• Open-book management: Using ‘transparency’ in a sentence

    Reylito A.H. Elbo

    Reylito A.H. Elbo

    IF you were in management, how would you accept sharing financial information with the employees? If this sounds like suicide to you, then pardon my Japanese. But if you’ve an open mind and would like to understand a different view, then this piece is for you.

    Since time immemorial, one of the root causes of conflict is our lack of sincerity and transparency in dealing with people. If there is no record to talk about or if the document proves to be lacking in substance and procedure, then we readily perceive the concerned individuals to be evil, corrupt, and morally bankrupt.

    Really, perception is one great equalizer by people who are always left in the dark.

    Joseph Pulitzer (1847-1911), a newspaper publisher and former congressman from New York who led a crusade against corruption said, “there is not a crime, there is not a dodge, there is not a trick, there is not a swindle, and there is not a vice which does not live by secrecy.”

    If you’re not telling it straight, then it means only two things—either you’re dead or deaf. This is not a general indictment of those in the government. The private sector too, has its own share of corrupt practices. Even the religious sector too, and the so-called civil society. In other words, everyone appears to be on the take. The only difference among these people is the degree of their loot and how they’re shrewd enough to delay the legal proceedings.

    This is not to say that I know everything on how to fight graft and corruption. But to tell you, at one brief time, I studied how to prevent graft and corruption in business with the help of some well-meaning people. As part of a pilot group under the Integrity Initiative project, I learned five basic and simple terms: communication, honesty, excellence, authenticity, and truthfulness—by which, if you will arrange the first letters of these words will lead you to a mnemonic term called “CHEAT.” It is one powerful term in the universe that destroys people and organizations, even those who profess good governance.

    And so how do you avoid management cheating or at least avoid wrongful employee perception?

    One approach is by an “open-book” system. The term was coined in 1993 by John Case, but became popular when Jack Stack wrote the 2001 book “The Great Game of Business.” The hypothesis behind open-book management (OBM) is to share with all employees about the company’s financial information like revenue, profit, cash flow, and of course—expenses, among other things.

    Case and Stack are saying that all employees must be treated like stakeholders in business, rather than wage earners. With financial information in their fingertips, the workers are expected to understand how to run the organization and make better decisions on how to improve it.

    OBM is the central and dominant employee engagement policy of one business processing outsourcing (BPO) company that I visited recently. Forgive me for not disclosing the name of this BPO as I don’t have any permission to disclose it. But I swear they’re extremely hot and literally ecstatic about OBM that has been in place since 1998 to put “every employee to do his or her part in taking the business where it needed to go.”

    This BPO company claims that OBM has helped reduced its attrition rate to a manageable level and confirmed by their morale survey where 98% of employee-respondents claim it is one best way to contribute to the company’s performance.

    However, practicing OBM is not without obstacles. Obviously, if the workers know how much money the company is earning, the tendency is to ask for more. But this is best cured when management has the untarnished image to convince the workers that they are set aside for future expenses or investments, and also to ensure that they perpetuate the business with their clients.

    Another possible issue is the high risk of misinterpreting financial data. That’s why this BPO organization has a several training programs to help teach the workers on how to read financial statements and other relevant reports like balance sheet and income statement.

    With OBM, this BPO continues to uphold its sworn strategy to be transparent and continue with its open communication program with employees. To put the money where its mouth is, the company gives employee cash incentive that range from 1 percent to 5 percent over the target profit.

    Personally, I think OBM is one strategic cure against high attrition and is one sure fire way to engage the employees. I would say without blinking an eye that it is the most imperative policy in contemporary management. Without it, people managers can’t use the word “transparency” in a sentence.

    Rey Elbo is a business consultant specializing in human resources and total quality management as a fused interest. Send feedback to elbonomics@gmail.com or follow him on Facebook, LinkedIn, or Twitter for his random management thoughts.


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