As an accounting and consulting professional who has been working with small businesses for 15 years, I believe that while getting your employees to do more with fewer resources is challenging, it is not impossible. If done right, it can lead to a better work environment where people show up early, eager to perform that day’s task, with everything running like a well-played symphony.
A few years back, a friend introduced me to Jack Stack’s 1994 best-selling book, The Great Game of Business, a book about a new business concept called “Open Book Management,” or OBM. The simple premise of this management style is to make every employee a business owner. This is accomplished by adopting a business culture that shares financial data with employees: explaining the numbers through intense training and ongoing communication, holding employees accountable for their critical numbers and rewarding organizational improvement. Once I had fully absorbed the philosophy of OBM, I decided to implement it.
Sharing your financials
Given that I own a small accounting business, my staff was already up to speed on understanding the financials. However, sharing our numbers was a different story. I was nervous about doing it, because at that time we were showing a loss and I was concerned it might rattle the staff. Needless to say, my concerns were unfounded. What happened instead was the opposite—it rallied them. They became aware of how important it was to retain as well as grow our customer base. They were in it to win it!
Know your critical numbers
Which numbers are important? Should we focus on billable hours vs. total hours, or customer growth vs. profit? Customer growth does not necessarily translate into more profit, because we have many different levels of service, and some are loss leaders. Along those same lines, our sales could increase without our customer base growing when our existing customers purchase more services. So that metric would always be suspect and not as meaningful. However, by focusing on billable vs. non-billable hours, positive growth is the focus, which eventually leads to more profit. Once we started paying attention to this number every month, by employee, we really noticed a change.
Rewards and accountability program
In order for my people to behave like business owners and put skin in the game, they had to know that I was willing to share some of the rewards of their efforts. However, I had put a lot of my own money into this business to get it up and running, so I wasn’t willing to share all of the profits right out of the shoot. We agreed on a metric for paying me back and rewarding their efforts. It was decided that we would start with a rewards program that would pay out bonuses for critical number goals achieved.
I love OBM, because I can see that it created a leaner and more authentic organization. The changes were subtle: from employees recognizing and sharing with their clients additional services that they might benefit from, to deciding which type of customers we would target and service in general. Expenses went down and our bottom line grew the first year by 10 percent, and by the second year we were showing a profit, without damaging employee morale.
In all its simplicity, OBM is about teaching your employees how to make money and have fun doing it. It is a great way to run a leaner business while retaining the best people. And everyone wins. I took a piecemeal approach to implementation, and I still have not implemented all of it. I will as it becomes practical.
OPEN Cardmember Pamela R. Bauer, E.A. is the president and CEO of Abacus & Co of NY Inc., an accounting and business consulting company for small businesses out of Rochester, New York.