An article I read recently described Open Book Management (OBM) as "Doing Business in the Buff." The analogy is certainly a strong one and goes a long way towards depicting both the degree of openness that is required and the reason why business leaders find it so daunting.
Yet, that begs the question as to why. Employees can be said to be investing their life in the business so surely that gives them the right to be treated with greater respect and trust? Isn't withholding this information misplaced elitism and a fear that 'ignorant' employees will kill the golden goose by demanding a greater share for themselves when they see how well the business is doing?
Even the most ardent proponents for OBM admit that it only works if you have some kind of profit-sharing arrangement. The argument is that "tying in profit-sharing with open books is crucial because you share what the company makes." This is unquestionably true. However, any claim that this in itself will create more motivated, engaged employees needs to be challenged.
Certainly if the emphasis is on the word more, the statement is probably indisputable. But whether it eliminates the deepest vestiges of employee disengagement is debatable. This is because the methods for distributing the profits all too often remain inequitable. Human nature is such that no matter how much better off you are as a result of something, if the method of sharing is inequitable, you will feel hard done by and become jealous and resentful.
This may be why, despite the increase in employee share ownership plans and profit sharing schemes, employee engagement surveys continue to show that employee disengagement is spreading. Profit sharing will only have a minimal effect in countering employee disengagement as long as the profit sharing is inequitable. Perhaps, this very inequity is also why owners and managers are so reluctant to open their books - and do see it as "stripping off."
But there is more to it even than that. Peter Drucker wrote, "The worker should be able to control, measure and guide his own performance ... The worker will assume responsibility for peak performance only if he has a managerial vision…" (The Practice of Management) How can employees have such a vision without any understanding of how their actions affect the business and how the business is doing?
Thus to have the level of employee engagement that will ensure the sustainability of your business you must have:-
- Universal employee ownership i.e. every employee having a stake in the business
- The employee stakes must be equitable with concomitantly equitable returns
- Every employee being in a position to "control, measure and guide their own performance"
- Everyone understanding how the understanding the business works and how it is doing
These are the 4 essential ingredients of OBM and if you are missing any one of them you have a problem and a potential recipe for disaster.