(Submitted by Brad Bapst, Director, Small Business Development Center, OSU South Centers)
Does everyone in your organization know the financial situation of the company they are working for? If not, you may be setting yourself up for turmoil. This type of management is called open book management. Many successful organizations share important operational and financial information with their employees so they can effectively do their jobs.
What information, how much and how frequently it is shared varies widely from one organization to the next. In its simplest form, open book management includes sharing some level of financial information with employees so they can understand “the big picture” of how the organization is doing and how the employees’ individual actions affect the results.
The primary objective of open book management is getting the employees to both think and act as though each individual is a part owner of the business. Sometimes this can be a difficult process, because it is not as simple as handing each employee a copy of the most recent financial report.
They must be educated about all of the financial information of the company and learn about how their efforts contribute to or adversely impact the bottom line. Employees in this setting must have motivation and want the company to succeed, if not, the sharing of the financial information could cause many other issues for the company that could have counterproductive results. Critical financial information could fall into the wrong hands and put the company in financial jeopardy.
Potential benefits of open book management can impact many areas of an organization:
• Overall culture of the organization improves (teamwork, innovation, morale)
• Employees are more engaged in their work
• Reporting and budgets become more accurate
• The organization’s adaptability to change and adversity becomes much greater
If your organization is struggling as a result of employees who have become disengaged and have lost overall trust with the company, consider open book management as a possible solution. It may not be the answer to all of your issues in the company, but it can help employees to feel more valued and assured that they are getting the whole financial story.