09/ 26/ 2007
by Lena Basha
Increase employee accountability with open-book management
Kevin Nolan has this motto about bad news: "It's like dirty laundry," he says. "When you air it out frequently, it never smells too bad." That's one of the reasons he opened his books to his employees at his Philadelphia-based residential painting company almost 10 years ago—and hasn't looked back.
Not that there's ever too much bad news at Nolan Painting, but the seasonal business does go through some slow months—and Nolan wants his employees to understand that.
One morning each month, Nolan's 75 full-time and 20 part-time employees gather as he goes over the numbers.
"To do that costs about $2,000 a month in lost productivity," he says. "That's a lot for us, but it's worth it."
The spirit of open-book management is that sharing all financial information with employees encourages them to make more responsible choices as workers. If your employees can see the difference they make to the business' bottom line on paper, they are more likely to conserve materials, order less frivolously and create less waste. Nolan says opening his books also has increased productivity as well as camaraderie and employee loyalty.
"Loyalty isn't common in my industry, but we have it," he says. "That's because we talk openly about profits, what they're for and what we do with them. Our employees know that every time Nolan Painting makes a profit, it goes back into the business, and they help us figure out where the investment should go."
Last year the profits helped fund a dental-insurance program that employees wanted. "It only happened because we were profitable, and everyone knew that would be one of the rewards for hard work," he says. "I believe that you can get anything you want in the world if you help enough people get what they want."
So why don't more businesses open their books? There are a variety of reasons, says Jack Stack, owner of Springfield Remanufacturing Corp., in Springfield, Mo., and author of open-book management guide The Great Game of Business (Currency, 1994). "In most cases, it's because owners don't think their employees can understand a balance sheet, or they think once their employees see the numbers, they'll demand raises or sell the company secrets to competitors," Stack says. "But those are myths."
In fact, it's likely that your employees will have a firm grasp on open-book management within the first six months, Stack says. As for the potential greedy, backstabbing employees, Nolan sees that as a positive thing. "I don't want people who aren't team players and can't understand the big picture," he says. "You'll be better off without them."
Open-Book Management Made Easy
All of your workers aren't accountants, so when you open your books, expect a learning curve. Use these five tips to make a seamless transition to open-book management:
1. Start slowly: Pinpoint a few key measurements of the business and start there. Then slowly add other measurements. Forcing your employees to understand too much information from the start could result in their not understanding any of it at all.
2. Revisit often: Going over annual goals once a year won't do it. Nolan Painting's employees take a look at the numbers monthly, while Springfield Remanufacturing workers revisit them on a smaller scale every week. Quarterly also might work. When setting a schedule, strike a balance between frequency and quality of meetings.
3. Take questions: Before and after his monthly meetings, Kevin Nolan welcomes feedback and questions from his employees. "You have to show that you're open to that," he says. Otherwise, you could be pegged as unwilling to listen.
4. Rethink us vs. them: If you aren't already, use "we" and "our" instead of "I" and "my" when referring to your company to help cultivate the sense of accountability for your employees and make them more amenable to open-book management, Jack Stack says.
5. Reward: Make sure your employees understand the reward for hitting goals and that it will have a direct impact on them.
NFIB.com
Start implementing open-book management at your business with more tips in the "Finance, Banking and Accounting" section of www.NFIB.com/toolsandtips.
