Open-Book Management: Creating an Ownership Culture

Take the padlocks off your financial data. That's the key tenet of open-book management, an innovative management strategy that advocates sharing financial information with your employees to help teach them how to think like entrepreneurs. Sounds good, but what's it like to actually function as an open-book company? Find out in Open-Book Management: Creating an Ownership Culture, a new Financial Executives Research Foundation study by Thomas L. Barton, William G. Shenkir, and Thomas N. Tyson. The study details how and why seven companies-ComSonics, GE Fanuc, Mid-States Technical Staffing Services, North American Signs, Physician Sales & Service, Plow & Hearth, and Springfield ReManufacturing-decided to adopt this style and the obstacles they encountered along the way. The executives interviewed also share successful techniques and approaches.

From Chapter 1: The approaching millennium offers business managers and owners the opportunity to reflect on how competitive pressures and new market opportunities will shape the way they do business into the 21st century. Business leaders have already experienced the upheavals and massive relocation of resources brought about by rapid technological change and the opening of markets in the former Soviet Union and the People's Republic of China. Who would have imagined 20 years ago that in 1997 the fifth largest company in market capitalization in the world would be a computer software firm-Microsoft-that was started only in 1975? Who would have envisioned that the richest man in the world in 1997-Bill Gates-would be a computer techie and Harvard dropout who was cranking out primitive computer code in 1977? Who would have had the foresight to imagine a McDonald's restaurant situated on prime Moscow real estate, with 50,000 Russians waiting to order Big Macs on opening day?

As the saying goes, "There is nothing permanent except change." The businesses that will survive and prosper into the next millennium are those that adopt the management practices and tools that give them the needed competitive edge and an effective, rock-solid management infrastructure capable of keeping pace with change. Business will only become more complicated and less predicable with each passing year; change will not go away.

It is ironic that with the many sophisticated resource management tools available in the late 20th century, the one resource that has the highest potential to help many businesses cope with change is the one most underutilized-the human resource. Inside every business and in every unit within the business are people with experience, insight, and know-how who are paid to perform a well-defined task and often nothing more. Surely there must be a way to tap that tremendous store of human capital and, in so doing, make the almost-certain upheavals of the future infinitely more manageable and profitable. Simply put, how can business leaders align employee goals with company goals to create a world-class organization that can compete successfully in a global economy?

To be sure, a number of management methods have been suggested in recent years to deal with this problem. But a new approach has taken root over the past several years that may be the most promising of all. It is called open-book management, and it has received a surprising amount of attention in the business and popular press. Open-book management can provide a framework for aligning employee goals with those of the organization-for making employees think like owners-and the method is credited with many successes.

As companies face unremitting pressure to reduce costs, add value, and improve financial performance, business leaders must consider breakthrough management methods with the potential to significantly improve the bottom line. Open-book management is one of the newest candidates and it challenges some basic assumptions of doing business.