Thanks to the practice of open book management (OBM), business owners are keeping employees involved with their business and empowering them to have a voice in managing their business. OBM can turn a disinterested employee into a happy and productive one.
In his book,Open-Book Management: The Coming Business Revolution, author John Case said employees should be rewarded by being partners in their business. They should take direct action when circumstances require it and understand what the business is all about. He noted that in OBM, “every employee learns to understand the company’s financials, along with all the other numbers that are critical to tracking the business’s performance.
“Employees assume that, whatever else they do, part of their job is to move those numbers in the right direction. Employees have a direct stake in the company’s success.”
OBM AND THE HVAC TRADEHVAC contractors and suppliers have also used OBM in their own businesses with a great deal of success.
Clay Blevins of Comfort Supply, Nashville, Tenn., holds regular staff meetings to discuss issues facing the management-employee team. “OBM truly spreads the responsibility of being an owner over the entire team,” he said. “The end result is a highly productive company.
“My measure of sales per employee is higher than most HVAC distributors, and we have doubled in size in three years. I believe that is a direct result of the entire staff participating in the business with the passion and enthusiasm of an entrepreneur.
“Employees at my business take ownership of the results and they know what the numbers mean. In essence, that helped changed my job function from being a manager, to an encouraging coach and teacher.”
Don Langston of Aire Rite Air Conditioning & Refrigeration Inc., Huntington Beach, Calif., said his company’s move to OBM has been calculated and measured - and successful.
“Currently we are practicing certain aspects of OBM,” he said. “It has not been fully implemented to the level that I envision, but we are sharing more and more information with our field and support team members.
“Over the past three years, we have been sharing more information with the middle managers and field supervisors. At our monthly service meetings, we have been giving our field technicians more information on direct labor and other controllable costs and how we are doing as a company. We are a work in progress as a company implementing OBM. The next phase will be to share in the profits, reward those as a team who are reaching their critical numbers.”
Mark Lammert of Crescent Parts & Equipment Co. Inc., St. Louis, said OBM is a good process for his company “because it helps us become a more efficient, profitable company by getting everyone to pull in the same direction. OBM provides the basic framework for our employees to know what the financial goals are for our company, to know how they are progressing towards those goals day-by-day and month-by-month (scorecards), and to be financially rewarded for their efforts through a bonus program (a stake in the outcome).”
Blevins added, “Personally, I feel that OBM gives me a higher purpose as a business owner by giving the average employee a chance to participate in the entrepreneurial process. I want to provide an environment where talented people can learn about business and leadership exponentially faster than they could at the average company.”
CAN OBM WORK FOR EVERY BUSINESS?Although OBM has proven successful results, it doesn’t mean everyone embraces it. Langston admits that his father, who started the business, is classic old school and has always been leery of sharing financial information. He said his father is resistant to the idea of sharing profits as a reward but Langston is encouraged that he will eventually come around.
“My father has become more comfortable with many of the principles of OBM, and he will be joining me on a two-day workshop on the topic this fall,” he said.
Blevins said he has no concerns about the confidentiality aspect of OBM - at least not now. “It was not an easy decision to share my company’s financial information with my employees,” he said. “Ultimately, I decided that it really doesn’t matter if a competitor sees my financial information. Publicly traded companies deal with that everyday, why can’t I? There isn’t much my competitors can do with my numbers anyway.
“Most businesses in the HVAC trade have very predictable numbers, and there aren’t many revelations there in the first place. I do not require the entire company to sign a nondisclosure. That being said, I do feel uncomfortable when an employee leaves my company to work for a competitor. I have, on some occasions, requested an employee to sign a confidentiality agreement in that case.”
Langston agreed. “We do not feel uneasy sharing confidential information with our employees,” he said. “Numbers and financial data are the language of business. How can you communicate with employees if you can’t talk about the numbers? How do they know if they are meeting their goals if you don’t share financial data with them?”
He said that in order to participate in OBM and the bonus program, Aire Rite employees are required to sign a confidentiality agreement at the start of every year. According to Langston, nobody has refused to sign to date and during the 10 years his company has been practicing OBM, it has not had a problem with any employee disclosing confidential information.
Lammert feels that any business in the HVAC trade is a candidate for OBM, even ones that traditionally have been hesitant to be open with their employees. “OBM could work for any HVAC company that is willing to share at least some of their financial information with their employees,” he said. “I realize some owners may be reluctant to share financial data. They could start small however, and share what they are comfortable with - maybe just sales and gross margin data. OBM could work fine in that type of an environment.”
With the exodus of so many employees from the HVAC trade in recent years, Blevins sees OBM as the right solution for keeping employees involved and happy. “There is tremendous competition for talent in this industry,” he said. “And I believe OBM can provide an engaging environment for high-performing people to thrive.
“OBM will work for any company that wants to be successful.”