Jack Stack wrote “The Great Game of Business” 22 years ago. Probably the most revolutionary concept of the book was the idea that if a company’s management shares the historically secret financial data with all employees, those employees would make better decisions and the organization would thrive far better.
The experience that Stack wrote about was his own, turning around a struggling equipment rebuilding division of International Harvester, called Springfield Remanufacturing Corporation.
Stack had nothing to lose, since he was in charge of a near-bankrupt unit of the parent corporation. He was the “turnaround” guy, who wasn’t accountable for the mess, but was being asked to clean it up. So he had low risk.
As Stack will tell you, he felt almost forced at the time to open the books. He didn’t know enough about the business to make decisions, so he had to ask those who had been there longer what their ideas were. They replied that they couldn’t offer ideas until they were able to look at the “dashboard” to find out what the data indicated. At that point, Stack was reticent to do so, but finally realized there was absolutely nothing to lose.
Even then, if the causes were not public knowledge, it was easy for management to blame external factors over which they had no direct control.
Divulging “sensitive” information resulted therefore in public scrutiny and perceived dilution of influence. Stack’s notion was revolutionary, and almost universally rejected by leaders of the day.
Once Stack showed the successful revitalization of Springfield Remanufacturing, and touted his methods as key reasons, the “open book” management movement took off.
As it turned out, the success Stack enjoyed was not a fluke. Other private industry experiments demonstrated that the methods of sharing information and including broader constituents in decision making actually improved organizational competitiveness and performance.
Of course, there was no barrier to entry for adopting the methods, and as more organizations applied the methods, the playing field leveled once more.
The Great Fiasco, I mean Recession, saw a return to sequestration of the numbers and facts. Fear drove business owners and leaders back to keeping the cards close to the proverbial vest — fear of employee flight, lawsuits from shareholders, cancelled credit from lenders, etc.
Six years after the Fiasco, we are still clawing our way back up the economic ladder and have a couple of years more before we return to the employment levels achieved before the bubble popped.
I’ve experimented with the “open book,” in good times and bad, with my own businesses, and through the advice given to clients of my previous consulting firm. I found that in any market, sharing the financial and operational instruments of the business with all employees resulted in a better outcome than when the information was reserved for only those who had a “need to know.” This sharing requires some preconditions to be successful, however.
The first precondition is that the owners and management team can’t be doing anything they wouldn’t be proud to allow others to know. Sometimes this is where the “open book” initiative meets an early demise. Many a leader or business owner rationalizes disproportionate remuneration for themselves in the name of risks accepted, or devotion applied.
But often the self-serving nature of financial decisions causes them to fail the smell test of trustworthiness that staff apply when judging the integrity of their leaders. So the favored few claim the common employees aren’t educated or mature enough to handle the information as objective adults.
The second precondition is that the employees receive education about how to understand and interpret the data they will be getting. And even with constant repetition, it will take time for people to acquire a facility for the instruments that are shared with them.
Here at WD-40, we share the company financial data with whoever wants to see it. We educate people about the implications, the business model, the regulations of disclosure required of a public company, and how to apply the information to making better decisions.
This education process is perpetual. Things change. Models are adjusted. Regulations are created or modified. Not everybody understands the data right away. Some not at all. That has to be OK, because the broader positive impact is significant.
We’ve found that “open book” methods do indeed promote better organizational performance. They create a high common understanding of company objectives, the rationale behind the strategies selected to promote those goals and the decision making that is necessary.
Coupled with the principle of engaging with people as capable, autonomous adults, opening the books as wide as you can is like adding pistons to your car’s engine. Everybody knows how to push in concert to create more horsepower.
Sewitch is an entrepreneur and business psychologist. He serves as the vice president of global organization development for WD-40 Company. Sewitch can be reached at email@example.com