GIE Today: Business by the Open Book

Frontline workers drive growth when owners operate with an open book. The “open book,” of course, refers to making company financial records available to all employees. And proponents of this management philosophy say it creates a true culture of ownership.

Bill Fotsch of the Great Game of Business, Springfield, Mo., reviewed the key components of open-book management during his presentation from 3 to 5 p.m. Wednesday, Nov. 3.

Fotsch kicked off the presentation by providing attendees background on the birth of this strategy. According to Fotsch, open-book management was simply about survival. He tells the story: Jack Stack and a group of managers at a remanufacturing plant had scraped together enough money to save his and hundreds of other jobs at the failing business. Neither Stack nor any of the other employees had experience running a company. Stack knew the firm needed an edge or it would fail.

That edge would come from the company’s people. They would be capable, committed and competitive. They would think and act like owners, rather than employees who are just working at a “job.” And this would happen because everyone would be working toward a common purpose, Fotsch says.

Stack, now president and CEO of this company, Springfield Remanufacturing Corp., in Springfield, Mo., has written two books about the management system he invented.

This system is rooted in numbers, according to Fotsch. With open-book management, employees know their company’s financial performance and how their behavior on the job contributes positively or negatively to it. Stack’s “Great Game of Business” management system integrates numbers into the day-to-day work.

Employees learn the numbers through many educational mechanisms, but the bonus program is chief among them, Fotsch says. The bonus program is a game in which the company keeps score and the employees win “prizes” – bonuses. The rules of the game are constant:

• Teach the financials;
• Get  of a company weakness;
• Increase the company’s value;
• Generate a short-term reward; and
• Build your company's spirit by working and winning as a team.

Implementing this system requires knowing and teaching employees each of these rules as well as following the action and keeping score and providing a stake in the outcome, Fotsch says. Start by identifying a critical number, he says. For the landscape industry, Fotsch says this could be a revenue goal or labor hours per employee.

Then, develop a simple scoreboard to show how the company is performing overall. Even a dry erase board or Excel spreadsheet can show budgeted to actual labor hours and expenses in an easy-to-follow format.

Make variances visible, especially when a unit is performing poorly, Fotsch adds. Particularly when employees see their score every week, it creates a pressure and drive to improve performance, he says. Employees see who is ahead and who is behind, and this performance is connected with their bonus.

Of course, open-book systems can be fashioned in different ways, and Fotsch shared one company’s implementation insights. The management team at Crescent Parts, St. Louis, Mo., focused on a team approach rather than the traditional boss/employee relationship. Employees set their own weekly goals, with the idea of surpassing weekly targets.

Weekly teleconferences review financial and sales forecasts and share information on new customers, success stories, new product lines and competitor information. On a monthly basis, employees gather to answer educational quizzes and review monthly  results, which helps prepare them to make better business decisions, Fotsch says.

Finally, bonuses are paid quarterly and at the end of the fiscal year. Every employee, including managers, share in the same bonus pool. And the overall result – creating a business-literate workforce – creates a sustainable competitive advantage, according to Fotsch.

Others have found success with open-book management, as well. In engineering companies, sales jumped 48 percent, and manufacturing companies increased net sales by 177 percent.