By Ari Weinzweig, Zingerman’s Co-Founding Partner
originally written for Specialty Food Magazine, January/February 2004

The more we develop and document clear, effective recipes at Zingerman’s, the more successful we are as an organization. This is obviously true of recipes in the kitchens at the Deli, at Zingerman’s Roadhouse, and in our Bakehouse where we prepare large quantities of full-flavored traditional food from scratch. But our use of recipes is not just limited to cooking.

It’s just as important to develop practical, teachable, repeatable recipes for the work we do organizationally, as for what we do culinarily. Whether in the kitchen or classroom, these recipes are easy to remember, repeatable and teachable. And the more effectively we use them, the better the bottom line results we achieve.

Zingerman’s “3 Steps to Great Finance are adapted from the excellent work done by everybody at Springfield Remanufacturing Company (also known as SRC), as presented in Jack Stack and Bo Burlingham’s outstanding book, entitled The Great Game of Business. (I highly recommend reading the book and also encourage you to attend—as I do—the Gathering of the Games conference that SRC puts on each spring in St. Louis. For more information, www.greatgame.com/work_gathering.cfm).

Here are those 3 Steps:
1. Know and teach the rules of Zingerman’s finance.
2. Keep score regularly.
3. Share the success.

Step #1: Know and teach the rules of Zingerman’s finance.
In finance, there are certain rules that all successful people learn, know and use. Yet few who work in foodservice organizations understand these rules of how business works. The understanding is left to a select few at the very top—usually owners, senior managers and accountants—whose job it is (in theory) to “get results. Sadly, most of the front-line staff that do the work that makes our businesses run have never thought about any of these. They just try hard and hope for the best.

How can you run a business effectively if you don’t know the rules? Answer: Not very well. Anyone can cook at home for fun, but that doesn’t mean you can work in the kitchen of a 200-seat restaurant. You absolutely have to learn the rules.

Formally, the broad rules of finance include the detailed legal and ethical requirements of the IRS and GAAP (generally accepted accounting principles) that we’re bound to live by. But they also include less formal yet critical things. For instance, a reality of business life is that “a dollar today is worth more than a dollar tomorrow. If we don’t learn these less formal rules, we will not get far.

Imagine you have 20 players on your team and each had his or her own set of rules to determine how things were going. Not likely to produce too many positive outcomes. No matter how “high or “low you may be on the organizational chart, no matter whether you’re in finance or not, every person needs to know the rules. It’s imperative to agree on the rules we operate by, and everyone who works here must play by the same rules.

That said, a couple of the key rules by which we play the game of business at Zingerman’s are quite different from those in most companies. For openers, everyone in our organization—not just accountants, partners and managers—is expected to learn how finance works. And everyone—busser, baker, box packer, partner—is accountable for the financial results that our teams or departments have committed to delivering. When those results are not in line, we all need to actively look at what each of us can do to hit the targets. Managers and accountants are a big part of that process, but they’re not operating alone; everyone is responsible for getting things going.

Step #2: Keep score regularly.
The second step follows directly from this assumption of responsibility—if each of us has committed to knowing the rules and delivering the results, we all have to be up to speed on how we’re doing so that we can adjust accordingly. This is what we refer to as “keeping score.”

Most businesses keep score by publishing financial statements to owners and execs. We do that too. More importantly, we keep score by having weekly huddles in each department and business. At the huddles, staff and managers from all levels of the department or business unit report the score so far and forecast what it will be in coming weeks.

Quite simply, the huddles are the place from which the operations of the business are run. In less than one hour, I have a great sense of what’s going on. I’ve seen all the key numbers, the forecasts for the coming weeks, who on the staff is actively participating, who’s on their game, who understands what we’re doing, who’s disengaged and may need extra attention, who the up-and-coming leaders are.

