Open Book Management: A way of doing business that benefits everyone

When I tell business owners we practice Open Book Management, some ask, "Aren't you afraid to share your financial data with your employees?"

In a word, no. Here's why.

Open Book Management does include sharing financial information with employees, but that's only part of the story. It is a unique approach where everyone understands that their daily actions and decisions turn into metrics for the business. Everyone has a stake in the outcome, which can fundamentally change how everyone, from the CEO to the assembly line worker, views the business.

Its core belief is that a company's greatest asset is its people, not the product or service that the company provides - and that empowered employees involved in the company's success means happier employees and a better-run business.

With Open Book, employees understand how and why the company operates: its finances, values and core philosophy. "Leaving employees in the dark" can lead to uncertainty, fear and anxiety, and incorrect conclusions about how the company is doing.

The Great Game of Business organization champions Open Book Management. Its CEO Jack Stack in 1983 sought to save 119 jobs at International Harvester's engine remanufacturing facility in Missouri by buying the company. He knew that any other decision would create hardship for the families.

He and his team scraped together $100,000 in cash, borrowed $8.9 million, and transformed a once-failing business into one of America's most successful, competitive companies. The process was far from easy. They were turned down by more than 50 banks, leading Stack to see lenders' fundamental lack of understanding about how business works.

Steve Baker, vice president of The Great Game of Business, said: "As a nation, we don't teach people enough about business. When we tell someone we want to make them a businessperson, they think 'accountant.' That's not it at all. We teach people that if you make a better company, you can sustain growth, and everyone will have opportunities they otherwise wouldn't."

Open Book Management is centered around three principles:

1. Know and teach the rules: Educate employees on how the business works.

2. Follow the action and keep score: Empower employees to help improve the business.

3. Provide a stake in the outcome: Engage employees to know that their work results in rewards and recognition.

At the core of GGOB is the "huddle," an all-hands weekly group meeting with a central scoreboard (simplified income statement). The meeting cadence is the same each week, starting with core values and purpose, how we celebrate, and reporting the forecast by line-item holders.

There is an analysis of the numbers by senior leaders, a roll-up of important department metrics, followed by announcements. We end the meeting on a high note by recognizing employees demonstrating our core values, knowing that even if the numbers aren't great, we can still create a difference.

The real magic in the huddle is in the story behind the numbers and how each employee can impact the bottom line. By harnessing the wisdom of the crowd, everyone participates in how the business is run.

Openness and transparency change how employees regard a business; they think, act and feel like owners. They understand the "what" of the business as well as its "why."

We never miss a weekly huddle. It is a lifeline to the financials of the business. All numbers are reported bottom-up, not top-down. Additionally, accuracy is critical, so we forward forecast weekly and compare them against the budget and actuals to see how we measure up on a monthly basis.

Companies looking for greater employee participation and buy-in should consider Open Book Management. First, read the book, "The Great Game of Business" by Jack Stack. Then talk with someone whose company practices Open Book.

Ask to attend a huddle to see the practice in action. And get a good coach to guide you through the process. Open Book Management has made all the difference for our company.

I cannot even imagine where we would be without it.

• John Costello is CEO of Cherry's Industrial Equipment (https://cherrysind.com), an engineering company that solves workflow problems and safety issues and creates ergonomic solutions across a wide range of industries. Cherry's Industrial Equipment is located in Roselle.