Is it Time to Open Your Books?
I can remember having a discussion with an entrepreneurial friend of mine. He had just met with Jack Stack, the legendary head of SRC and author of The Great Game of BusinessTM. We were talking about the merits and difficulties of opening up your books to your employees. I was against opening the books for multiple reasons. First, I didn’t like the idea of people knowing what each other made from the business. In my experience, that only resulted in weirdness as people questioned why Sally makes more than Joan. Second, I didn’t like the idea of people knowing how much money I made or even the company. Knowing what happened over the course of a month or even a year didn’t tell the whole story. I had had very lean years starting the company where I barely made any money and people might see our revenue numbers and think I was really piling up the cash. Finally, I just didn’t believe it would motivate anyone. People are fundamentally motivated by a common purpose, not money.
Over the next few years, I was exposed more and more to the Great Game of Business system and started to see it implemented with a few of our clients. The results I saw were impressive, not only financially, but culturally. I was particularly impressed by how much people in Great Game companies knew about their business and how they could succeed.
Slowly I began to gain insights that melted my fears away. Here is what I learned that allowed me to implement the Great Game at People Centric.
- Open Book does not Equal Open Salaries - This is a common myth. Opening the books does not mean giving everyone in the company a password to your QuickBooks account. It does mean helping your team to understand how your business works. Salary lines are often combined into a total earnings line along with taxes and sometimes with other expense lines. You get to choose what details you show to your team as long as it is all there and gives everyone insight into how the business is run. Plus, I began to realize that I wasn’t doing anything wrong in how I paid my people. Let’s be real, many of them already know what each other makes. As long as I am being fair and communicating well, there shouldn’t be a major problem. This was confirmed when I heard a story about a business owner whose accounting department accidentally emailed the entire staff a list of employees and their salaries. The company had 500 employees and had a good compensation strategy. The CEO braced for repercussions, but there were none. Lots of organizations run completely open without difficulties including government and non-profits.
- I’m Not Doing Anything Wrong - If my people were barely making a living wage while I was bringing home millions of dollars, then maybe I should be embarrassed by how much the company makes. That simply isn’t the case. The average business in the US makes a profit of about 7-8%. What does the average employee think the average profit is? 37%! The lesson from this is that the average employee thinks you are hoarding a lot more money than you probably are. Another key is helping your employees what profit really means. What happens when the company makes a profit? How is it invested into growth or put away for a rainy day? What happens when a company loses money? Where does the money come from to make payroll? All of these realities are helpful for employees, but require education on how a business really works. Basic financial literacy is critical to being open book.
- Clarity of Purpose is a Key to Motivation - A lot of people talk about the bonus program recommended by the Great Game as a key to motivation, but that really flies in the face of what I know about motivation. What I learned over time is that the bonus program isn’t the motivator, it the clear and aligned purpose that the Game brings. The bonus serves to align people with the idea that they can be successful when the business is successful. Its to encourage employees to think like owners because they truly have a stake in the outcome. Most bonus systems fail because they don’t include a deep understanding of the business and how day to day decisions impact the profitability of the company.
Don Harkey has recently become certified to coach the Great Game of Business. If you’d like to learn more about this program and what it can do for your business, contact Don Harkey at DonHarkey@peopleccg.com and we will send you more information. Maybe it’s time for you to get in the game!