around OBM that's not as obvious is the possibility for purpose-driven cultures to feel misaligned. This is especially true if OBM is being introduced as a new practice.

If a culture is actively built around values like stewardship, community, and so forth, introducing a focus on financials can feel like a pivot away from what the team has rallied to support. It's critical to provide context around the opportunities that healthy financials (i.e., profit) can make possible in terms of serving core values, and to balance any discussion of metrics with an equal dose of focus on initiatives that bolster the purpose-driven culture.

Ideally, OBM is introduced alongside a handful of classes or lunch-and-learn sessions to provide the staff with a working knowledge to help them understand simplified business financials, which also gives the team a professional development opportunity to sharpen their business skills. Providing this foundation of understanding and focusing on cultural context as you share financial information will help you balance your company's culture and sense of purpose with the accountability required to support it.

Published on: May 24, 2018