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Open-Book Management

Paul Deffenbaugh

Years ago, Jack Stack wrote one of the best books about running a business ever penned. It's called, "The Great Game of Business." In a nutshell, Stack's theory is that the most dynamic game available in the country isn't baseball, basketball or football. The best game is running a business, and the shame of it is that so few people get to participate.

His solution? Open-book management systems. Stack believes that employees will become more vested in a business if they have a stake, if they get to play the game. To get them motivated, he involves them in the business at the most elemental level, sharing the financials of the company in a systematic way and with proper education so they can understand what's going on.

One of the great advantages of involving employees is that when they see the business for what it actually is, the myths of ownership get allayed. It's not unusual for workers to believe owners have a secret vault where they keep the gold bullion. They don't understand the true costs of operation. To show them that reality, open the books and demonstrate what's really going on in the business.

Show employees the cost of operations, marketing and overhead. Show them how much of the money goes to ownership so they understand that some years owners make money, but there are other years when owners are putting money into the company. It's called "risk" for a reason.

But most importantly, show employees who they can affect the bottom line. How their decisions can add value or reduce company costs. Then reward them for that. Give them a piece of the business as part of their compensation so they will work harder for greater return. In that way, everyone benefits.

In the construction industry, this kind of arrangement is especially valuable. Even during lean times, we've had to compete for quality employees. I heard a speaker once say that the first thing the construction industry does during a down cycle is turn around and kick the crap out of its workforce. During the housing recession, nearly 80 percent of the workforce was let go.

That's understandable from a business point of view, but that kind of environment doesn't attract the most motivated and reliable workforce. If you have quality people, it is essential to your long-term success to keep them, to keep them motivated and to get the best value from their efforts.

I believe an open-book management model is the way to work in the construction industry. It overcomes the burden of employee turnover and battles the viral scourge a disgruntled workforce. Those hits are hard to manage.

Would you be willing to open the books on your company and share your financials?


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