Some companies take business acumen training even further than most: They make it a part of their business models. In the 1980s, a company called Springfield Manufacturing in Missouri got a lot of attention in the business world for its decision to share every bit of financial information with its employees in hopes of improving their performance and turning the company’s performance around.
Managers were trained to understand the financials, and told to pass the information along to their direct reports. The company's leadership began paying bonuses based on improvements in key performance indicators, and the company almost met ambitious goals of increasing its pretax profit by $2.2 million and reducing its debt by $3 million.
Other companies began to try the new method, and in 1990 author John Case wrote an article for Inc. magazine about these companies' success with the new idea, which came to be called "open book management."
The idea is to make sure employees understand how the company succeeds or fails, and how the financial numbers provide a yardstick to judge the company's success or failure day in and day out. By sharing this information with employees every day, and making public what is kept secret in most companies, open book companies enlist their employees to take a more active and conscious role in keeping costs down and profits up.
Case notes that open book management tends to be limited to small or medium-sized companies. Publicly-traded companies are bound by SEC regulations not to share financial information with anyone except certain employees, and larger companies have a much more difficult time with establishing that line of sight between what employees do and the organization's overall performance. But Case says that although not all companies can practice what he calls "classic open book management," many of them are taking the idea as far as they legally or practically can. The idea is to take advantage, to whatever degree is possible, of the group wisdom that exists in every workforce. "You hear it all the time: 'Nobody asks us what we think around here,' " Case says. "But open book companies get that when people understand the numbers and why they're important, they'll get involved and come up with ideas to improve them." – H.D.
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