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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.

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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.

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.

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.

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.

Business Entrepreneur

Is this normal (you wonder about your business)?

(ENTREPRENEURIALISM) It can be lonely not being able to openly ask potentially embarrassing questions about your business – there’s a way to do it anonymously…

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Entrepreneurialism is wildly rewarding – you are fully in control of the direction of your company, and you’re solving the world’s problems. But it’s also isolating when you’re not sure if what you’re experiencing is normal.

Sure, there’s Google, news networks (like ours), and professional connections to help you navigate, but sometimes you just want to know if something simple you’re seeing is normal.

Is Instagram Stories really where it’s at? Probably not if you’re a consultant.

Is it normal for an employee to attempt to re-negotiate their salary on their first day? Nope, but how do you keep the desirable employee without being bullied into new terms?

Do all entrepreneurs spend their first year in business as exhausted as a new parent? Sometimes.

You have questions, and together, we can share our experiences.

We have a brand new Facebook Group that is already wildly engaging, active, and you’d be amazed at how selflessly helpful people are – and we invite you to be one of them.

Want to anonymously ask a question about something you’re unsure is normal or not?

Click here to submit your question, and we’ll select as many as possible to discuss in the Facebook Group!

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Business Entrepreneur

Amazon on a collision course with politicians as they strengthen their monopoly

(BUSINESS) E-commerce has come a long way in the last decade, specifically led by Amazon, but are their controlling ways putting them on a collision course with regulators?

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In March, Amazon stopped replenishing weekly purchase orders for tens of thousands of vendors in a move that has stirred up some trouble. The tech giant has once flexed its power over first-party sellers over their platform. And it’s not the first time.

Amazon originally sent out to vendors as an automated message citing the hold up in orders as a technical glitch. The following day, vendors were told the change was permanent. The affected vendors were categorized as making $10 million or less in sales volume per year and not having managers at Amazon. Vendors selling specialized goods that were difficult to ship were also a factor.

The effects can have remarkable effects on the market as Amazon’s algorithms decide who is able to sell what to whom via their near-ubiquitous platform. According to John Ghiorso, the CEO of Orca Pacific, an Amazon agency for consultation and manufacturers representatives, the decision is driven by financial data such as total revenue, profitability, and catalog size.

In a response from an Amazon spokesperson, the change was made in order to improve value, convenience, and selection for customers. The mass termination of purchase orders and the delayed response from Amazon herald the transition to the One Vendor system, putting vendors in an exclusive relationship with Amazon. This system will merge the current Seller Central and Vendor Central.

Amazon’s message is loud and clear: they will do what’s in their best interest to mitigate the market for their convenience. One may be reminded of the anti-trust lawsuit against Microsoft in 2001.

The lack of warning didn’t do them any favors either.

While smaller businesses need to change for Amazon’s program, first-party business will revolve around larger brands like Nike with whom Amazon is maintaining a relationship.

Despite the streamlined platform Amazon is going for, the company wields power over vendors and customers alike. Capitalism is one thing, but monopolies are a whole other ball game, and politicians are finally paying attention.

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Business Entrepreneur

Culture Codes is the guide you need for company culture questions

(BUSINESS ENTREPRENEUR) One of the biggest sellers of a company to a prospective employee or customer is their culture. Culture Codes has compiled some the biggest companies cultures in convenient decks for you to study and align with.

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Organizational culture is a hot button of conversation. While a variety of definitions exist, one way of defining Culture is the way businesses exist – a summary of values, rituals, and organizational mythology that helps employees make sense of the organization they work in.

Organizational cultures are often reflected in Mission, Vision, and Value statements of organizations.

What many entrepreneurs or new organization struggle with as well, is how to create a culture from the ground up. What kinds of statements and values do they advocate? What are areas of focus? Who are our competitors and what can we do to create a service, product, or quality advantage?

Building a strong culture can be challenging, but a good place to start is looking at the best cultures around.

A new resource by Tettra, Culture Codes, has everything you could want to know on different companies their cultures available for you to study up.

Over 40 companies employing over 280,000 employees have created culture decks and collected core values and mission statements. Companies like Spotify, Netflix, LinkedIn, and NASA have all contributed information.

This information is great for young companies or entrepreneurs to start building a schema about what kind of culture they want to create.

Or existing established companies can look towards peers and competitors and help decide what statements they want to engage culture change on.

For job seekers, Tettra can help potential employees gauge if they are a fit for an organization, or discover that maybe an organization they dream about working for has a culture they may not jive with. And perhaps most valuably, transparently showing off your culture and allowing it to be compared means that organizations can better compete in the talent market.

Recruiters should be obsessed with talking about culture – because it keeps people in the door.

The reasons why people leave employment: work/ life balance, poor treatment, lack of training, or relationship issues with a supervisor or boss; in many ways are a by-product of organizational culture. If you want to compete in the talent market, make culture a selling point and show it off in everything you do.

Even consumer’s benefit from learning about an organization’s culture – values that indicate a commitment to excellence in ethics make consumers feel good about supporting an organization.

It pays to have a good culture. I encourage you to head over to tetra.co/culture-codes and see how companies like Etsy are keeping it real, every day.

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