Should you be using open-book management?

by Chloe Taylor10 Jun 2015
According to Gallup, employee engagement is hovering at 13% globally – perhaps this is one of the drivers behind the growing popularity of open-book management (OBM) in popularity in recent years.

The concept was established in 1983 by Jack Stack, who was tasked with turning around a dying division of International Harvester and saving 119 jobs. Stack shared the company’s financials with employees and taught them the ‘rules’ of business. This approach became known as the Great Game of Business.

One company to have adopted this approach more recently is O’Connells OBM, a Brisbane based accounting practice.

At its core, the management style is about having a positive impact on the lives of its team by engaging, educating and empowering them to feel like business owners. O’Connells’ technique has allegedly provided everyone in the firm’s office with a “story and purpose behind why they’re there”.

One of the firm’s employees claimed that businesses that incorporate OBM can help employees create and build a sense of purpose by including them in developing and owning the company’s vision and values.

“They take a sense of fulfilment home every night,” she said.

Here’s how you can make OBM work for your business:

1. Know and teach the rules

All team members are taught to understand what success looks like for the business – whether that’s education on how to read the financial statement, what target are critical to the business and how they are influenced, or how different team members contribute to the company’s success.

2. Follow the action and keep score

Once team members know and understand the different elements of the business, scoreboards and continual team meeting or communications keep track of progress, provide motivation and increase accountability.

3. Provide a stake in the outcome

There has to be some type of intrinsic motivation to engage people in the success of the business. This could be in the form of an Employee Share Ownership Plan, a team-based bonus or reward system tied to your targets, or smaller rewards and celebrations for reaching milestones or focus goals. 

COMMENTS

  • by denisc 10/06/2015 11:43:23 AM

    Once upon a time AFR led with a similar story, which I responded to but was never published

    The simple proposition was the question what if the books are/were wrong

    Accountants are forever finding misallocated transactions and fixing them with journal entries in later periods, generally without drawing others attention to them

    In an open book environment these misallocations can affect the whole of the work force who are not sophisticated and may cause untold damage to morale and therefore productivity

    Besides who wants to be regularly telling their workers; "We have had to revise the numbers"

    Think of the view the commentariat take of ABS numbers which are revised maybe a quarter or two later

    the real problem then arises on year-to-year comparisons unless the corrections are filtered back into the core data

    One instance I know of was a government instrumentality which discovered it had not been recording Superannuation payments correctly after nine months and then put in teh journal entry in the tenth month

    Managers who had been praised for their efficacy, and some even attracting bonuses, were hauled up before the executive and berated for dismal performance in the month

    But a year later it was still continuing because each moth on a year-to-year basis everyone was seen to be underperforming against last year even though on a true basis they were ahead.

    But imagine the celebration in the tenth month when the current month was compared with the month when the adjustment was recorded. Wow how the senior management preened in the light i\of such a turn around -- when all the time it was a recording error the year before

    In my view Open Book can be a very perilous journey

  • by Bill Fotsch 10/06/2015 10:48:46 PM

    It is great to see more written about the benefits of open-book management in Australia. While most of my clients are in North America, I am currently working with a private company North of Brisbane, using Go To Meeting. I have worked in Western Australia with the Iron Ore Division of BHP Billiton. Both companies saw great benefits, as has Stellar, another Australian company.
    Involving all employees to understand and share in the improved financial results creates a team structure and common language that enhances trust. The focus on the common good captures the employees’ hearts while the information captures their minds. This creates an empowered, learning organization.
    This 4 minute MSNBC video of one of my clients provides an example of a privately held company: https://www.youtube.com/watch?v=ev9JBmjjeCU
    These Harvard Business Review articles provide more background:
    http://blogs.hbr.org/2013/12/a-winning-culture-keeps-score/
    http://blogs.hbr.org/2014/06/share-your-financials-to-engage-employees/
    If interested, I would look forward to collaborating. You can reach me at bill.fotsch@openbookcoaching.com. Best wishes, Bill

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