Open Book Management – Pros and Cons, Transparency & Accountability

If OBM appears at first to be an unlikely strategy for achieving employee buy‐in within your
organisation, you’re not alone. This model does require a shift in thinking about the dynamics of
the employer/employee relationship. But consider this: all publicly traded companies are
required to share their financial reports with the world in order to freely sell their stock. Yet,
most privately owned companies won't share their reports with anyone. Perhaps publicly traded
companies are missing something.

Should Financials Be Shared with Your Employees?

There is no right or wrong answer to this question. The only right answer is the one that is right for your firm, depending upon numerous factors. Before you decide, let’s examine the number one reason many business owners are reticent to implement OBM: lack of trust.

Workplace distrust is a common, and somewhat disturbing, issue. Employees distrust employers; employers distrust employees…certainly, not an ideal breeding ground for sharing sensitive information. Distrust runs deep, and can lead to disloyalty. Employees often believe company owners care only about profits. Employers fear being exploited, assuming most employees are motivated only by remuneration.

For companies who have successfully implemented OBM, distrust is reduced or eliminated, while employees tend to score their employer higher on attributes such as transparency and
accountability.

The business owner’s typical OBM thought process may go something like
this:

“If employees know when profits are up, they’ll make more demands for
perks.”

"If you share your information with employees, someone is bound to sell
your secrets and strategies to the highest bidder.”

"It’s too much work to explain all of this to laymen.”

"If our employees know our profit margins they may share them with customers or suppliers, which will eventually lower those margins.”

The Trust Factor

When employees are expected to perform tasks without knowing why, feelings of powerlessness, apathy and self‐centredness can develop. Each of us wants to know that our contributions are vital to the team effort. Treating employees like mature adults and inviting them to ‘play on your team’ creates a sense of community, where the actions of one affect the progress and goals of another. The result is greater trust, increased loyalty, and better overall satisfaction, both from the employer’s side in terms of job performance, and from the employee’s side, in terms of respect for the organisation.

Is OBM Right for You?

These three companies have risen to the challenge:

Springfield ReManufacturing Corp (SRC) ‐ Jack Stack, first put the theory of OBM into practice as CEO of this company. From 1983 to 2004, his company's sales grew from $16 million to over $160 million using OBM. http://bit.ly/aTKc1A

Ellen Rohr of BareBonesBiz nearly ran a family business into the ground until a mentor taught her the principles of OBM. She discusses her experience in the New York Times. http://nyti.ms/ceABhd

Pool Covers Inc. Chief Executive Bill Pickens shares the challenges and joys of OBM in a recent
Wall Street Journal article. http://on.wsj.com/9pZiKY

Implementing OBM does not require complete disclosure. The success of OBM rests upon knowing how much information and what type of information to share with employees. For example, individual salaries would not be disclosed, but total employee compensation could be. The trick is to focus on several key areas, communicating important facts to employees who may not be savvy about corporate finances.

© inemmo Limited 2010
Joy Maitland MIBC FCMI FinstLM is a director of inemmo Business Coaching and Consulting
www.inemmobusinessconsulting.com
www.inemmo.com