UNC Kenan-Flagler Insights

Embracing Open-Book Management to Fuel Employee Engagement and Corporate Sustainability

February 14, 2012 By Heather Harreld

By Anne Claire Broughton, Senior Director – SJF Institute, and Jessica Thomas, Managing Director – UNC Kenan-Flagler Center for Sustainable Enterprise

 

When the concept of open-book management was introduced more than 30 years ago, the intent was to unleash the entrepreneur in every employee and to spur them—and their organizations—to better performance. Since then, countless organizations have opened their books and engaged their employees with positive results to their bottom lines.

Organizations practicing open-book management:

  • Communicate the organization’s key measures of business success to all employees.
  • Share financial information (such as income statements, balance sheets and other key metrics) with employees; ensure they understand them; and show them how they relate to the organization’s key measures of business success.
  • Teach employees how to track progress on critical numbers through regular meetings and scorecards.
  • Allow employees to share in the organization’s success through a profit-sharing program that is tied to key business metrics.
  • Engage the ingenuity of all employees in solving key business challenges, such as how the organization can become more socially and environmentally sustainable.

Clearly communicated and understood goals—a hallmark of open-book management—leads to improved profitability and encourages teamwork. This leads to increased job satisfaction and reduced turnover. Organizations practicing open-book management report that employees:

  • Feel a stronger sense of ownership in the organization.
  • Develop more trusting and collaborative relationships with their employers.
  • Understand their organizations’ cost structure and make better informed suggestions for improvement.
  • Become more responsible in how they use their organizations’ resources because they understand the need for cost controls.
  • Are more innovative thinkers because they feel more vested in their organizations’ success.
  • See the big picture, allowing them to leave their silos and become team players.

Giving employees a view of the big picture also makes them more engaged, helps them understand how their roles fit in the organization, and how they can make a difference.

All of these factors lead to an improved bottom line. A study conducted by the National Center for Employee Ownership (NCEO) found that organizations which follow open-book management principles experienced a 1-2 percent annual increase in sales growth above typical sales projections.

Not surprisingly, these outcomes are also hallmarks of successful corporate sustainability initiatives that emphasize the triple bottom line of people, planet and profits.

According to a 2011 McKinsey survey, successful corporate sustainability programs do a better job of attracting and retaining employees. Executives in organizations with successful sustainability efforts also report that their employees are more knowledgeable about their organization’s operations than employees in other businesses, enabling them to devise efficiency improvements that lead to more sustainable operations.

Open-book management can significantly contribute to achieving and maintaining corporate sustainability efforts by integrating social and environmental metrics into the traditional financial measures of business success. Open-book management practices also contribute to corporate sustainability efforts by empowering employees with knowledge of the critical numbers, enabling them to see where their innovative efforts can streamline operations, saving money and resulting in increased sustainability.

Open-book management practices help to improve the triple bottom line by giving employees the information they need to make informed decisions and the ability to act. These newly empowered employees are more invested in the long-term financial sustainability of the organization because they feel ownership in the organization’s environmental, social and financial effects and are empowered to drive the top and bottom lines. Everyone shares the same mission and goals and can better collaborate to meet those goals.

Senior leaders who realize the highly complementary nature of open-book management practices and sustainability and who work to find ways to implement and integrate open-book management practices into their organizations will offer their employers a true competitive advantage.