In early 1998, I was browsing through the bookstore, looking at the shelves in the business section. Something always jumps off the shelf when I do this and, mysteriously, the subject matter always seems to be just what I need at that moment in time. I found myself in the checkout line holding Open-Book Management by John Case (April 1996). The book referenced a real world example of open-book with SRC Corp in Springfield, MO. CEO Jack Stack, who had single-handedly invented the process of open-book management, wrote a book called The Great Game Of Business. So, I read that, too. That’s when I decided to implement open-book at Harrington Group. But first, we had to learn how to make it work.

How did I start?

The Internet was a much more open place in the 90’s. Finding John Case’s e-mail address was easy, so I sent him a message. To my surprise, he responded. I gave him a snapshot of Harrington Group and mentioned what I hoped to achieve with open-book.

With John’s help, I contacted a local group of CEO’s trying to improve their companies by implementing open-book principles. I contacted them and  joined forces.  We organized our first meeting and hired someone to facilitate the meetings. During the two years we met, I had launched Harrington Group’s open-book management system, refined it, and even had it audited. I hired a facilitator, an expert trained by Jack Stack himself, to audit our approach and make suggestions. 1999 was the first full year of open-book management. The process was continuously refined.

Implementing Open-Book Management

Open-book management isn’t a change you can make overnight. Opening your financial statements is a small part of a larger process. After learning how to implement open-book management, you have to convince partners and administrators that the process is valid and worthwhile. By teaching others how the process works, they will gain an understanding of the potential benefits. Having everyone on-board for implementation is crucial. Incubating open-book management within Harrington Group took several months.

We set up a bonus system that tied directly to performance on our critical numbers and paid out only if we reached our goals. We set annual goals for key critical business performance areas:

  1. Net profit  (profitability)
  2. Overhead rate (productivity)
  3. Collection period (collect the cash)

Agreement was reached and goals were set, but a key element was still missing: participation. For open-book management to work, employees had to be motivated. There is a trade-off in open-book management between employees and employers. The handshake is that they can have more knowledge and more ownership if they are capable of handling the responsibilities of the business. With the new risks are potential rewards – no boot camp required. Instead, everyone participates in the great game of business.

By Jeff Harrington, CEO and Founder of Harrington Group, Inc.