This post is based on a podcast with Mike and Nikole Rose. If you’d like to listen to more #FlipMyFunnel Podcast episodes, you can check them out here and listen to this episode below!
Most people don’t have their profit and loss statements sitting around the office blown up to a 4×6 foot size. But Nikole and Mike Rose do. The founders of Mojo Media Labs, Nikole and Mike are committed to a culture of trust and transparency. And they’re crushing it.
On today’s episode of the Flip My Funnel podcast, Nikole and Mike talked about how they created a culture of open-book management in their business.
Here’s what we’re unpacking today:
- What open-book management is all about
- Five steps you can take to start implementing open-book management in your business
- The positive outcomes that result from an open-book management philosophy
All about open-book management:
Open-book management is about financial literacy.
When Nikole and Mike started their company, they were surprised at how many people did not understand how the company made and lost money. People seemed to have this idea that if the company was producing $5M in revenue, Nikole and Mike were pocketing it.
Mike and Nikole also observed that people generally come to work every day wanting to do a great job. They want to be a part of something bigger than themselves. But if they don’t know about the issues or struggles the company is dealing with, they can’t give their all to help solve those issues.
Mike and Nikole believed that if they were committed to transparency, being honest about financial struggles and talking about opportunities for improvement, their team members would get it. They would understand how they could make unique contributions to overcome these issues and help the company be more successful.
Five ways to start implementing open-book management:
#1: Make a commitment to weekly team huddles. At Mike and Nikole’s company there’s a team huddle every Monday morning at 11:00. The twist? The team runs the meeting. Sure, Mike and Nikole are there, but they’re not in the spotlight.
Since they’re committed to open-book management, each of their team members owns a particular line item on the profit and loss statement. That person is responsible for controlling the budgets and ensuring the funds are being utilized well. Even Nikole and Mike have a line item. At the huddle, each person gets up and presents on their item.
Another thing Mike and Nikole do at the huddles is teach forecasting. They realized after a meeting with their CFO that it did not do any good to look at their financials once the books were already closed. At that point, they couldn’t make any changes or improvements.
Now, the first week of each month they make a forecast for that month. This way they can catch potential issues early. This has been key in the success of Mike and Nikole’s business.
#2: Go all in. Many companies have tried open-book management but haven’t succeeded. This is likely for one of two reasons. One, the companies tried pieces of open-book management, but did not commit to the whole thing. Two, they were transparent about the wrong number. Sharing top line revenue is not as helpful as sharing something like net income. Be committed. Go all the way and be fully transparent.
#3: Make a plan and stick to it. Make a plan for the year that covers your strategic objectives, the investments you need to make, how will you scale, etc. Once you create that plan, follow it. Track it on a monthly basis.
#4: Do test runs with a small task force. Mike and Nikole’s team practiced for 6 months before they rolled the program out company wide. They made mistakes, improved, and made new mistakes. And they’re still committed to making improvements every week.
#5: Start with a solid foundation. Get your culture right first. And start with your core values. Make sure everyone on your team knows them inside and out.
What happens when you are transparent:
By teaching their employees to be financially literate, and by being transparent and allowing them ownership of the financials, Mike and Nikole have empowered their employees to really make a difference.
If the monthly forecast shows that net income might be negative, their employees are committed to making changes and cutting expenses where necessary. Because of this, in some months, Mike and Nikole have had positive 10 or 20 percent swings in net income without adding any additional revenue.
And because their team truly understands the value of a dollar, they are able to provide a better experience for the company’s clients. Everyone recognizes that marketing is an expense on the client’s budget. And they’re committed to maximizing the value for that client. The team members are thinking like business owners and they’re committed to creating the best customer experience that they can.
Lastly, one unintended consequence of implementing open-book management is that people take it home. By becoming more financially literate at work, they’re also better able to manage their home finances.
Here are my three big takeaways from this podcast.
I love the idea of creating a work environment about what people do, not where people go. Everybody comes to work because they want to do their best job. Nobody comes to work not wanting to do their best. I love how being transparent and open really allows the team to do their best.
Second, I like the idea of building a culture that is based on trust and transparency. Being transparent means reporting on your finances daily, weekly, and monthly. And you shouldn’t be adding or removing items when things go wrong.
Lastly is the idea of rituals. This idea of making a ritual, of having a weekly huddle where you are part of the team but not the one running it is a huge takeaway. For any agency, any owner, any leader, if your team rises up like this, know you’re doing a good job as a leader.
A challenge from Mike and Nikole:
As always, I asked Mike and Nikole to challenge us with one thing we can go ahead and do right now to take a step towards creating a culture of transparency and trust.
Here’s what they said.
Nikole: Push away the fear of exposing things like financial struggles. Trust the team that you have in place and be vulnerable. And start having those difficult conversations and allow the people on your team to help.
Mike: Come up with intentional and purposeful rituals. At one time our rituals were celebrating someone’s birthday or having a happy hour in the afternoon. We still will do those things, but we realize those aren’t really adding to the value of our company. Come up with rituals that are value-driven. Purposeful rituals that drive the value of the company — not just superficial happiness.