Employee Ownership Can be Accomplished Without Open Book Management?

I have blogged here often about how instilling an ownership mentality among employees is accomplished at our 2008 Top Small Workplaces most readily through the use of open book management (OBM). This is a practice whereby the company financials, sans individual salaries, are reported to employees on a regular basis. Some companies choose to go further and teach workers how to read these financials.

Fourteen of our 15 Top Small Workplaces practice OBM, and 10 of them provide structured financial literacy training to employees. You can learn about the nuts and bolts of OBM over at The Great Game of Business, and about all of the productivity-stimulating team building and employee engagement best practices of our 2008 winners on our website.

One of the questions I had as I moderated the chat for our webinar yesterday on "Five Powerful Strategies to Develop and Retain Top Notch Technical Talent" was, can you get to a place where employees at all levels assert ownership in the company without OBM, if the leadership is opposed to it? Tamsin Jolley, the President of 2008 Top Small Workplace Decagon Devices, prompted this with her explanation of her employee engagement and retention strategy #3, ensuring employees have a stake in the outcome.

Check out the audio of Tamsin on this strategy from this webinar, which shows the power of something as simple as weekly lunch meetings:

mp3 - 2.4 MB - 2:34

Here's a snapshot of how the theme of each week's lunch meeting changes, and yet still falls under the umbrella of employee ownership:

Week 1 - Marketing and sales department report of previous month sales, presentation of latest marketing materials, summary of recent trade shows attended and customer survey results
Week 2 - R&D and engineering report on status of current projects and/or new product training
Week 3 - OBM and financials review/training; profit-sharing checks passed out in this meeting on a quarterly basis
Week 4 - Operations training/reporting – how they're doing in getting the product out the door and to customers
Week 5 (if there is one) – open forum and safety meeting

So clearly, Decagon Devices empowers employees using OBM one week out of the month (week 3). But does the practice extend to the other weeks?

Do you already do weekly or monthly lunch meetings? If so, think about how you can approach your employee engagement activities in a different way and get more bang for your buck – ie, more committed employees who think like an owner.

Comments for Employee Ownership Can be Accomplished Without Open Book Management?

Friday, March 27, 2009 by Jerry Sweas:: This is a great recommendation, but probably only for a small business with less than 50 employees. A more realistic approach for larger (50-200 employees) might be to schedule once a month and/or quarter All Employee meetings at a location where everyone can sit and easily see a slide presentation and a venue that makes it easy to do Q&A. Have anyone had succes with group employee conference calls which include both hourly/blue collar workers with professionals/salaried staff? Jerry
Thursday, April 2, 2009 by Rich Armstrong:: Mark, I love to read your blogs. You do such a great job of communicating all the wonderful things companies are doing to build long term success for both the company and its employees. I don’t believe I’m being biased when I say this, but it’s simply impossible to create an ownership mentality without practicing some form of Open-Book Management. What separates Open-Book Management from other management fads and flavor of the month programs is its system of continuous improvement involving all aspects of the business as a function of the financial health of the company. It elevates the efforts of all employees by focusing on building a better business. This is what employee ownership and creating an ownership mentality is really all about. I think the issue is how people tend to narrowly define Open-Book Management. They get stuck on the “Open-Book” and forget about the “Management and Leadership” part of the practice. For the most part, people believe OBM simply means management shares financial information with employees on a regular basis and teaches them how to read and understand the financials. However, companies who have experienced the real power behind Open-Book Management take it far beyond just opening up the books. They create a process where employees provide input into creating the financials, learning to forecast the financials, learning what drives financial results, communicating progress with each other, and sharing the rewards of good performance. Successful Open-Book companies find a way to bring the numbers to life so that each and every employee can begin to see how they can directly influence the results and build a better company. With that said, all the communication efforts that Tamsin Jolley from Decagon Devices used to inform and involve their employees are all best practices of Open-Book Management. For example: • Week 1 - Marketing and sales department report of previous month sales, presentation of latest marketing materials, summary of recent trade shows attended and customer survey results OBM is very much about sharing with employees critical information such as marketing and sales efforts and the related results. How else would you give your employees a line-of-sight to how they influence the top line of the Income Statement? If nobody steps up and sells something, nothing else really matters. • Week 2 - R&D and engineering report on status of current projects and/or new product training OBM is about encouraging employees to be forward looking and think strategically about how to grow the business. R&D efforts provide you your future revenue stream and educating your employees on what new products are coming down the pipeline gives them line-of-sight to how they can support the efforts and influence the financial results that are expected from the R&D efforts. • Week 3 - OBM and financials review/training; profit-sharing checks passed out in this meeting on a quarterly basis Stick to the basics. • Week 4 - Operations training/reporting – how they're doing in getting the product out the door and to customers Operational numbers are the drivers of financial performance. Again, if you don’t share with your employees how we are doing in regards to getting the product out the door, how do you connect them with the importance of Cash Flow, cost of sales and customer service? SRC (our parent company) learned early on that it took much more than simply sharing financial information, handing out stock options, or setting up an ESOP to get employees excited and engaged in the business, let alone to think, act and feel like owners. While well-intentioned, these moves are rarely effective, since the employees often have little understanding of how they might affect the company’s profits or how they can influence the value of the stock. As our CEO, Jack Stack, has said “It’s relatively easy to create an illusion of ownership by handing out stock. It’s far more difficult to give people the business education and tools they need to realize the rewards that ownership can provide.” Simply put - nobody can think and act like an owner without first understanding how the business works and what’s critical to success. And that must include the practice of Open-Book Management. The principles of Open-Book Management. Every employee… …is given the measures of business success and taught to understand them. …is expected and enabled to use their knowledge to improve performance. …has a direct stake in the company’s success – and in the risk of failure. - Rich
Friday, April 3, 2009 by Mark:: Thanks for your comments, Jerry and Rich. What you suggest when it comes to employee conference calls sounds like a good idea, Jerry -- I hope others chime in and share their experiences. Rich, I guess you answered my question! I appreciate you clarifying that employee ownership and OBM are inextricably linked. This was my suspicion, and it's great to have your expert opinion to confirm that. Anyone want to play devil's advocate to what Rich said, or do you agree?