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You should use an open-book management style at your startup

Open-book management is a controversial style, but done properly, can be a tremendous tool at your startup or small business.

open book management

open book management

A firm endorsement of the open-book management style

Earlier this year on AGBeat, Destiny Bennett penned an overview of a subject that I am very passionate about: the open-book management style. Bennett provided a solid overview with some basic pros and cons, but I believe the subject deserves a deeper examination, and a firm endorsement.

Open-book management is as much a philosophy as it is a strategy. There are tactical, strategic and emotional components to evaluating its impact on an organization. I’ll touch on each below.

Private vs. Public

First off, there are very strict rules and regulations for public companies about what information they can share, with whom they can share it, and when they share it (when they can’t, when they can, and when they have to). This article is only about private companies, and is especially relevant for start-ups.

Tactical Implications

Bennett discusses the issue of making salary information known. While this is an issue that is important to every employee, any negative blowback from opening this information up to employees will be short-lived. Entrepreneurs will find that there will be immediate activity in the ranks when salaries are published, and some discussions will be required and perhaps adjustments will need to be made.

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Very quickly, though, the issue is put to rest. If anything, the information frees employees from guessing and gossiping about compensation and allows them to focus on their work.

Even more tactically important – opening up finance, strategy, and other information to all employees gives them the information they need to make smarter decisions, measure their performance, and think bigger picture. Empowering individuals with information also frees supervisors from a lot of micromanagement. This allows for increased time and attention for coaching, and focus on higher level issues, strategy, morale, and motivation.

Strategic Implications

Most entrepreneurs who do not employ an open-book style make this choice because they fear proprietary information will get into the hands of the competition.

Two comments here: 1) If your competition really wants to find out information about your operations, they’ll probably find a way to get at least some of the data they seek no matter what you do, and 2) Even if your competition gets confidential data, if you, management, and your employees are working well, it won’t really matter much at all.

There is tremendous strategic value to opening up information to all employees. Everyone is on the exact same page. Each member of the organization, top to bottom, understands the key performance metrics, where the company is measuring them, and what effect efforts are having towards meeting KPIs. Employees will not guess, gossip or speculate about risks or scenarios. Instead, they know the situation, the plan, and the actions upcoming, thus they can focus on the performance of their team and themselves. Knowledge powers people to work their best and frees them to focus on what is important.

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Emotional Implications

The emotional impact of implementing an open book philosophy is likely where you will see the greatest gains. The guiding principle here is to trust and empower your workforce to make them feel like owners. This is the most powerful motivational tool that an entrepreneur has. Eliminate a haves verses have nots culture at the company. Emphasize teamwork, individual effort and spirit for the good of the team, and shared responsibility and rewards for all.

Employees who take ownership at their job will work harder, longer, and better, and you will retain them at a much higher rate. They will be motivated to continue to earn this trust and the responsibility that comes with it. It is also important to provide options, profit sharing, bonuses, or some other “ownership” type compensation to your employees so that your open-book style is enforced in a financially tangible way too. Your employees will be self-motivated, and they will inspire each other.

Final Words

You have to believe in your employees. Every person you employ trusts you with his or her livelihood – financially and emotionally – and you owe it to each to trust in return. My advice is to hire well and then trust, share, and empower… and grow with your team.

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Written By

Hoyt David Morgan is an entrepreneur, angel investor and business strategy leader. He is an investor and/or adviser to a handful of exciting and high growth companies, and has been a part of several high-value exits. He is passionate about customer experience, smart business and helping innovative companies grow... and sailing.

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