The Value of Open-Book Management
For this shop, it helped motivate employees to work more efficiently because they can readily see how their performance affects the company’s bottom line.
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Ogden, Utah’s LeanWerks practices open-book management (OBM), a management style in which a business’ financial information is regularly shared with all employees. In fact, Reid Leland, who started the company in 2003, says it represents the cornerstone of his company’s culture.
OBM as it is applied at LeanWerks has three primary elements: financial training, feedback and profit sharing. That said, Reid says this management style is not a panacea. Learn more.
Reid Leland’s LeanWerks offers financial training to new employees as part of its OBM approach, covering topics such as the gross profit to operating expenses (GPOE) ratio. GPOE is calculated each day and presented to employees on a large monitor inside the entrance to the shop area. This simple metric shows if the shop is profitable on any given day. Simply put, the company makes money on days in which the ratio is higher than 1, loses money when the ratio is less than 1, and breaks even when the ratio is precisely 1. Profits are shared with employees when total GPOE for a month is 1.2 or higher.
