Open-book management (OBM) is a

management Management (or managing) is the administration of an organization, whether it is a business, a nonprofit organization, or a government body. It is the art and science of managing resources of the business. Management includes the activities o ...

phrase coined by John Case of

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, who began using the term in 1993. The concept's most visible success has been achieved by

Jack Stack Jack may refer to: Places * Jack, Alabama, US, an unincorporated community * Jack, Missouri, US, an unincorporated community * Jack County, Texas, a county in Texas, USA People and fictional characters * Jack (given name), a male given name, ...

and his team at

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. The basis of open-book management is that the information received by employees should not only help them do their jobs effectively but help them understand how the company is doing as a whole. According to Case, "a company performs best when its people see themselves as partners in the business rather than as hired hands" (Case,1998 as cited in Pascarella, 1998). The technique is to give

employees Employment is a relationship between two parties regulating the provision of paid labour services. Usually based on a contract, one party, the employer, which might be a corporation, a not-for-profit organization, a co-operative, or any othe ...

all relevant financial information about the company so they can make better decisions as workers. This information includes, but is not limited to,

revenue In accounting, revenue is the total amount of income generated by the sale of goods and services related to the primary operations of the business. Commercial revenue may also be referred to as sales or as turnover. Some companies receive reven ...

profit Profit may refer to: Business and law * Profit (accounting), the difference between the purchase price and the costs of bringing to market * Profit (economics), normal profit and economic profit * Profit (real property), a nonpossessory intere ...

cost In production, research, retail, and accounting, a cost is the value of money that has been used up to produce something or deliver a service, and hence is not available for use anymore. In business, the cost may be one of acquisition, in which ...

of goods,

cash flow A cash flow is a real or virtual movement of money: *a cash flow in its narrow sense is a payment (in a currency), especially from one central bank account to another; the term 'cash flow' is mostly used to describe payments that are expected ...

and

expenses An expense is an item requiring an outflow of money, or any form of fortune in general, to another person or group as payment for an item, service, or other category of costs. For a tenant, rent is an expense. For students or parents, tuition is a ...

. Stack and Case conceptualize open-book principles in similar ways. Stack uses three basic principles in his management practice called,
The Great Game of Business
'.Stack, J. (1992). The great game of business. New York, Currency Doubleday. His basic rules for open-book management are: *Know and teach the rules: every employee should be given the measures of business success and taught to understand them *Follow the Action & Keep Score: Every employee should be expected and enabled to use their knowledge to improve performance *Provide a Stake in the Outcome: Every employee should have a direct stake in the company's success-and in the risk of failure Similarly, in 1995, Case made sense of open-book with three main points: *The company should share finances as well as critical data with all employees *Employees are challenged to move the numbers in a direction that improves the company *Employees share in company prosperity In a company fully employing open-book management employees at all levels are very knowledgeable about how their job fits into the

financial plan In general usage, a financial plan is a comprehensive evaluation of an individual's current pay and future financial state by using current known variables to predict future income, asset values and withdrawal plans. This often includes a bud ...

for the company. However taking a company from "normal" to open is not as easy as just sharing financial statements with employees. Open-book management is considered to be a success when companies allow improvements on their financial numbers to come from the bottom tier of employee rather than pressure exerted by a traditional top-down management system. (Johnson, 1992 * as cited in Aggarwal & Simkins, 2001). While employees need to be trained to understand

income statement An income statement or profit and loss accountProfessional English in Use - Finance, Cambridge University Press, p. 10 (also referred to as a ''profit and loss statement'' (P&L), ''statement of profit or loss'', ''revenue statement'', ''stateme ...

s and

balance sheet In financial accounting, a balance sheet (also known as statement of financial position or statement of financial condition) is a summary of the financial balances of an individual or organization, whether it be a sole proprietorship, a business ...

s; open-book management aims to achieve a level of understanding of company finances between all employees to the degree that they are able to report predictions to upper management. In order to motivate employees to strive for change, open-book management focuses on a "Critical Number". The number is different for every company but it is a number that represents a prime indicator of profitability or break-even point. Discovering this Critical Number is a key component of creating an open-book company. Once this is discovered, a "Scoreboard" is developed that brings together all the numbers needed to calculate the critical number. The Scoreboard is open for all to see and meetings take place to discuss how individuals can influence the direction of the "Score" and therefore, ultimately, the performance against the Critical Number. Finally a Stake in the Outcome is provided which can be a bonus plan that is tied to Critical Number performance or it can include Equity sharing or both.

Conferences

The Great Game of Business Conference
is the only practitioner-led conference on creating a culture of ownership by teaching employees to think and act like owners . At the event, business leaders learn from people who have used open-book management to increase the size, profitability and

employee engagement Employee engagement is a fundamental concept in the effort to understand and describe, both qualitatively and quantitatively, the nature of the relationship between an organization and its employees. An "engaged employee" is defined as one who i ...

in their companies . The conference consists of sessions, keynote speakers and workshops that are specifically targeted to each phase of open-book management.

Notes and references

*Shaffer, J. (2000). The Leadership Solution. ''McGraw-Hill'' 38–40, 98, 159; {{ISBN, 978-0070790636 * Open-source radio interview of a CEO explaining how his company functions under open-book management
Interview
Human resource management