The benefits of open book financing

What is a positive company? It’s the idea that businesses can and should not only create economic value, but also provide great places to work, be a good neighbor and help solve some of the world’s greatest challenges.

So how does this apply to finance? Michigan Ross professor Wayne Baker says opening your books to employees and showing how they drive numbers can improve business performance and keep people energized.

It’s a practice known as open book finance and used by more than 4,000 companies worldwide, including Southwest Airlines, Harley-Davidson and Whole Foods. Baker has studied open book finance in several organizations and published a related case study.

You can learn more about this and other ways to build a positive business at the 2015 Positive Business Conference at Michigan Ross.

“There’s always this assumption that finance exists ‘out there’ disconnected from operations and disconnected from sales and marketing,” says Baker, Robert P. Thome Professor of Management and Organizations. “An interesting question to ask is: Who creates the financial numbers in your organization? The answer you usually get is the CFO or accountants. But the truth is that everyone creates the numbers. Everyone takes actions that affect these numbers.

Implementing open book finance is not just about allowing employees to view financial statements. When done well, it connects financial results to the operations that create the numbers. It actively connects macro to micro, and anyone can learn it.

So how should you get started? Start small, says Baker. Get people to see business as one big game, where everyone knows the rules, has a stake in the outcome, and enjoys a collective reward if the game is won. Some companies have had success starting with mini-games to solve particular problems.

However you start, keep three principles in mind:

  • Educate — know and teach the rules
  • Empower – follow the action and keep score
  • To hire — provide a stake in the outcome

It is not an effort that can be executed successfully from the top down. Games should be organized in “huddles” where participation is voluntary and the group takes full ownership of the process. It’s also a good idea for a company considering open book financing to visit or learn from companies that have handled it.

“When a new 18-year-old employee knows all the key company metrics as well as the CEO, you can expect an extraordinarily dynamic workplace,” says Baker.

Learn more about positive business and how it applies to you and your business at the Positive Business Conference 2015, May 14-15 at Michigan Ross. Registration is now open.