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Being an “Open Book” Business

Monday, March 18, 2013   By Mike Reddy


The term ‘open-book management’ was coined in 1993 by John Case, of Inc. Magazine.

The idea behind the strategy was that companies would perform better when employees viewed themselves as partners in the business, rather than the hired help.

At its simplest, open-book management means sharing the financial statements with employees in order to empower better overall results.

Corporations are less inclined to share their finances with all three thousand employees, therefore, open-book management can provide small businesses with an advantage over the big guys.

The idea behind sharing histories and information with employees is that it will empower them, encouraging them to do their jobs more effectively, armed with the knowledge of the business as a whole.

The basic rules of open-book management are:

  • Know, and teach, the rules. Employees should know and understand what it means to be ‘successful’ in the business
  • Follow the action and keep score. Employees should be enabled, and then expected to improve their performances. Develop a method of measuring improvement.
  • Provide a stake in the outcome. Employees must have a direct stake in the outcome- be it success or failure.

With fewer employees, small businesses reap the benefit of a more close-knit, and therefore emotionally invested, group of employees.

Adopting this strategy means more than simply sharing the financials. You must empower the employee by teaching them how to read and assess the statements.

Most importantly they must understand the overall meaning and be inspired to action, when necessary.

This may seem like a large-scale endeavor for a small business owner. Luckily there are small steps that can be taken towards becoming an open-book business.

Put together a team to work on the planning and implementation. Their goal will be to work out kinks and devise capable plans of action.

An open-book business is about financial and operational transparency. A successful open- book business may well see a boost in loyalty and productivity.

It also cultivates a workplace where innovation problem-solvers are valued and encouraged- motivated to make your business better.

By Mike Reddy, Business Coach

Mike Reddy is a Chartered Accountant, business coach and advisor helping businesses in Sydney, Melbourne, Brisbane and Gold Coast to easily increase their profits and cash flow. He is currently President of the North Sydney Chamber of Commerce, a Regional Councillor for Sydney North East and a member of the Institute of Chartered Accountants Sydney leadership team. As well as advising businesses, Mike presents business development seminars and webinars and is regularly contacted by the media to comment on small business matters. You can connect with him on Facebook, Twitter and Google+.