Retention Secret #7: Open Book Management

It was in 1989 in an Inc. magazine article called “The Open-Book Managers” that the phrase open-book management was used for the first time. It was a startling idea back then. In the early 1990s then-president Bill Clinton was presiding over a national labor relations conference at which one of the early advocates of open-book management, Jack Stack (CEO of what is now SRC Holdings), spoke about it. This is what Clinton had to say after the conference:

“…and the phrase…that made the biggest impression on me here was “open-book management.” If we could do nothing other than convince people that somehow the only way to get everybody on the same team is to give them the same information, the same capacity to evaluate the information, I think that would be a terrific thing.”

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Clinton’s reaction to the idea of open-book management is a concise summary of why I’m including it as one of the secrets of employee retention. Think about it this way: If you want people to really feel like they’re valued members of your corporate team, what better way to do that than open up the books to them? It’s a powerful way to build solidarity and loyalty in your workforce. In short, it’s one strategy to get your employees thinking more like owners than just workers.

Your company pays attention to key metrics and financial data to constantly assess if it’s heading in the right direction. It’s worth remembering that part of what moves your company in any direction, whether the right one or the wrong one, is based on the collective actions of everyone in your workforce. If you start sharing some the key metrics in an open-book approach, your employees will start not only paying attention, but figuring out how their actions can help push things in the right direction.

Here’s a great example of how it can work: A travel-management company wanted to leverage an open-book approach into better performance. It came up with a key metric called direct profitability, made up of site revenue minus direct site costs that it began sharing with employees. In a surprisingly short amount of time, front-line travel agents were coming up with all kinds of ideas for how to move that key metric in the right direction. One figured out how to recoup more than $180k from vendors due to hotel and flight no-shows. Each branch of the company has specific profit targets they should hit. In the three branches where the open-book approach was taken, profit targets were exceeded by 10%, 17% and 20% for a total of more than $1.7 million in additional earnings. Meanwhile, none of the branches lacking the open-book approach made their profit targets (source). That’s downright impressive!

With results like that, you’d think there might be a tidal wave of companies adopting the open-book management approach, but a 2012 article in The Economist estimates that worldwide only about 4,000 companies have picked up on it. What’s the hang-up?

First and foremost is the very long-standing tradition of corporate executives, whether in public or private firms, holding their cards very close to the vest. Some are undoubtedly just used to doing it that way while others may be fearful of employees exiting the company with sensitive data. But given the kinds of results that many companies have seen from the open-book approach, it seems to me that more CEOs need to get over it and just do it.

John Case, author of Open-Book Management, puts it this way: “The bottom-line advantage is that it focuses employee attention on what matters to a business: money. People have talked about various goals–Total Quality Management (TQM), teamwork and so forth–but if you don’t put the business numbers out there for employees to see, those objectives are meaningless. When you put the numbers out there, you’re involving your employees in the guts of your business and helping them see how they can play a role in the business’ success” (source).

What really makes it a no-brainer is that a company doesn’t have to suddenly divulge everything all at once. Given the example of the travel company shared above, your company can find a way to dip its toes in the open-book waters as an experiment to see how it goes.

November 17, 2014   Updated :March 23, 2015   engagement, open-book management, retention   

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