Business Insider: How open book management leads to uncommon profit growth

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My experience implementing open-book management (OBM) is that it helps good firms become great and helps underperforming firms up their game.

Keep in mind, it’s not enough to just show the accounting books to your troops and expect magic to happen. On the contrary, opening your books can backfire (just like any other management tool) unless you roll it out thoughtfully and correctly. Here are some tips to help you implement OBM.

Nine tips for implementing open-book management:

1. Keep it slow and simple: Start by sharing basic information with a limited number of people who can have the maximum impact on the business. After your inner circle grasps the concepts and the numbers, you can ramp it up and show more of the financials or show the same numbers to more of your people or both.

2. Commitment: Be consistent week to week and month to month. Build habits and credibility. Set recurring dates and meetings when you plan to share and discuss numbers. Only start this when you know you can be consistent.

3. Accuracy matters: If your numbers are not accurate, you will lose credibility. Make sure you have your accrual accounting processes buttoned up. Start with your senior leaders and work out the bugs and errors before sharing further.

4. Yearlong plan: It can take a couple of years to get your larger team to understand what they are looking at. Plan to be on this educational journey for the long haul.

5. Focus on what matters: Start with the data you want your team to focus on. Don’t treat everything equally. If they don’t manage it, don’t show it initially. That or don’t emphasize it. Help each team connect the dots to what they control.

6. Charts and graphs: Convey your numbers using pictorial representations to show how your operation is doing. Many people cannot grasp and interpret a list of numbers. However, everyone can understand visuals like a goal thermometer. If need be, hire someone to create and update visuals for each presentation. 

7. Support: Identify the people and brainpower needed to put your numbers together and set up the handouts. If you don’t have the resources internally, get outside support to follow through.

8. What’s my number?: Your meetings should not consist of you (or your financial director) doing all the talking. Involve as many leaders as practical. People need to talk to internalize and process the results. Plan on the different leaders owning a piece of the results and the conversation. Then, make sure those listening ask enough questions. Don’t let it become a lecture.

9. What’s in it for me?: You must answer the question “What’s in it for me?” for your team members. You want your team to feel that a benefit comes to them when the company wins. Ownership thinking takes over when people feel like they have skin in the game. 

Skin in the game

I see dramatic profit improvement in the landscape firms I work with, especially when they implement gain-sharing. For example, I have worked with Drost Landscape in Petoskey, Mich., for a while now, and their team gets increasingly better results each year. Last year they ended with well over 20 percent net profit and had the most profit sharing ever. This commitment from the Drost team has the employees stoked.

If you want to start but are not sure where to begin, have your leadership team read this article.

If you need help implementing OBM, reach out to me or consider joining my high-impact Leader’s Edge peer group as we discuss and implement this. Go to JeffreyScott.biz/PeerGroup for more info.