The concept of employee empowerment has many facets. Search for any term or phrase surrounding “how to empower your employees” and you’ll receive millions of online results. None of those approaches is necessarily wrong. Yet, traditional tactics that are typically used to “empower” employees leave room for so much more.
Using a strategy called open-book management, business leaders have an opportunity to empower employees in a unique-yet-proven way.
What Is Open-Book Management (OBM) and How Does It Help to Empower Employees?
Open-book management was a concept originally developed in 1983 by Jack Stack and his team at Springfield Remanufacturing Corporation (now SRC Holdings). This practice became known—alongside Stack’s management practice entitled The Great Game of Business® (GGOB).
Generally, companies operate on the premise that employees “need to know what they need to know” to perform their jobs effectively. The idea behind OBM and GGOB is to educate employees in financial literacy and how the business makes money, and involve them in decision making. Here’s what that looks like…
Unique Characteristics of OBM and GGOB
Sometimes, business leaders look at “management practices” and think they need to choose between the various methods available. For example, EOS (Entrepreneurial Operating System) is a viable management model for certain business initiatives practices (how best to lead meetings, get people on the same page, heighten accountability). One could look at it as, “How can we most effectively and efficiently reach this goal in the next quarter?”
Open-book management goes beyond a task-based methodology of business operations. It incorporates the “how” element, but it also focuses on the why. Why, exactly, are we working towards company success?
OBM (and GGOB) introduces access to relevant financial information, with the goal of helping employees make informed (and thus better) decisions. Such information includes revenue, profit, cost of goods sold, cash flow, and expenses—crucial components of daily business operations. To be clear, business owners and leaders are not opening up the entire financial recordings to employees. Personal information such as salary, bonuses, and benefits is kept private.
This methodology is also rooted in educating employees about the business; how the company makes money, what they do with that revenue, why employees are such an integral part of the business strategy. Journalist John Case of Inc. Magazine, who wrote a book about the OBM model, comments, “a company performs best when its people see themselves as partners in the business rather than as hired hands.”
Why Does “Sharing the Numbers,” Work to Empower Employees?
Armed with key financial information, employees better understand their responsibilities in company success—or, alternatively, failure. Now, they have a stake in company performance and play an essential role in advancing the company toward certain benchmarks. Their new-found knowledge surrounding business operations is what is known as financial literacy.
The OBM-driven methodology uses a “Critical Number” that represents an indicator of pre-defined goals. For example, the objective might be profit. It could also be net promoter score (NPS) or employee retention. In today’s climate of The Great Resignation, employee retention may be a significant objective. It costs much more to hire a new employee than retain an existing one. The Critical Number is different for each company, based on those specific business objectives.
Once the Critical Number goal has been defined, business leaders foster employees’ role in the efforts to work towards it. A foundational element of OBM is setting employees up for success. It’s common for people to support something they have helped to create. Employees become more engaged as they begin to comprehend how their actions affect the company’s bottom line. They now have the financial literacy they need to truly make a difference.
Employees also develop a greater sense of trust toward their employers, and even fellow employees. Open-book management reduces the pressures of a top-down management model. Employees feel a sense of inclusion, which further supports the idea of working alongside management/leadership rather than “beneath” those roles.
Of course, employees do not go unrewarded for their investment in the company’s success. Each company decides how to best acknowledge employees’ contributing efforts. Some may decide to offer a bonus plan as a way to reward everyone’s shared efforts—or “gain sharing.” For company owners, this is a win-win. The business is making more money, and so are the employees.
Additional Benefits of OBM and Employee Empowerment
While financial rewards are valuable to employees, they’re also developing characteristics along the way that make them better employees overall. Many business leaders turn to five domains of the human experience—in the context of the workplace environment—known as the SCARF® Model (Status, Certainty, Autonomy, Relatedness, Fairness).
- Status: With OBM, employees perceive an elevated status, as they are privy to information not typically available to non-leadership team members. With status comes the motivation to work even harder.
- Certainty: There’s great assuredness in “hard numbers.” OBM works to forecast financial outcomes, and employees may find comfort in knowing exactly what they’re working towards. It’s much more tangible than the idea of “success.”
- Autonomy: Control in outcomes leads to personal accountability. Employees often feel a sense of pride knowing they’re actively contributing to company success, financial or otherwise. They also understand that being a part of the OBM method means they cannot place “blame” on others when the financial needle isn’t moving (or is moving in the wrong direction).>
- Relatedness: When a company does not employ OBM, employees often perform their work in silos. They may not know how their performance impacts another department or even another employee. Because OBM works towards a common, central goal, employees learn to better relate to each other as well as to leadership.
- Fairness: After learning all the benefits of OBM, one might say, “Why notopen up the books and be open about financials that affect the company?” Empowering employees with transparency levels the playing field. It also motivates employees and elevates engagement.
Uplevel Employee and Team Empowerment with Foundational Strategies
When a company implements OBM, all the traditional strategies for empowering employees still apply. For example:
- Foster a positive work culture
- Encourage open communication and feedback
- Incorporate genuine empathy towards employees
- Instill an environment of two-way trust
- Be open to ideas and input
- Delegate when appropriate and try to avoid micromanaging
- Offer opportunities for growth (e.g. continuing education)
- Share business values, vision, and objectives
- Provide any essential required resources
Bring More Success to Your Business by Empowering Your Employees
Employee empowerment will never be an exact science, yet incorporating open-book management into your leadership toolkit brings an element of “structure” to your empowerment efforts. When you effectively empower your employees, you’re taking an influential step towards unlimited potential for business success.
I’ve seen many companies thrive when incorporating OBM into their business strategies. I am also a GGOB certified practitioner. If you’re interested in exploring this option, my team and I would love to talk to you about it. Schedule a call with one of our experts if you’d like a free consultation.