Open book management is a term that scares many owners and managers of businesses. The top three objections - Employees will not understand it, sharing of wage information, and my competition will get a hold of the information. The objections hold little merit.
Employees manage their paychecks which really is not much different than how the company spends its money. Share the wage information as a % or aggregate number (they probably know what others make anyway). Your competition probably already knows more about your financial situation than you realize.
Still doubt that open book management is a good practice. Here is a real example of a company that did not practice any type of open book practices and this is what happened when they took the step (or risk as some may view it).
Their DSO (days of sales outstanding) for the prior three years were 48, 53, and 51 days and they had to access their line of credit the entire three years. They started opening the books in May of the next year. What do you think happened? Within two months their DSO was down to 45 days (the goal was to be at 47.72 by the end of the year) and they did not have to access their line of credit the rest of the year. It was a stretch for them to set the goal of 47.72, but they blew right past it. The power of sharing the information and getting the organization focused created a big win for the company.
The new goal for 2010 is 42 days and they have already hit that goal in month two! If you want to hear more stories like this you may want to consider attending the Annual Gathering of Games conference this May.
