If you want to build trust and take performance into the stratosphere, open the books. Share information that matters to improving operating and financial results. Celebrate people when they score big successes. Repeat.
Open book management is the purest leadership communication philosophy I’ve seen and worked with. It’s grounded in the notion of creating businesses where everyone in the organization thinks and acts like a business owner. Open book organizations focus on meeting or exceeding customer requirements through their people in order to create a better balance sheet.
Here’s an example.
I received a call from the leader of a high-tech engineering company who was frustrated because he shared vast amounts of information with his employees, but they weren’t using it.
He wanted our help in discovering what was going wrong and what to do about it.
After spending a day and a half with his employees in nearly every area of the operation, it was clear why the information wasn’t being used. Much of it was irrelevant to improving what mattered most—quality, service delivery, productivity and costs. And it was coming to employees as old news about what happened yesterday or last week rather than as current information employees needed today or tomorrow to improve the numbers. As one employee said: “It’s like we’re driving the car looking out the rear-view mirror.”
We recommended a 180 degree turn. Connect people to the numbers they can have an impact on and are important to the business. Install a continuous improvement process that is obsessed with pushing performance higher and higher. Celebrate successes and keep moving.
The model we installed used lean processes to improve operating income. Here’s what it included.
- Daily huddles around scoreboards that report yesterday’s results as well as annual and today’s goals and results to date. Every employee participating in the huddle process—purchasing, product engineering, finance, research and development, manufacturing, maintenance and shipping and receiving.
- Huge doses of training of business and financial literacy. Business literacy including information about customers, competitors, products, services and the company. Financial literacy including information on how the company made money and how each employee affects the number one metric—operating income (OI). Employees in each area of the operation learning how their area affects the business and OI. To illustrate, sales people were shown the importance of balancing travel costs to a prospect with projected revenue that was likely to come from converting the prospect to a paying customer. Distribution center employees were taught the importance of balancing the size of inventory with the need to deliver products on-time. Call center employees learned how to balance the length of time they were are on the phone with a customer and the speed with which they solved that customer’s problem.
- Recruiting, orientation and all-employee meetings reinforced the importance of the critical numbers associated with operating income.
- Mini-games, which are small team-focused projects designed to attack and improve a critical part of the business, such as reducing scrap and re-work, improving on-time delivery, or reducing the number of OSHA recordable accidents.
Three weeks into building the new communication process, employees throughout the operation were excited about what they’d created. The mini-games were starting to pay off. The huddling and scoreboard process built teams of people that were regularly cheering each other on as they hit new performance milestones.
In only five months, the people had taken performance to heights that surprised even them.
- Accidents dropped from 13 to 0
- On-time delivery went from 67% percent to 92%
- Total cycle time improved 31%
- Gross inventory turns improved 18%
- Productivity went up 7%
- Annual savings was $94,000
- The ROI was 1,148%.
This process was replicated elsewhere in the same company with similar results.
Key Takeaway: Open books open the business to better results. Don’t make your employees feel they must drive the car with only the rear-view mirror.