Open book management is the purest form of organization communication that I’ve seen in more than 30 years. Blended with a sound change management process, it can take business performance to heights never thought possible. It is the high performance cocktail.
I met Jack Stack nearly 25 years ago. He was CEO of SRC Holdings in Springfield, MO and had just published his first book, The Great Game of Business, which described open book management as a leadership philosophy that’s grounded in the notion of creating businesses of business people where everyone in the organization thinks and acts like business owners.
This style of leadership is the model of transparency and superbly managed communication. People in open book companies are steeped in business and financial literacy, work daily to improve relevant numbers, have huge amounts of financial information available to them and their rewards and recognition are tied to financial performance.
Employees who clean truck engines for a living can tell you within a penny or two how the company is doing against its forecasts on any given day. They can tell you exactly—to the penny—what all of this means in terms of pay, bonus and profit sharing.
Why open the books?
First, because people with information related to the goal—realizing a vision and generating cash to continue doing it—perform better than people who don’t have that information.
Second, opening the books builds trust. Trust builds teamwork. Teams that focus on the right things are apt to win more often than teams that don’t.
Third, it provides a daily sense of purpose—a goal far greater than “put these 1,000 nuts on these 1,000 bolts.”
Coupling those benefits with a proven six step change management process is a mighty powerful cocktail. We use this craft cocktail because it creates a sense of urgency, builds strong leaders, connects people to the business strategy, produces and sustains big results with a hefty ROI.
Here’s an example from a high-tech engineering company.
The head of the operation was frustrated because he shared vast amounts of information with his employees, but they weren’t using it. Employees said they weren’t using the information because it wasn’t relevant to improving results that mattered. It wasn’t relevant because it was about what happened yesterday or last week rather than current information that employees need to improve the numbers today and tomorrow. As one employee said: “It’s like we’re driving the car looking out the rear-view mirror. We can’t do anything about what happened yesterday.”
We recommended a 180-degree turn. Create a sense of urgency. Build a strong leadership team. Open the books and connect people to numbers that are important to the business. In this case operating income was the critical target. Build business and financial literacy. Have fun with mini-games that tie rewards and recognition to results.
Here’s what happened in about six months.
- Accidents dropped from 13 to 0
- On-time delivery went from 67% to 92%
- Total cycle time improved 31%
- Gross inventory turns improved 18%
- Productivity went up 7%
- The ROI was 1,148%.
Open book management blended with a solid change management process pays off with excited, turned-on people who take the customer experience and financial returns to new heights.
KEY TAKEAWAY: Open book management builds trust, gives people information they need to excel and, when blended with a proven change management process, can take organizations to unheard of levels of performance.
PS: I’m going to be sharing similar case studies at the 25th Annual Gathering of the Games in Dallas, Texas next month. It’s the world’s largest open book management conference. Here’s the conference link.