What is Open-Book Management?

What is open-book management? Open-book management is a management style where — you guessed it — company leadership acts as an “open book” by sharing important financial information with their employees.

By being transparent with employees, they can do their jobs more effectively and understand company operations as a whole.

The term was coined in the early 1990s by John Case, who worked for Inc., a magazine about business and entrepreneurship. Open-book management gained notoriety in the early 2000s when Jack Stack, President and CEO of Springfield ReManufacturing, published books explaining his team’s open-book management techniques and practices.

The question is, does open-book management still work today? What are the benefits of using this management approach?

The problem with employee engagement

Think about some of the jobs you’ve had in the past. Not the terrible jobs that you left at the first opportunity, and not the fantastic jobs that you’ll fondly remember because they helped you become the person you are today. Did you ever have a job that…well, just felt like a job? You clocked in, did what you had to do, and clocked out. It wasn’t engaging or exciting.

You may have felt that your job had no real purpose, that what you did (or didn’t do) probably didn’t make any real impact, or that you were simply a cog in a much larger machine.

Now, think of another job you had in the past when you were genuinely excited to get to work. It didn’t matter if it was an entry-level job in the service industry or a leadership position in a giant company. You got to work early, you gave every day your absolute best, and you helped your coworkers or managers in any way you could.

Perhaps you had an amazing supervisor, or you worked with an awesome team, or you always felt appreciated by the company.

What’s the difference here? The level of engagement. Engaged employees are committed to and passionate about their job and their workplace. Only 32% of American employees are engaged, according to a study by Gallup.

There are many factors that can cause employee disengagement. However, one way to combat it is to practice open-book management.

How open-book management works

Rather than keeping employees in their own lane by focusing only on their job, open-book management encourages employees to see themselves as more than just a member of the staff. By sharing financial information with everyone in the company, open-book management empowers all employees. It helps them see how their work affects all aspects of the business. Every employee gets a sense of the bigger picture, and why their work matters to the company.

Information shared with employees might include:

  • Expenses and losses
  • Revenue
  • Inventory
  • Sales
  • Profit
  • Cash flow
  • Cost of goods, services, or equipment

Open-book management is more than just sharing income statements and balance sheets, though. It’s also training employees to understand the numbers and what they mean. It’s recommending that employees use this information to influence the choices they make in their every day work.

Open-Book gives employees purpose

Why bother with the open-book management approach, though? What’s the point?

For one thing, being transparent with employees motivates them to be more engaged with the company. Sharing important information shows that executives trust everyone on their team. It shows that they are more than just employees: they can see themselves as valued partners in the business.

Open-book management also gives employees a stronger sense of purpose. They can see how their work is impacting the company’s bottom line, affecting inventory, or boosting sales. That’s a pretty powerful feeling.

Open-Book helps out managers and executives

Open-book management works both ways. Employees have something to gain, but so do managers and executives. By sharing important company data and financial information with employees, you’re giving them a goal on which to focus their efforts. And sometimes they’ll have a fresh perspective on how to bring in new business or drive sales.

Take Gourmet Events Hawaii, for example. When sales for this event-management and hospitality staffing firm petered out in 2013 and 2014, founder Kathleen Lin-Hurtubise was at a loss. She decided to give open-book management a try by sharing the financials with her team. She encouraged them to watch the monthly gross margin. As an incentive, she linked gross profit to employee bonuses.

Eventually, gross profit increased in late 2015. Revenue and profits saw a boost. Not to mention that her staff’s confidence and morale were high.

Customers and jobseekers reap the rewards, too

Open-book management benefits employees and management, but it also affects customer relationships too. Have you heard the phrases “sorry, that’s just company policy” or “I’m just doing my job.” We bet you have. An employee who says those phrases is probably disengaged. They’re just there for the paycheck.

Now, an employee who’s part of an open-book company is not just an employee. They’re treated like owners, and they’re encouraged to think and act like owners. That will affect the way they behave towards customers. An employee at an open-book company might say instead, “I’m so sorry. Let’s talk about how we can make this right.”

Having an open-book management style can also attract some talented jobseekers. As an open-book management company, you’re telling everyone that you have nothing to hide. You trust your employees and empower them so they can act like owners. Jobseekers who have passion and are team-driven are more likely to want to join your company over a competitor with traditional management style.

Plus, you’ll likely attract jobseekers who are good at parsing financial data. And if they’re not? They’re probably willing to learn, and they learn fast.

Open-book management benefits everyone

An open-book management style can seem very daunting if you’re used to traditional workplace management approaches. However, the benefits are worth it. Be transparent with your employees about the company’s finances and critical data.

You’ll give them a sense of purpose, a larger insight into their job and the company as a whole, and a focal point that can guide their actions and ideas. In turn, you’ll get more engaged employees who are satisfied with their job and loyal to their company.

Customers will appreciate the attitudes of engaged employees, and you’ll attract some top talent. Open-book management is a win for everyone.