written by MO.com Subject Matter Resource Dr. Greg Bier
Does it seem like your business has plateaued? Try releasing your employee’s intrepreneurial drive! What probably got you into business in the first place was the sense of satisfaction of controlling the bottom line and being rewarded for the risks you take rather than the rewards all going to “the man”.
Open-book management is a concept started by Jack Stack. Stack developed “the Great Game of Business”. The notion is pretty simple; teach your employees to not only think like the owner/entrepreneur, but to act like the owner/entrepreneur. Why? When employees thoroughly understand the business model and are included in the business they become stakeholders in its success too. It is more than simply allowing employees to look over the financial records of the company. The “Great Game of Business” calls it a process. Just as you learned about your venture as you went through some sort of business planning thought process, employees need to understand too it they are to help grow it.
Before thinking about the open-book process think about what you hope to achieve… getting your employees to care as much about the venture as you do. To get everyone to move beyond thinking about everyday jobs and simple cash flow to thinking about margins, net return on sales, and profitability.
“The Great Game of Business is about running your business in a strategic, forward thinking fashion. Employees are taught the rules of business, enabled and expected to improve performance based on that knowledge, and given a Stake in the Outcome – good or bad. They aren’t looking to historical financial information for answers, they are forecasting the future of the business and making it happen.” [http://greatgame.com/]
Does it work? I visited a company this week that previously had about 2.5% net return on sales. After implementing open-booking management for a while they were at 5% net return on sales and are now approaching 7%. Wow! How? Every employee has learned the key measures of success for their company and their particular job in that company. Work with employee intrapreneurs to help them understand the business. Ask them to help measure those items. Empower the employees to improve their performance because they can now understand how it impacts those measures. Employees now want to do things right the first time because it impacts those measures.
But why do they really want to become intrapreneurs within an entrepreneurial company? Buy-in. Once the business reaches the goals they have set out in those measures, an agreed upon percent of the profit is dispersed to all your little intrapreneurs. Why not? If you don’t, you are just going to have to pay it to Uncle Sam anyway. So the true cost of letting your intrapreneurs make you more money isn’t really a cost at all.
In Jack Stack’s implementation of open-book management he took his company, Springfield Remanufacturing Corp from a debt-to-equity ratio of 89-1 to 1.8-1. I’ve seem similar success in other organizations. Employees are your biggest (underutilized) resource. They are your smartest resource. They know where the scrap is coming from. They know how to do things better. They know where the inefficiencies are coming from. Load your venture with the right folks and guide them in becoming intrapreneurs in your venture.
Open-book management isn’t a fade or theory. It is how to take your venture and your employees to the next level. If you don’t, your competition will.
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