The huddles focus on what we call DORs, or Department Operating Reports. DORs are much shorter than typical financial statements; somewhere between five and 25 line items would be typical. DORs should include all key measurements operational folks need to do their work well. Some come directly off the financial statements. Others—check average, on-time deliveries, mystery shopping ratings, etc.—never show up on statements but are essential to knowing how the business is doing week to week.

The DOR is “built on a single white dry erase board mounted on a wall where everyone can see it. Basically, the white boards serve the same purpose as the scoreboard does at a baseball game—they’re easy to read, easy to see, and you can look at them at any time and see how things are going. Since they’re easily adjusted (just erase and write in the new numbers), they’re fluid, flexible and forgiving. They’re easier to read quickly and effectively than longer and more complicated financial documents. They stay on the wall all week, so everyone sees the score whenever they walk past.

(Passing around spread sheets instead of using the white boards just doesn’t work; keeping score in a large group on an 81/2-inch by 11-inch sheet of paper does not have the same impact. Spread sheets also easily get lost in piles of paper, making it convenient to ignore the information they contain.)

A novice cannot just walk in and interpret a DOR. Yet with a modicum of training, any interested individual can learn to read the DOR and quickly figure out how things are going. They can then determine what actions they, personally, can take to improve results.

This second step is the one that we lagged longest on implementing effectively. Once it’s working (and it does take many months to train people), it’s amazing to behold. You watch the staff start to understand how the rules of business they learned in Step 1 above work. The most amazing factor: The staff will soon deliver increasingly impressive results.

Step #3: Share the success.
When front-line staff look at the “score every week, they are confronted with the bad news as well as the good. When the score isn’t pretty, people get bummed out. Who enjoys looking at bad results? When I see discouragement and frustration on people’s faces, it’s difficult for me. I’d rather see staff enjoy the “thrill of victory than experience the “agony of defeat. Everyone has been trying hard, but, as most leaders know, effort does not always equal results. Everyone in a leadership role has felt that feeling of discouragement and frustration many times.

As the owner, I see the bad as well as the good all along. But most front-line folks never see the score at all. That’s a big mistake on our parts. It’s appropriate—actually, imperative—that everyone in an organization feel the ups and downs that the leaders do. This creates a more effective distribution of stress and keeps all focused on attaining the same goals.

When the numbers are weak, the leaders must get everybody’s heads back in the game. If everybody pulls together, we can turn things around and win even when we start out with an early deficit. It’s one of the most rewarding aspects of my work—to see people’s sense of pride and achievement when they beat their numbers.

That pride alone is a way of sharing the success. Letting that sense of accomplishment be shared by everyone is a great thing. Intangible as it may seem, that feeling of jubilation and achievement is actually more valuable, more meaningful, than a bonus payout for many people.

We also share the success in more tangible ways. Some of the most common and effective include:

a) Year-long bonus games: These are tied to key numbers in each business—generally based on Net Operating Profit or Gross Margin because those are such important numbers. Given a few not-too-challenging qualifying rules, everyone in that business is eligible to participate.

b) Mini-games: We also run shorter-term, month- or week-long games tied to specific numbers; check average, numbers of mistakes, etc.

c) Individual bonus plans: Bonuses for specific individuals (especially at leadership levels) tied to the results.

When we have success, everyone gets some appropriate share of that achievement. And when we fall short, everyone has a vested interest in helping to set things right.

More Success with Reduced Stress
When we use the 3 Steps well, they do work—the level of energy, buy-in, enthusiasm and involvement from the front-line staff is energizing, inspiring and exciting. These 3 Steps to Great Finance and the entire Open Book Finance approach are radically different from what most businesses do—but the results are better.

I should also add that my stress level is a lot lower. If you feel as if you’re carrying a load that’s way too big; that no matter what you do the results just don’t come as you hoped; and that you seem to be the only one who cares enough to make it all work, give some thought to a new approach. To maintain sanity and success as leaders, it’s more rewarding and effective to work in an environment in which everyone is responsible for understanding how the financial end of the business works. And in which everyone—regardless of position, seniority, title, or anything else—is fully accountable for the financial performance.