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A Manufacturer's Guide to Open-Book Management

Feb. 19, 2024
It's been a winning strategy for our company for both employee engagement and business results.

Many of us in manufacturing know that finding and retaining talent for our warehouses and plants is not always easy. COVID-19’s impact on the workforce, along with advances in automation, have exacerbated the challenges in recruiting and finding skilled workers.

As my company sought ways to have our employees approach their work as a meaningful career and not “just a job,” we researched and then adopted the Open Book Management approach to business. It has proven to be a winning strategy for both our business and the people who make up our team.

When I tell fellow manufacturers and business owners that our company practices Open Book Management, they will often ask, “Doesn’t that mean sharing your financial information with employees?” And that question is sometimes followed with this one: “Aren’t you worried about what that could lead to?”

I reply that yes, Open Book Management does in fact mean sharing financial information with employees, although there is far more to the practice than simply sharing finances. And no, I’m not at all worried about where the practice leads – in fact, quite the opposite.

Three Core Priniciples

Done properly, Open Book Management can be a game-changer for any manufacturing company.

The “old style” of management often leaves employees in the dark about the company’s finances and its purposes, and this can lead to uncertainty, fear and anxiety among employees. Also, it can result in their drawing incorrect conclusions about how the company is actually doing.

Open Book Management, on the other hand, will help engage employees more purposefully in the operation of the business.

Open Book Management follows three core principles:

  • Know and teach the rules: Educate employees on how the business works.
  • Follow the actions and keep score: Empower employees to help improve the business.
  • Provide a stake in the outcome: Engage employees by rewarding them for exceptional performance

With Open Book, everyone understands that their daily actions and decisions turn into metrics for the business. Everyone in the plant has a stake in the outcome, and can share in the rewards of a job well done. What a difference this can make in how everyone—from the second-shift assembly line worker to the warehouse foreman to the CEO—views the business.

People Make the Magic Happen

An Open Book Management central belief is that a company’s greatest asset is its people, not the product or service that the company provides. This belief and values system will empower employees, who will then become involved in the company’s success. This in turn results in happier employees and a better-run business.

With Open Book, employees learn and understand how the company operates and the “why” behind it: the company’s finances, values, and core philosophy. 

Inside the Huddle

At the core of Open Book is the “huddle,” which is an all-hands weekly group meeting with a central scoreboard (simplified income statement). The meeting cadence is the same each week, starting with core values and purpose, selection of the celebration leader for the week—the person who chooses what to celebrate and how—and reporting of the forecast by line-item holders. There is an analysis of the numbers by senior leaders, a roll up of important department metrics, followed by announcements. We end our huddle meetings on a high note with core-value recognitions, knowing that even if the numbers aren’t great we can still create an impact.

The magic in the huddle is in the story behind the business’s numbers and how each employee can impact the bottom line. In harnessing the wisdom of the crowd, everyone participates in how the business is run. Openness and transparency changes how employees regard a business. Employees think, act and feel like owners.  They understand the “what” of the business as well as its “why.”

We never miss our weekly huddle. It is a lifeline to the financials of the business. All numbers are reported bottom up, not top down, with the exception of the financial analysis. We forecast how the month will end and compare it against the budget. If the number is up or down, a story behind the number is told.

Learning About Business Is Empowering

For manufacturers interested in learning more about Open Book Management, a good first step is to find a business that practices it and discuss how it has worked for them. Ask to attend one of their huddles and see firsthand how it operates. Bring your leadership team along and involve them in the discussion.

And there are three programs which will prove very helpful for companies seeking to adopt Open Book. The Great Game of Business organization is a champion of Open Book Management, and they have an interesting story of how they evolved. GGOB CEO Jack Stack in 1983 sought to save 119 jobs at International Harvester’s engine remanufacturing facility in Missouri by buying the company. Any other decision, he reasoned, would create hardship for those families. He and his team raised $100,000 in cash, borrowed $8.9 million and transformed a once-failing business into one of the most successful, competitive companies in America. Through this challenging process, Stack encountered resistance from banks and saw firsthand a fundamental lack of understanding by lenders about how a business works. 

GGOB believes that as a nation we need to do a much better job teaching people about business. GGOB Vice President Steve Baker says, “We teach people that if you can make a better company you can sustain growth, and everyone in that company will have opportunities they otherwise wouldn’t.”

Two other programs which can help create the proper structure and climate for Open Book are EOS (Entrepreneur Operating System), which provides the framework for issue processing, meeting pulse, goal setting , long term planning, core values and getting the right people in the right seats; and Small Giants, which works with business leaders to help train emerging leaders in their organizations, connects them with like-hearted peers, and teaches them how to run a values-driven business. 

We chose to have a coach to guide us through the process. The success in Open Book rests in the proper execution, which a coach can help facilitate. Many companies-self implement using online tools and workshops, however we hired a coach through the Great Game of Business organization in Springfield, Missouri. Our coach, Kevin Walter, helped us develop our design team, scoreboard, bonus plan, financial literacy and company-wide roll out.

Companies looking for greater employee participation and buy-in should consider Open Book Management. It has made all the difference for our company. I cannot even imagine where we would be without it.

John Costello is CEO of Cherry’s Industrial Equipment, a manufacturing and engineering facility in Roselle, Illinois, which solves workflow problems and safety issues and creates ergonomic solutions across a wide range of industries. 

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