I planned on reading the book and blogging about it earlier and am finally getting to it now that I’m posting every day. I read the book right away, however.
I also just came across an article in the April 2013 HR Magazine “An Open Book” by Dori Meinert that basically discusses the same topic.
So with that, I am going to blog about both because I love the concept!
Both books encourage companies to be transparent with their information and encourage all employees, including line employees, to participate in important business decisions. Open up the books to all employees and start encouraging them to think like they are owners of the company. Hence the titles An Open Book and Ownership Thinking!
Hams’ subtitle, “How to End Entitlement and Create a Culture of Accountability, Purpose and Profit” directs you to his focus of where he sees the problem with many companies today. He believes that entitlement is the “insidious disease” crippling companies and destroying our economy – not the recession or scandal. That too many employees think they are entitled to a paycheck just because they show up for work. He understands that many of these employees actually want to do a good job and contribute to their employers in a meaningful way but they need an environment to do so.
His book provides the framework for doing this and breaks it down into a four step process:
- The Right People: Ownership Thinking creates an environment that promotes learning and development, while at the same time increasing visibility and accountability. Your best people will excel, and your poorest performers are generally self-selected out by their peers.
- The Right Education: Employees are taught the fundamentals of business and finance, so that they are better equipped to make decisions that are financially sound.
- The Right Measures: Rather than focusing only on lagging financial measures, an emphasis is placed on identifying the most critical leading, activity based measures (Key Performance Indicators, or KPIs), and utilizing those KPIs to forecast results on a regular, formal basis.
- The Right Incentives: The process of employee education and focusing on the right measures in an environment of high visibility and accountability will increase your organization’s profitability – guaranteed. We can now design and implement a broad based incentive plan, because it is self funding.
Meinert’s article encourages the concept “open-book management” of sharing financial information with all employees and including them in the decision making process. She gives several examples of companies that have successively practiced open-book management including SRC Holdings who claim it requires more than just sharing financial statements and should include:
- Teaching employees to understand the business and what makes it profitable.
- Helping employees determine how they can affect the bottom line by setting companywide and department-level goals, keeping score, and holding people accountable.
- Providing employees with a stake in the outcome, through bonus and incentive programs that encourage them to get involved in improving business results.
She also talks about how rare transparency is and how reluctant corporate management is about sharing financial information with the rank and file.
Only 7 percent of private companies share financial information with all workers, according to an April 2012 survey by Robert Half Management Resources. Another 17 percent provide quarterly or annual financial data to select employees, while 76 percent don’t share financial updates with employees at all, the survey of 1,300 chief financial officers found.
Many CFOs and CEOs “don’t want to let the secrets out because they are afraid … information is going to get to their competitor that can harm them,” says Paul McDonald, a senior executive director at Robert Half.
I fully understand these concerns but I would like to think that companies can trust their employees and would increase the trust these employees have of management if they would be included in discussions and important decision making and are taught to understand the financial information of the company.
Meinert breaks the process down to three steps which you will note match up with Hams’ steps 2-4 and, ironically, leaves out the “people” element:
- Financial Literacy Training
- Keeping Score
- Cash Incentives
I think teaching all employees to understand the company’s financials and including them in decision making and keeping them “in the loop” is important to the long term success of any company. The process helps create a strong culture of engaged long term employees who actually care about the contribution they make towards the big picture because they understand how it all relates.