Share all relevant financial information with your employees

Companies that practice open book management share everything with employees: the balance sheet, the income statement, and a company’s unique “critical numbers” – the numbers by which that company can determine its success on a daily, weekly, or monthly basis. Critical numbers differ by industry – for instance, the number of garments a factory produces hourly or the percentage of quality-based returns a manufacturing company is getting.

I recommend: Determine what your critical numbers are and compare them with industry averages. Many industry associations publish annual state-of-the-industry reports that include some of these numbers. To find your industry association, search Google’s industry association directory. Once you know your critical numbers, post and update them on a bulletin board, white board, or an intranet for all employees to see. Take a look at this checklist for using critical numbers on Inc.com.

Make sure every employee understand the financials

Sadly, financial literacy is limited in this country. In order to practice open book management well, all employees – from the receptionist to the CEO – must have a solid understanding of income statements, balance sheets, and all of your critical numbers.

I recommend: Visit Bizzer Professional Training’s “Understanding Financial Statements” and Ameritrade’s “Understanding Income Statements” and share their explanations and examples with your employees. The point is not only for employees to understand the financials, but also for workers to understand how they personally contribute to company profits by increasing sales or controlling costs. If your company is project-based, try these Inc.com worksheets for tracking project-based progress and profits (free registration required).

Invest in open book management training

If you really want to make it work, take a training seminar or attend a conference devoted to open book management.

I recommend: Jack Stack, CEO of Springfield ReManufacturing Corp., in Springfield, Mo., was the pioneer of open-book management. Stack took his expertise and started a consulting company called The Great Game of Business (also the name of his book). To attend the company’s annual convention, The National Gathering of Games, visit The Great Game of Business. If you simply want to educate your employees on the financials, inquire about courses at your local Small Business Development Center. In addition, here are two good sites that offer financial training either on-line or in person: Missouri Small Business Development Centers and Cornell University’s online courses. Learn better from games? Try the business simulation “Income/Outcome” from Andromeda Training.

Reward employees by sharing the financial results

Employees will be even more motivated to take responsibility for their contribution to the company’s performance if they share in the rewards.

I recommend: Set up a profit-sharing program. Find a profit-sharing service provider at the Profit Sharing/401K Council of America.