Rebellious Practices: The Power of Open-Book Management

The first time we witnessed Open-Book Management (OBM) in practice was during our visit to Zingerman's in Ann Arbor (USA). When we saw it our jaws dropped to the floor. This experience inspired us to study OBM in more detail. For this blog post we teamed up with expert Duncan Oyevaar (OpenBook.Works) and together we will explain you how it works, how it can be implemented and why it can be so extremely powerful.

Open-book management

American serial-entrepreneur Jack Stack is considered 'the father of open-book management" after being dubbed so by Inc. Magazine. He pioneered in a highly transparent way of managing in his own organizations. This particular way of managing was later coined open-book management (OBM) by author John Case. The original goals of OBM were to focus solely on improved profitability and productivity. But over time several organizations started to realize a range of other benefits from the practice as well, such as improved employee satisfaction, engagement, retention, motivation, innovation and corporate sustainability.

But what is OBM? As the name suggests, it's all about opening the books. It's based on the assumption that if employees are treated like owners, they will act like owners. It's about translating the state of the business to a team level and therewith creating engaged employees that have the feeling to run the business themselves.

OBM is about empowering employees to act like owners. But before you can act like an owner, you need the right education, information, and rewards to do so.

• Education: just like owners, employees need to understand the basic financials of their business (i.e. income statements, balance sheets and other key metrics) and how they relate to the organization’s key measures of business success.
• Information: once people are able to understand the financials, they should be provided with the necessary information to make well-informed business decisions. Share the information and track progress of the key metrics. ZingTrain, one of the Zingerman's businesses, describes it beautifully: "Transparency is great but OBM is about actually taking charge, not just taking time to look at some financial spreadsheets that management was nice enough to share with you".
• Rewards: to feel like owners people need to have a stake in the success of the business. Whether it's through an employee stock ownership plan, a financial reward, or another type of reward, make sure people benefit from their efforts of improving the company's success.

How to implement OBM?

So how can these things be implemented? First, let's look at a short Inc. video on the subject:

Now, let's move to the views and experience of Duncan Oyevaar, co-author of a book on OBM ("De Kracht van Open Book Management") and currently implementing OBM in several organizations.

Duncan Oyevaar: "Open-Book Management is a mode of operation, a mind-shift, where everyone, at all levels within the organization, get relevant operational and financial information. Every employee knows how he or she can make a contribution to improving the chosen goal, operational or financial. When the selected goal is achieved, it will be celebrated and everyone is rewarded.

But how to start? First you will have to focus. Meaning you will have to select 3 to 4 main topics that will contribute to the top-line in the coming 12 months. Start with the ‘low hanging fruit’. The selected topics are translated in a number, this can be a production or a financial number. A number that will involve all employees. Once you have selected this number it will be important to explain to your employees ‘Why’ this is such an important number. By showing the bigger picture, it will be much easier for both the employees and the managers to discover the ‘How' to achieve it and ‘What’ to achieve.

The next step is to explain the financials of the organization. Start with small steps and explain the financial or operational numbers that are related to the selected main topic and let the employees come with idea’s how they can improve these numbers.

Depending on the size of your organisation make cross-departmental teams that will be responsible for a selected subject that will contribute to the main topic. Now create a game. Let the team determine what their goal for the selected subject will be (the lagging indicator) and how they will measure the progress (the leading indicator) on a regular short basis. To make it fun let the teams themselves design a scoreboard. You’ll be amazed how creative your employees are.

In addition, determine with the employees how to celebrate once the goal is achieved. Remember it’s their game. Do something active with the team, that will be remembered longer than only giving a financial compensation.

To keep informed on the score the team captains will have a short weekly meeting with his/her team, every two weeks he/she will inform you and you will address the overall progress in a monthly town-hall meeting and focus what still has to be done to achieve the goal. This creates ownership, innovation, engagement, focus and entrepreneurship. Have Fun!"

Benefits of OBM

So once OBM is implemented, what benefits will you reap? What we saw at Zingerman's was exemplary: a 17-year old boy (dishwasher) explained to us the weekly sales, profit and customer satisfaction numbers. He was just working there for a few months and told us: "In previous jobs I was just expected to fulfill my standard tasks. Since I am working here I feel that I use parts of my brain that I wasn’t using before. I feel like I am actually running a business and that I contribute to it in a valuable way".

You can imagine what kind of benefits your team and organization might reap if employees start acting like the employee above. To provide you with some additional proof, companies practicing OBM have shown increased sales and higher profits¹. Various case studies show higher productivity, higher engagement and motivation, and an increased employee retention.

Challenges to overcome

So why are not more organizations in the world practicing OBM? Especially since John Case's book, with the promising subtitle "The coming business revolution", was already published in 1996! Duncan's provided us with his view on the biggest challenges to overcome.

Duncan Oyevaar: "The main concern most people have when it comes to Open-Book Management is whether it is wise to share financial information as they are afraid it will be shared with the competition. Experience shows when you give someone trust you will receive trust in return.

Communication is key to successful implementation of Open-Book Management. If you are comfortable sharing your company financials, you must also be comfortable explaining what those numbers mean for your employees.

Some of your employees are not interested in Open-Book Management, don’t focus on them, focus on those who are interested. Make small steps, don’t overload your employees with information. Also don’t expect big jumps of improvement overnight, but keep going.

Middle management can sometimes be unwilling to embrace Open-Book Management, they have to change from directive to facilitating management but they are still responsible for the results."

Start with rebellious practices

We've seen the benefits of OBM in real life and we feel they can highly contribute to becoming a Corporate Rebel. Many of the companies we visit practice some form of OBM to get their employees engaged in the running the business. Eager to learn more about OBM and its implementation? Check out the following resources:

• The Great Game of Business - Jack Stack (The pioneering work)
• Open-book Management - John Case (Check it out for great examples)