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John Case Open-Book Management Buy this title or join our Management Literature Club and have a chance to GET IT FREE! |
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Business Nugget by Robert Morris When Open-Book Management was first published by HarperBusiness in 1995, its subtitle suggested “The Coming Business Revolution.” Well, that “revolution” has arrived and author John Case deserves much of the credit. In the Introduction, however, he makes it crystal clear that open-book management is NOT a panacea, is NOT a substitute for TQM or reengineering or any other operational overhaul, and is NOT a single system. In essence, open-book management helps companies to create a shared environment in which everyone understands that they are competing in a marketplace, trying to make money. But for whom? Frequently, effective ownership has been limited to relatively few people. In privately held companies, usually to a single person and/or to a family. Presumably Case agrees with Al Ehrbar (author of EVA: The Real Key to Creating Wealth) that the traditional concept of “ownership” must be re-defined so that everyone involved in a given enterprise assumes personal responsibility for adding value. Hence the importance of recognition of peak performance but also the importance of financial incentives. “What’s in it for me?” is a quite legitimate question. Given the increasingly greater impact of globalization, the information revolution, and what Case calls “entrepreneuralization”, companies must find new and better ways to answer that question. For Case, each company needs a mission, a strategy. “But more than anything else it needs eager, willing employees, people who have a reason to care about their employer’s prosperity and who know how to help it succeed.” Case then examines two traditional and durable (albeit erroneous) assumptions: A job must be defined as narrowly as possible, and, workers need close, direct supervision. If employees are treated as being essentially interchangeable, if they can say of most tasks “That’s not my job”, and if they see no need for personal initiative, they have no “reason to care” about anyone else, or about anything which is not of direct and substantial benefit to them. Employees treated as “hired hands” tend think only in terms of money in hand. Theirs. Is it any wonder that, thus isolated, the same employees are self-preoccupied? Case suggests an alternative perspective. Encourage and reward employees who see themselves as partners in the business; empower them, especially to take direct action whenever circumstances require it; and help them to understand what the business is all about. Open-book management is based on this perspective, as indicated in the implementation process. First, “Every employee in an open-book company sees -- and learns to understand -- the company’s financials, along with all the other numbers that are critical to tracking the business’s performance.” OK but so what? Next, “Employees assume that, whatever else they do, part of their job is to move those numbers in the right direction.” OK but what’s in it for them? Finally, “Employees have a direct stake in the company’s success.” Presumably Case would agree that employees should think in terms of first-person plural pronouns (“We”, “Our”, and “Us”), spend the employer’s money as if it were their own, immediately take ownership of every problem they encounter, commit to a team approach whenever appropriate, and in countless other ways think of the company as if they were its owners (if not its CEO), not as “hired hands.” Operation goals (“Our goals”) must be explained within a company-wide context. The same is true of continuous-learning goals. The open-book company has a “scoreboard” which everyone involved can see it. But Case goes to great pains to explain that each company has its own “book” and thus each company must determine to what extent that book will be “open.” Also, the best way to “keep score.” It is a quite a serious task to determine what the most appropriate standards of measurement should be. For publicly traded companies, perhaps stock value and reduced costs of doing business. For privately held companies, perhaps margins and customer share. Which measurements are most relevant to a given company’s priority objectives? Of perhaps greater importance, which measurements will create the most excitement (“buy in”) among employees? Key point: Open-book management is more an attitude than a process. It forces managers to know and to understand their own numbers; over time, it forces other employees to know and understand those numbers must relevant them, both as individuals and as members of a department or division; finally, it builds a dynamism -- a driver -- into the system and throughout the company. Case devotes about half of Open-Book Management to implementation of quite specific principles, stressing that each company must modify them to accommodate its own needs and interests. With regard to financial incentives and rewards, he identifies several “pot holes” into which a company can fall:
Ultimately, the measurable value of open-book principles will be determined by several factors: The extent to which a company modifies them to accommodate its own circumstances; the extent to which employees in that company (top to bottom) commit to the program, once devised; and the extent to which everyone involved shares equitably (NOT equally) in the rewards. Order Open-Book Management here. Find the full list of Robert Morris's Business Nuggets featured by Eastbook.com here.
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