Common-Sense Management: Open the Books

Jack Stack
Founder and CEO
SRC Holdings Corporation

In most companies, financial information lives with the CFO. If any numbers are shared, it’s on a need-to-know basis with just the highest tier of management. But what if everyone in your company had the ability to read and understand financial statements and spot business weaknesses and opportunities? What if they could act on that information to make your organization better, stronger, and faster?

As more and more companies are finding, you’d have better decision-making at every level. You’d be able to nip problems at the source and the flexibility to make necessary adjustments on the fly. You’d have a more entrepreneurial workforce, better communication, a healthier bottom line, and an enviable competitive advantage in your marketplace.

Some of the best companies “open the books” and teach everyone how the business makes money, but I think people still have many misconceptions about what it means to “open the books” and what it takes to practice open-book management. Companies who have experienced the real power behind open-book management take it far beyond just opening up the books. They create a process where employees provide input into creating the financials, learning to forecast the financials, learning what drives financial results, communicating progress with each other, and sharing the rewards of good performance. Successful open-book companies find a way to bring the numbers to life so that the employees begin to see numbers as interesting, understandable, and sometimes even a little fun. It’s common-sense business management, and it works.

If you would like to see the practice in action, I invite you to my company to attend one of our weekly financial huddles. A huddle is our weekly ritual of calculating the financial score. In an SRC huddle, employees track progress, commit to results, and continually think about how they can improve those results. Because we have a common goal of improving the bottom line and are working from a common financial scoreboard, we better collaborate between departments and focus our energies on the critical issues of the business. Because we frequently and openly discuss wins and losses, we keep learning and getting better. When we come out of our weekly huddle, we can see the whole playing field before us. We know who is where, how the game is unfolding, and what each of us has to do to make sure we keep moving closer to the goal line.

To achieve this, leaders must be willing to look at business through a whole new prism – and sharpen two critical skills that can rapidly unleash the power of your people. These are:

1. Teach and Motivate Employees.

Open the books and share the big picture. Show employees where their daily work appears on the budget and income statement, and how they can improve the numbers they control. Unify your team with a stake in the outcome with incentives that bind everyone to the critical goals of the organization.

2. Walk the Talk.

This is about positive and lasting culture change. Leaders have to establish organizational trust through open, honest, results-oriented communication. They should demonstrate a genuine commitment to change and model the desired workplace behaviors every day.

There are intrinsic benefits when companies make financials available to everyone:

Ending Organizational Ignorance.

Ignorance can kill companies; awareness can grow them. If information is power, then sharing it and using it wisely and profitably unleashes that power exponentially. When people lack facts, they fill the void with fiction. Explain to everyone how your business works – and why moving the numbers in the right direction puts more money in their pockets. Once they feel that sense of control and responsibility, they can’t help but step up and act accordingly.

Enhancing Teamwork.

When employees have the same objectives and share in the same well-designed financial incentive program, they tend to support one another, pull together, and do whatever it takes to achieve those objectives.

Generating and Spreading the Wealth.

Employees have a real stake in corporate results. To effectively ensure their own prosperity, they must help to grow corporate earnings. When they know the financials, their fiscal fate is directly in their own hands.

Educating People and Boosting Job Satisfaction.

Most employees already use the basic skills that an open-book workplace demands. They just need to learn how to use your financials to strengthen your business. Customized, on-the-job training works best when it’s hands-on, informal, and rooted in reality.

Promoting Continuous Innovation.

When people know how the business works, they’re more likely to innovate on the fly and continually improve processes and procedures. Open-book management works because employees get a chance to act – to take responsibility rather than just “doing their job.” Because each employee knows and understands how they can contribute to the financial performance of the company, they understand that they have a direct stake in the company’s success.

Ultimately, open-book management makes companies more agile and better equipped to overcome challenges and champion opportunities in the marketplace.