- The pros and cons of using “open book management”
- Sharing financial information with employees can lead to better productivity and job satisfaction, but carries some risks as well
- Tie the financials to the economics to ensure that you don’t lose focus on day-to-day operations
Summary by Dirk Langeveld
For employees at many companies, the financial workings of the business of a mystery. They may only know how well the company is faring through the rumor mill, or by developments such as layoffs or bonuses.
To give employees a better sense of how their company operates, some business leaders use “open book management.” Although this method is only used by a small fraction of businesses, it can potentially lead to a number of benefits in your employee relations.
Simply stated, open book management involves sharing financial information with employees. This can include the balance sheets, revenues, expenses, and other data. Managers can choose how detailed they want the numbers to be. You might break down the financials of individual projects, departments, or product lines. Companies have also been increasingly willing to offer pay transparency, sharing salary information as a way of pursuing equity.
Sharing the financials not only gives a better understanding of the company’s operations, but can also help motivate employees to address shortcomings or improve productivity. The process can also lead to better job satisfaction and more of a sense of belonging in the company.
The strategy is not without its risks, however. Employees may experience greater stress if the numbers are lackluster, feel dissatisfied that their efforts aren’t producing better numbers, or be angered when they compare their compensation to other workers. While open book management is meant as a sign of trust, it can also open up the possibility that an employee will leak financial information to competitors, suppliers, or customers.
It’s also important that open book management isn’t simply limited to sharing a set of numbers, which may be difficult to interpret. Make sure you don’t lose track of the economics, such as the number of sales, products moved, billable hours, and other factors specific to your industry. Keeping a focus on this information allows you to improve the efficiency of your operations, which in turn will be reflected by an improvement in the financials.
