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Posted by Stefanie | May 26, 2016

Show them the money: How opening the books to employees can improve your business

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The idea of “open-book” management first turned up more than 20 years ago, most notably in Jack Stack’s “The Great Game of Business.” The seasoned CEO wrote about his experience using the method to turn around SRC Holdings, and the open-book approach has been winning over skeptics ever since.

It’s easy to see why any executive might at first have some doubts about this way of running a business. After all, one of the main premises of open-book management is to share the organization’s financial details with employees – that is, to literally open up the books and let everyone see what’s going on.

That degree of openness may seem risky at first, but when you realize the positive impact open-book management can have on business performance, it’s easy to become a believer. I know I did, and I’d like to share with you a bit about the benefits of open-book management for MyITpros, as well as how I think the approach can improve almost any business.

What does it mean to open the books?

Let’s start with what opening the books doesn’t mean, which includes showing everyone how much everyone else is getting paid or sharing other private, personal data. Rather, it refers to sharing profit and loss details, or expense information, with people who have a stake in the company’s financial performance. How much or how little you share depends on what you’re trying to accomplish – and, of course, the degree of transparency you’re comfortable with.

At MyITpros, we show our service people how much revenue they’re generating, as well as the cost of bringing in that revenue. This insight into our margins lets them see firsthand exactly what it will take to achieve the company’s goals for profitability, as well as how they can have a direct impact. And because we have a profit-sharing program, they have a clear incentive to do what they can to improve profitability.

Open Book Management

Amazing things can happen when employees think like owners

When you open the books to employees, you’re entrusting them with information that has traditionally been available only to owners and executives. In that sense, you’re enabling them to think like owners – people who have the responsibility to make decisions that can improve margins and profitability, and also share in the benefits of those improvements.

Trust is a two-way street in open-book management. By entrusting employees with information that gives them a sense of ownership, you show them they can trust you. Specifically, they can rely on you to be transparent about how much it costs to run the business and to give them

the power to affect those costs, thereby influencing the company’s (and, ultimately, their own) financial well-being.

It’s all about people using their powers for good

I firmly believe that the power of an organization rests with its people – for better or worse. We recently published a post about data security that shows the enormous power employees have to do a company harm – for example, by downloading an innocent-seeming cloud application that ends up causing a data breach. Open-book management is all about harnessing and directing employee power so it helps instead of hurts the organization.

From well-known companies like Harley-Davidson and Whole Foods Market to small businesses like Pixibility and The Sky Factory, organizations around the world are discovering how open-book management can unleash the power of the workforce. Sharing financials is the aspect that gets the most attention, but that’s just one part of a larger initiative to get employees to start thinking like owners. It’s all about having the right people in place, entrusting them with information and empowering them to drive the organization forward. And it’s working very well for us at MyITpros.

Bill McCharenBill McCharen, President

The goal of this blog is to answer the questions you ask! For more information around the MyITpros way and my experiences managing a growing small business, please check out my other posts or feel free to email me questions and comments. 

Tags » Business Management