What is Open-Book Management?

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April 26, 2013

When open-book management is done well, a business is operated in a way in which every employee is focused on making the company money. They are educated in the principles of business and finance. They are regularly exposed to the company’s financials and other metrics that are critical to the success of the organization. Finally, they share in the success of the company.

In his book, The Great Game of Business, Jack Stack states: “The more people know about a company, the better that company will perform. This is an ironclad rule. You will always be more successful in business by sharing information with the people you work with than by keeping them in the dark.”

In open-book management companies, employees at every level are expected to take on the role of business owner, in addition to the role for which they were hired.

If you are interested in open-book management because you want to achieve a culture of ownership in your organization, please understand that simply opening the books will not accomplish this goal.

The same is true for employee ownership plans or profit sharing. Many businesses that have expected an Employee Stock Ownership Plan or a profit sharing bonus would inspire ownership thinking, have been disappointed when little or nothing changes. Often the results are worse, and the ESOP or bonus comes to be considered an entitlement.

Successful open-book management companies understand that in order to think and act like an owner, every employee must have access to the same information owners do, and that information must have context for them, and it must be meaningful to them. Finally, there must be a material stake in the outcome – good or bad – for everybody in the organization.

Furthermore, successful open-book management companies educate all of their people in business finance, empower them with consistent and honest accounts of the true results of the business, and engage them with a meaningful share in those results. When these three main elements are executed properly, a culture of ownership thrives.

Of course, this does not happen overnight. For many companies, it takes a couple of years.

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Chris-BoyleChris Boyle, CEO

Please subscribe to view my upcoming articles. Our goal with this blog is to answer the questions you ask. If you have any questions about succession or any topic email me at chris@myitpros.com.

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