The Latest from the ABM Experts
September 10, 2019
Using Open-Book Management to Improve Company Culture
Written by Sangram Vajre
Category: FlipMyFunnel Post
Most of us realize transparency in business culture is crucial.
The challenge, however, is actually carrying out transparency as a core value.
In the second episode of the four-part series Culture Eats ABM for Breakfast, husband-wife duo Michael and Nikole Rose give us insight into implementing real, living business transparency.
Here’s what we’re unpacking today:
- Cultivating a culture of owners
- Implementing open-book management
- Budgeting and forecasting within OBM
Building a team of owners
Mojo went through a company culture overhaul throughout the past five years. Once the core values and team members had been chosen, it was time for Nikole and Michael to figure out how to continually engage the members of their team (AKA, Mojo makers).
Nikole: I’m over the moon passionate about OBM, open-book management. It’s, in essence, a way to create trust and transparency in your business. The ultimate goal is to create a business of businesspeople who think, act, and feel like owners.
Michael: Really, once the foundation of the culture is established and you feel like you’ve got a trusting and transparent culture, it’s time to ask “What’s next?” What else can we do to build an exciting environment for people to want to come to every day?
Without that foundation, getting to the engagement is really hard. But, the process of getting people’s buy-in ownership commitment, to finally get to that engagement, is pretty exciting. It’s a well-known statistic that about 30% of the US workers say they are engaged in their work.
Nikole: With all businesses, there are problems, issues, and areas for improvement. Almost always, those are reflected in the numbers.
Since most businesses don’t share the numbers throughout the organization, it’s very difficult for people to truly know how they can have the biggest impact.
Show ‘em the money
Michael and Nikole understand the apprehension some might have for displaying the company’s numbers to its members. They offer some advice on preparing for an open-book management approach.
Michael: We talk to a lot of owners that are a little skeptical or perhaps even scared to share certain numbers within their business, and that’s OK. It’s something you can get over with the right process.
For us, it was teaching financial literacy. First understanding it as an owner, then teaching it to everyone within the company is a really exciting process.
Nikole: We get a lot of people who might be a little confused about what open-book management is. They say they show the numbers to their people, but only the profits and losses once a month.
That is not open-book management.
Open-book management involves everybody within the organization. They actually have responsibilities to report out, help forecast, and to make decisions on how monies are spent. There’s a lot more accountability.
Michael: We’re going beyond just gross revenue, we’re talking about gross profit. All the costs that are involved in delivering your product or your service to your customer base.
Beyond that, it’s about all the line item expenses that, as they say, are below the line, that go into keeping the business running. Each one of those general ledger line items is what we share.
Depending on the size of your organization, managers, departments, or sometimes individuals within the organization can have line item responsibility to manage that line.
Nikole: It’s really cool.
Almost all of our team members have what we call “line item responsibility.” For instance, we have one gentleman – he is a digital marketing specialist on our team – and he manages our general office expenses. So, if someone needs to buy office supplies or needs a new computer, that all funnels through him.
He understands what we have budgeted. He understands where we are for the month and can make a decision on things that we should be purchasing now or if we should hold off until later.
Rolling out the plan
Of course, there are some logistics that need to be tackled in order to successfully roll out an open-book management process.
Nikole: First of all, it starts with creating a budget and a plan. It sounds pretty simple, but I’m actually surprised at how many businesses don’t start this process.
After you’ve created your budget, pick what your critical number is.
In businesses, there are so many different things you could focus on, so many different data points, numbers, it’s just exhausting. The whole purpose of a critical number is to have the most important – the most critical – number in your organization that the team is rallying around.
The next step (and this is really important as far as open-book management) is forecasting.
Michael: The trick is to forecast each week for the month. Some people think that when you do weekly forecasting and weekly huddles, you’re forecasting for the week, but you’re actually forecasting for the entire month.
The better you get at forecasting, the better you’ll be at budgeting.
Next time on Culture Eats ABM for Breakfast…
In the third part of the four-part series, Nikole and Michael discuss an idea known as ROWE: Results Only Work Environment.