Have you ever wondered why some enterprises keep failing while seemingly similar ones thrive?
I have. And after studying hundreds of businesses and leading a handful, I can affirm that enterprise success is the biggest mystery of all.
You can do everything right yet still be struck with bad luck and fail miserably.
There’s hope, however. Luck aside, ventures that repeatedly show up with stronger market share and higher profits than their competitors share one essential dimension.
It has to do with leadership.
I mean, the kind of leaders who understand the importance of transparency and open-book management.
You know, the ones who make a key point of educating their team members on all aspects of the business.
In such companies, knowledge isn’t kept secret. Essential business information isn’t restricted or used as a tool to demonstrate power. Instead, critical numbers are constantly shared and co-analyzed to keep improving performance.
To be clear, I’m referring to key financial statements that keep everyone on the team focused on the business’s most critical issues.
And, if you want a refresher on income or profit and loss (P&L) statements, please look at my previous post on The 6 Habits of Extremely Successful P&L Owners.
I’ve seen the difference it makes when everyone in the team turns fluent in the income statement and balance sheet analysis.
So, how can you get started with open-book management?
Here are a few rules that greatly help:
1 – Adapt income statements to focus on what was happening inside our business.
Don’t get overwhelmed by tiny details. From customers down to suppliers, focus on the most significant contributors – think 80/20 rule – and expand from there.
You should also slice the numbers so that every team member can see the direct impact of their work on the business performance. In other words, ensure everyone is the clear owner of one number with a direct link to the bigger picture.
2 – Build accountability at every level of the team
Once team members own a number, they’re not only in charge of reaching it. They define it and should end up forecasting their performance.
It doesn’t happen overnight, but you don’t need an MBA to figure this out. Once everyone on the team understands the connection between their domain and the greater business, they are the most accurate forecasters.
It can be painful and very approximate at first. Still, as you all keep discussing and forming an educated opinion on the numbers, you will build a predictable machine.
3 – Enable strong discipline for action-biased analysis
Make sure you divide our annual plan into chewable chunks that you analyze with the team on an ongoing basis.
Most key performance indicators can be reviewed weekly or monthly. So, don’t wait. And if actuals deviate from the plan, then take immediate action.
Don’t turn it into a blaming game when you’re off on a number. Instead, focus on understanding the root cause and fixing the issue.
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Open-Book management starts with a simple question: How is our business genuinely doing?
From there, it can take as many forms as you have business types. It can become complex, but most importantly, it only works if leadership is open to playing the game.
Lastly, don’t get discouraged if your bigger corporation doesn’t seem to align with open-book management. Start small with your team. Find a few key performance indicators you can share transparently and link your collective work to the team’s performance.
You’ll build more engagement and trust than anyone else, and your performance will soon be noticed.
And if you need help along the way, just reach out, and let me be your guide.