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Six reasons to go Open Book

company_financesI'm writing this Monday Morning Wake Up on September 6th in St. Louis, MO. I'm here to speak at Jack Stack's 21st Annual Gathering of Games. It's my fifth time speaking at this conference, which is the only one devoted entirely to the open-book business model. The first edition of Jack's book, The Great Game of Business, was published in May 1992, one year before I started Strategies. To this day, it is my all-time favorite business book. To me, open-book management just makes sense. It's how I run Strategies, it's what we teach in our courses, and it's what we coach our clients to do.

The class I'm presenting here is part of the leadership track titled, "No-Compromise Leadership: From Ordinary to Extraordinary." My job is to educate the leaders here on the thinking and behaviors required to not only implement an open-book business model, but to make it stick long term. The quest to become an extraordinary open-book company is a process that requires financial literacy training, information-flow systems, and reward strategies for achieving the right outcomes. Simply put, achieving extraordinary means everyone must be on the same page, pushing in the same direction. Leadership is key.

The open-book business model is not just about sharing the numbers. It's about creating a transparent company where each and every employee understands what the company has to do in order to win. One of my favorite Jack Stack quotes is, "With every pair of hands you get a free brain." This is Jack's way of saying, if you want employees to think, act, and make decisions like an owner, give them the information they need. The cultures that emerge at open-book companies are fast, competitive, and profitable.

Here are my six no-compromise reasons to go open book:

  1. To get there - get over it: Many leaders cringe at the thought of sharing numbers with employees. It's like bad things will happen if employees know the "real" sales numbers, what the "real" costs are, and what the "real" profit is. Guess what? Absolutely nothing bad happens. On the contrary, by not sharing the numbers, employees never really get the true picture. If you think they'll freak out when they find out how profitable the business is - they probably think you're making a hell of a lot more already. Remember, going open book is a process that begins with financial literacy training so everyone can understand what the numbers mean. Get over it.

  2. Trust comes from knowing: The power of knowing eliminates fear and builds trust. In an open-book company, employees know the current state of the business. If the company is doing well, there is no reason to waste time worrying about job security, benefit cuts, or getting laid off. If the company isn't doing well, they understand what needs to be done and dial up the sense of urgency to get it done. Jack says, "Financial literacy is about teaching people what reality is. Otherwise, it's just perception." If you think you can build a true high-trust culture without going open book, you're fooling yourself. People cannot truly and freely trust leaders that do not trust their employees enough to share financial information. Truth is easy to sell. Non-disclosure is not.

  3. Engagement at a higher level: When people are given the gift of financial literacy and understand how a company makes money, they focus on what's important. They begin to think, act, and make decisions like an owner. More importantly, they begin to forecast with greater accuracy. Jack says, "If you can control the forecast - you control the future." It's powerful when everyone buys into and signs off on the forecast. How many of your employees help you build forecasts? How many of your employees buy into and sign off on your forecasts?

  4. Mutual confidence: When a team of people shares the confidence to control their future, a company shifts from ordinary to extraordinary. Mutual confidence breaks through barriers and obstacles that stop other companies at ordinary. They solve problems faster. They innovate faster. They cut costs better. They measure their performance by understanding and making decisions from the same financial data their leaders are looking at.

  5. Accountability x 10: Every leader wants his or her people to be accountable - to get what needs to be done, done. Accountability is a process that must be connected to financial measurements and critical numbers. If your interpretation of accountability is driven by consequences, you're using a "carrot and stick" approach that will never get you to the level of accountability existing in open-book companies. People simply fight harder to create a better future. Fact: Employees generate the numbers. They're their numbers too. Shouldn't they see and understand them so they can make a difference?

  6. Your focus is down range: Open-book companies naturally create leaders by empowering and mentoring people to lead. Leadership is inherently connected to measurements and financial outcomes. The more potential leaders that are connected to the financial reality of your company, the freer you are to focus your attention down range. One last quote from Jack, "If you're making decisions today that will affect your company in the next thirty days, you're making the wrong decisions." Process that quote for a while. It's what no-compromise leaders do.


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