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What's Going On Behind Closed Doors

What's Going On Behind Closed Doors

October 25, 2017

How much are you willing to share? I mean really share. Real information. Financials.

You may have heard this term in passing, “open the kimono” (business jargon for sharing the inner workings of a company), but when was the last time you stopped and actually thought about doing it yourself?

Jack Stack in his book, The Great Game of Business, was one of the first to popularize the concept of open-book management.

I’ll cut to the chase. We live in a world of transparency. For better or for worse, we can all see what our long lost buddy from college ate last night for dinner on social media. We can Google a vacuum cleaner brand and read all of the customer reviews, the good, bad and the ugly. “Behind the scenes” videos are some of the most popular ones out there. We like to see what’s going on behind closed doors.

This transparency has made its way to the business world and it’s here to stay. Millennials, in particular, value and seek transparency in a work environment. They’re not satisfied to just do their work, get paid and go home (like many Boomers were happy to do). They want to understand how they contribute to the company in a real way. They want to be part of something bigger.

Now I get it, trust me. As a business owner myself, I know how scary transparency, especially financial, can be.

What’s the biggest fear? Salary divulsion. It sounds like this...

I don’t want my employees knowing how much make.

I don’t want my employees knowing how much other employees are making- they’ll think they’re getting taken advantage of.

If they know the company is doing well financially, they’ll demand a higher salary.

If they know the company is doing poorly financially, they’ll lose faith in the company and panic.

These are very real and valid concerns. But here’s the bottom line about your bottom line. Open book management is about looking at the bigger picture.

Ask yourself: am I willing to get over the initial discomfort and yes, maybe take some small hits, but shoot for the bigger goal of building a team of owners?

If the answer is yes, then you need to start opening that kimono.

Check out Darrel Bishop, President of MetalTech. They were 20% short one month. He opened his books and here’s what happened…

By sharing your financials and showing all of your employees (yes, even your secretary!) how they contribute to the bottom line, you shift their mindset dramatically. You take them out of a passive mindset where it’s all about what the company can do for them, and move them into a proactive owner’s mindset who’s eager to solve problems and take initiatives.

You build an environment where they see for themselves how they’re making a difference and reward them based on behavior associated with real numbers. It creates a culture where it’s not about clocking time at the office but about getting results.

By letting them in on what’s really going on, you enable them to step up and perhaps come up with new ideas or solutions that you may never have thought of on your own.

When done right, transparency is a help, not a hindrance.

One complaint I hear all too often is that employees, especially millennials, have a grating sense of entitlement. They expect to be rewarded and recognized just for showing up. (After all, they have received “participation medals” in elementary school…) They feel deserving of things they haven’t earned. They’re overly sensitive to criticism and easily feel taken advantage of.

Now let me turn the tables for a second. If employees have no clue as to what’s really going on in the company and how their performance affects the bottom line, they’re naturally going to assume the worst! They’ll consciously or subconsciously believe that their employers are taking advantage of them, getting rich while they, the employees slave away.

Is this true? Probably not. But your employees will likely believe that unless you show them otherwise.

That’s right. I’m saying that it’s on you, the owner, to replace entitlement with ownership.

Now for 2 practical tips...

1. Open Book Management is a Scale

Open book management is not an all or nothing. Think of it as a scale from 1 to 10. The more you share, the more people will understand and feel responsible for. But that doesn’t mean you should share everything with everybody. You choose how much to share, with whom and when.

2. Create Quantitative KPIs

Create a sense of ownership, literally, by tying salary to performance. But here’s what often gets in the way: how do you set quantitative metrics to assess performance in jobs that don’t easily lend themselves to simple metrics?

Check out how Landsharks, a retail line, created quantitative KPIs using this simple formula.

Being transparent is how you build honest, trustworthy relationships. And building, and maintaining, relationships is what successful business is all about.

Taking you from where you are to where you want to be,

Jon