Open-book management

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Open-book management is a management technique originated by Jack Stack and his team at SRC Holdings and popularized in 1995 by John Case. The technique is to give employees all relevant financial information about the company so they can make better decisions as workers. This information includes, but is not limited to, revenue, profit, cost of goods, cash flow and expenses.

The basic rules for Open-Book Management are as follows:

Give employees training to understand the financial information
Give employees all relevant financial information
Give employees responsibility for the numbers under their control.
Give employees a financial stake in how the company performs.

In a company fully employing Open-Book Management employees at all levels are very knowledgeable about how their job fits into the financial plan for the company. However taking a company from "normal" to open is not as easy as just starting training classes on income statements and balance sheets. Employees rarely find it compelling to understand these numbers. In order to overcome this problem Open-Book Management focuses on a "Critical Number". The number is different for every company but it is a number that represents a prime indicator of profitability or break-even point. Discovering this Critical Number is a key component of creating an open-book company. Once discovered then a "Scoreboard" is developed that brings together all the numbers needed to calculate the critical number. The Scoreboard is open for all to see and meetings take place to discuss how individuals can influence the direction of the "Score" and therefore, ultimately, the direction of the Critical Number. Finally a Stake in the Outcome is provided which can be a bonus plan that is tied to Critical Number performance or it can include Equity sharing or both.

[edit] Books about Open-Book Management

Open-Book Management: The Coming Business Revolution by John Case (1996, ISBN 0-88730-802-3)
The Open-Book Experience: Lessons from over 100 Companies Who Successfully Transformed Themselves by John Case (1999, ISBN 0-7382-0040-9)
The Great Game of Business by Jack Stack (1994, 038547525X)

[edit] Notes and references

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