BodyShop Business
Opening the Books: Balance Sheets
4/1/1997

Research shows employees are inclined to work harder if they're familiar with how the company makes money. In fact, in a survey by Ernst & Young, a U.K.-based consulting firm, 86 percent of employees said they'd be more motivated to help their employers succeed if they had access to the company's financial data.

That's the premise behind a philosophy called open-book management - a concept in which employers treat employees as if they're business partners.

"Open the books so people can understand the financial aspects of the business and find out how the shop makes money," says John Case, writer for "Inc." magazine and author of the book, "Open Book Management." "Sit down with employees in regular meetings and explain what the numbers mean.

"But don't expect employees to become accountants overnight," he says. "Repeat, repeat, repeat. Once they realize how a shop's success benefits them and how much impact they can make, they'll snap to attention."

Case says shop owners should make a game out of teaching employees about the company's income statement. But keep it simple. He recommends keeping track of the shop's financial success on a large scoreboard that hangs in an area accessible to everyone. Each week, update the figures in the following categories: gross sales, cost of goods sold, gross margins, other expenses and net earnings.

Once employees are taking responsibility for the company's success, they should be rewarded. Consider giving staff members bonuses or profit-sharing awards. The amounts can be based on financial results.

"If net earnings reach a certain number, tell employees you'll give them each $100," says Case. "Suddenly, work has changed into a game that employees want to win. People will start watching the scoreboard and looking for ways to improve the numbers. They'll be motivated to cut costs and bring in extra revenue."

Keep employees constantly informed by sharing facts and figures on a regular basis, along with future plans and ideas to boost business. Always ask for employee input. With some persistence, you may see results in as little as two months.

Keep in mind, successful open-book management takes more than a team of company-minded employees. You, too, must be interested in building a thriving, long-term business and realize that employees are business partners - not hired hands.

(Article reprinted courtesy of Movin' Parts magazine.)



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