“When you appeal to the highest level of thinking, you get the highest level of performance.” Jack Stack, The Great Game of Business
Not long ago, our business was growing quickly. We were adding people as fast as we could find them, sales were through the roof, and business was great.
With so much growth and so many new people on board, we knew we needed a better management system so that we could improve communication, maintain our strong business culture and stay on top of our financial results.
We found a better system in open book management.
If you are like most breweries, your business is growing fast, too. Sales growth is awesome, but it can leave you feeling overwhelmed.
It is a challenge to manage brewery operations, stay on top of the finances, and know what’s going on in the brewery. You want the sales growth, but you need to grow the right way. You need to grow smart, sustainable, and profitable.
Open book management provides a system to solve these pain points.
This article will provide an overview of Open Book management (OBM) so that you can decide if it is right for your brewery.
- What OBM is and how it can transform your brewery
- The OBM building blocks: Superior communication, sharing numbers and high-involvement planning
- How we did it in our company and the benefits we received
At the end of the article I will issue an OBM challenge to you. This idea is interesting on paper, but only matters if you take action and try it out in your brewery.
What OBM is and how it can transform your brewery
Open-book management (OBM) is a system where employees are provided with company financial information so that they can make better business decisions.
The idea is that employees are more motivated, engaged and productive when they are treated as business partners – who commonly have access to financial data – rather than employees.
OBM involves four basic elements:
- Training employees so they become business literate and can understand financial statements (financially literate)
- Empowering employees to use that information in making business decisions
- Trusting them as business partners with proprietary company information
- Rewarding them fairly for the brewery’s success.
Think about it this way – the financial statements are the scoreboard for your brewery and the numbers show whether you are winning or losing. They show you where you are in relation to your financial goals and how much harder you have to push to hit your targets.
If your employees don’t know the score, how can they help you win the financial game? Short answer is that they can’t. This is like blindfolding them and asking them to make beer. It’s not going to come out well.
Train them, empower them and trust them to make great decisions. Then reward them when the financial targets are achieved. This is the basic success formula for OBM.
The OBM building blocks
The premise of OBM sounds great, right? Training employees, empowering them and rewarding them for a job well done; this is all stuff we are doing already or we want to do for our teams.
The question is how exactly do you implement OBM in your brewery to make all this good stuff a reality?
The practical side of OBM involves three main pieces:
- The weekly meeting on steroids.
- Critical Numbers. Only those numbers that make a difference in your brewery.
- High involvement planning. Including your greatest minds (your employees) in the financial planning process
Huddles: Weekly Meetings on Steroids
A huddle is a weekly gathering to report financial results and communicate the most important business matters facing the brewery. Huddles are the time to make decisions and take action.
The key difference between a huddle and a regular meeting is that huddles communicate information in numbers.
The attendees to the meeting report on the financial results for their department. They present the actual numbers (income, expense, etc.) compared to the planned results, and explain any variances. Any negative variances are discussed openly by the group with the goal of finding a solution or corrective action.
This is the magic of the huddles. All the minds around the table working on the same problem: how to improve the financial results of the brewery.
A key difference between huddles and ordinary meetings is that huddles are open to all employees. This isn’t just for owners or department managers – it’s for everyone in the company. Imagine harnessing the brain power of your entire organization. Huddles can do that and help transform your company.
Critical Numbers
There’s no shortage of numbers you can track in a brewery. The key is to narrow down the list to only the most important numbers. These are the critical numbers.
A Critical Number is the “the center desk drawer number”. It’s the number that your department managers use to measure their success, productivity or effectiveness. The goal is to bring those numbers out into the open (get them out of the desk drawer) and report them at the weekly Huddle.
Another way to identify Critical Numbers is to take a minute and write down a number that is meaningful to you. What do you look at? What keeps you up at night? What do you worry most about?
Determine what is most important, measure it, and report it at the Huddle. You may find that someone else in the Huddle has the solution to the problem that’s been keeping you up at night.
High Involvement Planning
The traditional budget process can be a nightmare for everyone involved. A lot of time is spent creating spreadsheets that are outdated as soon as they are done. It’s a waste of time and money for everyone.
High involvement planning is an entirely different approach to the budget process. It empowers department managers and line employees to create their own plan.
Further, the plan is a ‘living’ thing. It is built to adjust and adapt to changes in the business. In this way, the plan is used all the time, instead of being hidden away in a three-ring binder somewhere.
Each department financial plan is shared at the huddles and serves as a weekly reminder of the financial goals of the brewery. If you are coming up short, everyone can see what is going on and help to fix the problem. If goals are being met and exceeded, everyone can celebrate in the victory.
High involvement planning allows employees to have a voice in the process and to shape the financial direction of the company. Imagine, all those minds working to create and achieve the financial goals of your brewery.
OBM: How we did it and how you can to
We implemented Open Book management in a time of rapid growth. We were concerned about keeping on top of our financial results, improving communication and maintaining a strong corporate culture. OBM helped us with all of these.
The first thing we did was hold a series of OBM meetings to explain what this was all about. We held group meetings with each department, explained the purpose of OBM, and encouraged questions.
Many people were skeptical about OBM, and assumed this was just another wacky management idea that would fade away after a few months. Others were interested and embraced the concept.
After the group meetings to explain OBM, we started our weekly huddles – weekly meetings on steroids. The ground rules of our huddles were pretty simple:
- Huddles would be held on the same day and time each week: Tuesdays 7am, no exceptions.
- Each department (sales, admin, etc.) was required to send at least one representative to report their numbers. The manager was not required to attend every huddle, but someone from each department needed to represent.
- The reps were required to do three things: Prepare, participate and lead. Prepare the numbers in advance, participate in the huddle, and lead their department discussion.
For the first few months, I would attend every huddle and assist with putting together the weekly financial scoreboard. The sales department would forecast sales and report their expectations for monthly revenue. The inventory manager would report on the cost of goods, and each department manager would report their actual and forecasted expenses.
At the end of each huddle we had a completed financial scoreboard. The numbers prompted lively discussion about how we were doing, and how we could do better.
While the communication during huddles was primarily done in numbers, there was time each week for sharing other business information.
We talked about new products that were being sold, new customers that had been signed up, and information about the beer industry in general. The communication in numbers kept us on track financially. The sharing amongst department representatives improved our communication, and kept our culture strong.
Employees want to be in the loop about what is going on in the business. They are always looking for details and are starved for information. Open book management is a great way to share information, open up lines of communication across departments, and help to manage the growth in your brewery.
Take the OBM Challenge
So, how do you get started? Take the OBM Challenge. Get a copy of the Great Game of Business by Jack Stack and read the section entitled Player’s Guide: How to get a game going in your organization.
The guide itself is only a few pages long but will fill you with ideas on how to test out open book management in your brewery.
Rapid business growth is exciting, but can leave you feeling overwhelmed. Open book management offers a new way of managing your brewery so that you can leverage the power of your team and gain control over your financial and operational results.
Take the challenge, and get the book. Take action and test out the ideas so that you can transform the financial results in your brewery.
