Open-book Management

Managers will cringe when they find out what open-book management is, as championed by Jack Stack in his book The Great Game of Business.

I pulled my weathered copy off my bookshelf to write this column under the theme of environment, social and corporate governance, central factors in measuring the sustainability and the ethical impact of an investment.

Stack maintains that if you empower staff with the necessary metrics and financial incentives, they will make the best decisions for themselves, their teams and the company. This falls squarely under the social as well as the corporate governance categories.

How would this work in reality? Do managers need to disclose everything? Certainly there may be situations for which confidentiality is needed.

The “great game of business” is akin to the disclosure of current, relevant information. What is different in Stack’s concept is the players participating in developing the financial plan and financial reports—in fact open-book management is much different.

It isn’t simply about sharing your financial reports with staff. It is about creating usable metrics for each team, department and the company as a whole.

This enables a CEO to head off problems before they happen, and also empowers management at every level to be accountable for the targets they set.

You may say that your accounting team is top-notch. I’m sure they are, but their job is really only to ensure taxes are minimised within the legal extent possible and that there aren’t any mistakes made.

It isn’t their job to advise management on how cost of goods sold can be minimised or who is to blame if sales are down.
They don’t know about the new product introduced by your rival, and they are not aware that the marketing returns from the most recent campaigns were less than those expected. This information is siloed, or worse, hidden from view.

Open-book management can change this situation. Setting up a company scorecard, with the people responsible reporting on each line item, humanises management and financial figures. Every week there is a huddle when the numbers are reported by each leader, and everyone writes their scores down on a pre-printed version of the scorecard posted on the wall.

Through this exercise, each team behind a leader—sales, manufacturing, purchasing, etc.—needs to explain collectively what changed and in what way their predictions were wrong. This makes the budgeting process an exercise in reality, rather than an exercise in turf building.

Why does this work? Managers read and think about empowering or motivating staff, or finding a good salesperson. In the end, firms are a success or failure based on what they give back to society and how staff feel about working there.

Companies that build a valuable brand are deemed successful by their customers or by society at large. Firms that practice open-book management are invariably the ones that are voted the best places to work.

A manager’s job is not to come up with the answers. His job is to build confidence in other people. To do that, he has to show people he is human.

The best way to do that is to admit he doesn’t know everything. People know it’s impossible to know everything, but managers still tend to think they do.

I heartily recommend executive teams and directors looking into The Great Game of Business. It can not only be implemented company-wide, but also in a stand-alone team. If you are looking to empower and motivate your team, why not consider their best interests when doing so?