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Issue #25: April 8, 2003
To our readers:
You have probably worked for a company whose leaders believed that employees were best kept in the dark when it came to financial information. It is a very human tendency to keep certain things private, and anything money-related ranks very high among those "certain things." Yet keeping financial information safe from the eyes of employees might mean depriving your company of a highly effective tool for motivating those employees to do everything possible to improve those financials.
According to 2002 Employee Review, Randstad North America's comprehensive study of almost 2,000 employees, conducted in partnership with marketing research and consulting firm RoperASW, "employees want company financial performance information. There is compelling evidence that individual performance improves when people know and accept the company's goals, expectations, rewards and consequences."
Share financial information with all employees? This is the kind of thing that sounds good in theory but is a bit hard to picture in practice. Yet there are real-world examples of the power of sharing financial information. One such example appeared in the March 2003 issue of Inc. magazine. In "The Power of Listening," John Case described the success of Atlas Container Corp. under the leadership of brothers Paul and Peter Centenari. Atlas Container Corp. has grown almost 25% per year for 10 years, reaching $69 million in sales in 2002.
Since about 1995 Atlas Container has had an "open books" policy, which includes sharing financial information with employees; a genuine "open door" between the shop floor and management offices that results in real conversations between the two; and company-wide voting on decisions ranging from which $1,000,000 corrugator to buy to which health insurance plan to choose.
When it inaugurated its open-book policy, Atlas Container began by providing education to its employees so they could understand basic financial concepts. Then Atlas began showing employees all the numbers, including sales, costs, and profits. Atlas pays bonuses when EBITDA (earnings before interest, tax, depreciation, and amortization) reaches a certain level. Employees and management regularly review all the numbers together and identify areas to improve and problems to solve to boost those numbers.
Among the benefits Atlas Container has enjoyed from its open-book policy: Only one supervisor is needed in a plant that would usually require six supervisors, because "we have people here that run the plant themselves," according to an Atlas printing manager. Employee retention averages 85% compared to an industry average of 50%. Within about a year of acquiring another company and switching it to open-book management, Atlas had achieved a 30% increase in monthly sales, an improvement in on-time delivery from 60% to 97%, and a drop in labor costs.
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Paul Centenari said of Atlas Container and its open-book management: "When people feel they're part of an organization, they feel the passion. And if they feel the passion, you're going to be dangerous in the marketplace." Passion for their work and company lends people the will and the ability to accomplish things other companies' leaders only dream about.
To learn more about open-book management, check out these resources:
1. Open-Book Management: The Coming Business Revolution, by John Case
2. The Open-Book Experience: Lessons From Over 100 Companies Who Successfully Transformed Themselves, by John Case
3. Maverick: The Success Story Behind the World's Most Unusual Workplace, by Ricardo Semler
Whether or not you are in a position to create a complete open-book policy in your organization, you can use the open-book principle to create an atmosphere that encourages an unusual level of investment in the success of your company, organization, or department. And that can make your group "dangerous in the marketplace," whether that "marketplace" is within your company or outside it.
Three tips for creating an open-book policy that makes you "dangerous in the marketplace":
1. If you are stingy with information that comes your way, think about how useful that really is to you.
Consider whether or not sharing information might be more useful to you than hoarding it. Sharing information could aid your employees and colleagues in accomplishing their work, and that might make them more enthusiastic about working with or for you, and could make your job easier. Consider the benefit to you of helping to create an atmosphere of greater cooperation, and how that can raise your level of trustworthiness among employees, colleagues, and company leaders.
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2. Determine what information you can share with your employees and colleagues.
Take a look at all the information to which you are privy and determine which could be useful to your employees and colleagues. This information might be sales figures, labor costs, outsourcing costs, the cost of marketing materials, training and development, office supplies, telephone service, utilities, the cost of accidents, cost of workman's compensation claims, outlays for equipment, or any other cost of doing business. It might be information that is not directly financial such as production rates, number of sick days taken, number of hours spent in meetings, time required to complete a project, time spent on the telephone closing a sale, etc.
3. School your employees in the meaning of whatever figures you are able to share with them.
Call on your CFO or controller to instruct employees on financial information, or provide an outside expert if that's appropriate. Ask in-house experts to explain how the various numbers affect the business: how the cost of utilities and workman's compensation and other costs affect the bottom line; the various ways that sick days affect production, the bottom line, and salaries. Let them see how their jobs and the jobs of others in the company affect profits, and how those profits affect salaries, benefits, and bonuses. Given the opportunity to look at the numbers and think about them, many employees will figure these things out for themselves. Let them do that in a company- or department-sponsored forum where they can benefit from one another's insights. If you lack resources to bring in the CFO or an outside expert, teach the classes yourself. Most of your employees will be excited about the opportunity to learn more about the financial side of the business they work in.
Remember that most people will work harder and think more creatively to accomplish goals that make sense to them and their futures. And sharing information can both improve understanding and build enthusiasm for the work at hand.
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