Is Open Book Management Right for My Business?
In Part I and Part II of The Guide to Open Book Management posts, you learned what Open Book Management is and Making Case for Open Book Management. Next up, helping you determine, is Open Book right for your business?
In The Guide to Open Book Management, you’ve learned:
- 1. What is Open Book Management?
- 2. Why use Open Book Management as way to run your business?
- 3. Is Open Book Right For You?
There are many, many reasons businesses choose to operate using Open Book Management. But you may still find yourself on the fence, wondering, “But is it really for me?”
Open Book works in so many different industries: heavy manufacturing, retail, law firms, nonprofits, higher education, custom design-build, grocery stores, restaurants, and on and on. But only you can really answer the question of whether it’s the right thing for your business or organization.
Honestly answering the questions below will help you make that determination:
Are you making boat-loads of money, and don’t want anyone to know how much you’re taking home?
If the answer is yes – Open Book may not be for you. But you could always invest in training for your team with all of that money!
If the answer is no – you’re like most owners/business people, and you likely find yourself wiping the tears of near-hysterical amusement out of your eyes.
But it’s a legitimate question! This is one of the biggest barriers to businesses choosing to go Open Book – an owner doesn’t want their staff to know how much money the business is making, how much they’re taking out of the business, or how much money they’re personally earning. This is a decision made out of fear in most cases – fear of judgment, fear of consequences (such as people asking for a raise), etc.
It is an owner’s right to expect a return on investment. What makes an Open Book business different from a conventional business is two-fold: first, the willingness to share the success with the people who contributed to that success, in a way that is crystal clear on how they did so and what the rewards will be when it happens. This is antithetical to how many owners choose to share the success, in a patriarchal way of random bonuses. In the latter case, the extra cash is always welcomed by employees, but because it’s seldom tied to direct actions or team effort, it doesn’t lead to repeat success. (This is different from performance bonus programs where both parties know what the expectations and stakes are.)
Second, because education is a key component of Open Book, you’re teaching people why it’s reasonable for an owner to expect a return on their investment, that this is not the “Greed is Good, Profit is Everything” kind of business that they may be familiar with. In addition to opening eyes to good business practices, part of the education might also be things like what the industry standard is for gross margin or net operating profit. Then the team will have a better idea of the health of the business – and can rightly ask questions if things aren’t making sense or are wildly skewed.
MISCONCEPTION #1: You tell everyone everything when you’re Open Book.
Nope! While Open Book calls for the vast majority of information to be shared openly and lavishly, it doesn’t mean that every single, nitty-gritty financial detail is out on the table. Frequently, wage information is not shared in great detail, particularly salaries or “below the line” expenses, such as interest on loans or taxes. Instead, the information is aggregated, so a key measure is “Labor”, which includes the pay of everyone working on a given shift, often with the exception of managers and other salaried folks. If someone *really* wanted to do the math, to figure out what they make in relation to other people, they could probably get pretty close – but that rarely happens.
Do you want help?
If your answer is no, then you’re most welcome to peruse our other blog posts.
If your answer is a resounding YES, then Open Book might be a good fit for you. As in Part II of the Guide to Open Book Management, one of the major benefits of being an Open Book business is that everything doesn’t rest on the shoulders of the owner or leaders.
Generally, when employees feel bought in and they care about the success of their employees, they’re not only willing but eager to help! And this doesn’t just mean “Help in a way that gets them paid”, it means that they’re sharing ideas for improvement or innovation, they’re hustling a little harder to hit targets, and going above and beyond. They’re working with you on the success of the business.
MISCONCEPTION #2: The Leader still needs to lead everything in an Open Book business
The role of a Leader in an Open Book business is, of course, a really important one. But because all of the weighty decisions and responsibilities aren’t on the leader, that frees you up to lead differently. In the Open Book meeting – or huddle, as they’re typically known – the Leader’s role is more about coaching, asking great questions of the team, and gently helping shape the conversation.
Do you care about helping those who work with you to improve their knowledge and their lives?
If the answer is nope – again, Open Book is probably not for you. But feel free to check out our other free resources!
If the answer is yep – whew. Much of Open Book revolves around increasing financial literacy and teaching staff at all levels what it takes to run a business. This results in many employees from Open Book businesses, when they move on, to introduce Open Book principles in their new jobs, or even going so far as to champion OBM implementation! And, whether they choose to use Open Book or not – many alumni of OBM businesses become entrepreneurs and business owners themselves. They’re in a much better position from the start, because they’re more well versed with what it takes to run a successful business, they’re practiced in making tough decisions, and they’re going in with clear eyes instead of rosy-colored glasses.
MISCONCEPTION #3: Open Book will turn everyone into financial experts
Oh, what a nice thought! In reality, employees in an Open Book business run the gamut of knowledge and expertise about financial matters – from the certified CPA and MBA degree holder to the person who passed high school math by the skin of their teeth. There is no expectation that every person can speak to every line on the Profit & Loss Statement, or recite the formula for calculating Gross Margin. What will likely happen though, is that the most unlikely folks end up being the most enthusiastic champions of Open Book, once they start learning the story behind the numbers. Not only that, many people start applying the principles to their personal lives: tracking their own cash flow and making timely adjustments or even creating a family scoreboard for financial success.
If you find yourself ready to say, “YES! Open Book can work for my business!”, great!! That’s the first important step: deciding that you’re ready to take the next steps toward practicing Open Book Management.
Next up in this blog series: an overview of the 3 Steps of Open Book Management.
And if you’d like to learn alongside other folks who are also interested in going Open Book, check out the half-day virtual workshop (launching January 28th, 2021!), Intro to Open Book Management!
Want to talk some more about whether Open Book could be a good fit for your business? Reach out to us anytime!