We show you how to make the transition to sharing financial and operational information with employees.
At Tasty Catering in Elk Grove Village, Ill., owner Kevin Walter ensures that even workers with limited English can read a balance sheet. It’s part of his adherence to Open Book Management, a business practice based on principles of transparency.
Grocery stores, hospitals and manufacturers have all implemented OBM, although there’s no single approach for doing so. Essentially, you must share financial and operational information with every employee so that they become more involved in the success of your business. Start by educating yourself on the philosophy, whether by taking a workshop or reading a book like The Great Game of Business by Jack Stack, who is known as the father of open-book management.
Then take five basic steps:
1. Educate your employees.
Begin with some form of financial literacy education for your employees. “Most employees have never seen a balance sheet, much less a profit and loss statement,” says Walter, who also coaches small businesses on OBM. Train employees to read a profit and loss sheet, sales projections and costing standards so that they can participate in future meetings.
2. Open your books.
Every employee should understand how much the cost of items like office supplies, toilet paper and the price of gas cuts into profits. At Tasty Catering, Walter handed out binders containing financial information to every employee and offered incentives to improve sales. This enabled salespeople to track their sales and shoot for higher goals, with the understanding they would be rewarded in return, another important component of OBM.
Whether through profit-sharing, a bonus program or something else, employees should see a direct link between their performance and financial rewards. Walter says that salespeople were initially reluctant to upsell clients by suggesting beverages with their orders. Their attitude changed, he says, “once we showed them if we get more sales per delivery, it ends up being more profitable for the company.” When the average delivery sale went up by two dollars, the workers themselves decided which rewards—such as pizza lunches and gift cards—they would receive.
3. Hold huddles.
In a workshop on OBM through Greatgame.com, Walter learned to hold weekly "huddles" - brief company-wide meetings in which everyone participates. Each employee takes ownership of a line item as the company reviews its profit and loss statement posted on the wall.
Walter recommends having individuals also oversee their own budgets to heighten their awareness of core metrics. Doing so could challenge them to move the numbers in a direction that improves the company.
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4. Follow through.
OBM is an ongoing process. Charlotte, N.C.-based VirtualLogger president Jim Veilleux says he boosted loyalty among workers through OBM, but says his biggest challenge is keeping up with it. “We tell our folks how we're doing financially on a weekly basis,” Veilleux says, “But since we’re small, the numbers are not always handy.”
Walter says that using Quickbooks or other financial software can help mom-and-pops pull up any available numbers, and advises focusing more on forecasts than on past expenditures that aren’t yet available.