OPEN-BOOK MANAGEMENT:
YOUR EZ OVERVIEW

What's OBM Require?

OBM requires five things:

a. Information

b. Decision Making (Control)

c. Wealth.

A leader must give people the real numbers about their firm's financial performance to achieve both credibility and motivation. Employees must have the opportunity to make a difference in a significant way. Not everyone gets to make the decisions of the CEO, but most employees will want and need more control over their work. Leaders must be willing to share the wealth created by the efforts of employees.

Education helps establish a "line-of-sight" between an employee's everyday actions and the larger operating and financial results of the business. A line-of-sight traces the effect of an individual's actions on the firm's financial performance. Beginning with the key financial measure(s) the company uses, instructors can work backward through the measure's components until the line reaches the employee's department, team, and job.

Giving information to persons who are not educated to properly interpret it can create problems, not solve them. Responsible business partners who act to achieve the mission of their enterprise must be both informed and educated. Managers who cite problems of information sharing with employees usually describe situations where the employees were given the information without sufficient prior education. They argue against sharing information because it was misinterpreted or misused. This misses the point. They should argue for better education so that the shared information is properly understood and used.

Key financial and operating measures are carefully defined, measured, and intensely managed by all employees to produce results. These are called the firm's "critical numbers." OBM uses an information exchange system to track and achieve these critical numbers. This may turn traditional, hierarchically oriented financial information reporting systems on their heads. Instead of being aimed at satisfying managers' needs for information, OBM stresses that the "troops" have information so they can make decisions to respond to changes. Information must loop quickly back to the people who contribute the data as well as move upward to inform managers.

OBM invites a high level of employee involvement with business affairs. The degree of involvement needs to be proportional to the degree of education and information possessed by those involved. It's like controlling the angle of a dive into a swimming pool based on the depth of the water. The more thorough the education, and the more extensive the information exchange, the greater the involvement can be.

This is a question of long standing. Corporate America has not answered it well. Many "merit" pay programs (rhetoric aside) don't really pay for performance. For most employees, the amount in the paycheck has little to do with their organization's current performance or their individual or team contribution. OBM stresses rewards linked directly to the "critical numbers" and profits. These rewards take a variety of forms.
a. Short-term and long-term rewards.
b. Cash and non-cash rewards.
c. Individual and group rewards.
d. Operational and financial performance driven rewards.

These choices are not either/or. Rather, they are both/and. All eight possibilities can be used simultaneously. Some firms focus on sharing profits, while others provide equity stakes in the firm through ESOP's (Employee Stock Ownership Plans). All firms must balance psychological and monetary rewards to create a balanced motivational climate. The secret is to keep it simple, easy to understand and administer, and on-target for organizational performance.