We don’t have to tell you about the stress involved in starting a business. It can be just as stressful working for a startup – in part because those who work for you are never quite sure exactly where the company’s fortunes stand.
A solution, one that some say can boost employee morale and promote an esprit de corps in your ranks, is to simply open the books and give people a look.
Yes, you read that right. Open-book management has actually been practiced here and there in the business world since the 1980s. This style of management makes it possible for employees to see everything from annual profit to salaries.
If this type of business management is something you’d entertain in your own shop, be sure to read up on the arguments for and against. Here’s a summary:
Pro: Gives employees more stake in the company
Nobody wants to be treated like a robot hired to execute the same monotonous task again and again. Unfortunately, this is how it can feel for employees who perform tasks without getting to see the big picture.
Giving employees the ability to see exactly how their job impacts the company is a great way to keep them motivated. You can build a stronger sense of community because employees will see that small tasks play a major role in a company’s success.
It also can open the door to more creative ideas about solving company problems. Usually, members of the management team are the only people who handle issues that come up. Asking for help from employees might yield a different perspective to the problem, resulting in a better solution. As a bonus, employees who have more of a say will be more likely to remain loyal to the company.
Pro: Transparency creates trust
Knowing exactly how much money is going to each shareholder in the company is crucial for a full understanding of the business. Employees might be surprised to find that their boss takes home a smaller paycheck than they thought, or that the business’ bills are larger than they realized.
This is especially true for companies who pay employees a percentage of their gross income. Employees are usually able to see when profits increase, but they might not realize that costs also increase. Showing them everything could prevent any disgruntled whispers about salary.
Open-book management systems can be successful if they are handled appropriately. Some business owners who use this system have saved so much money they were able to give out companywide bonuses or implement other positive features.
Con: Poor Results Demotivate Employees
Sometimes, a business just doesn’t work out. It’s not necessarily anyone’s fault, it could just be a bad economy or too much competition.
If you have an open-book management system, however, your employees are going to see every lost profit. This can invoke the desire to “abandon ship” if employees feel there’s nothing they can do to improve profits.
Con: Not everyone wants salary information shared
Employees and management might have problems revealing how much they bring home each month for several reasons.
People who work on the same level might make different amounts, which can lead to friction between employees. Likewise, employees who see their boss taking home 40 percent of the company’s revenue but skimping on common perks such as 401(k) match could be upset or feel shafted.
The information could also get out to competitors, who could use it hurt your business.
If you’ve been thinking about an open-book management system, it’s important to know all the facts. You can also start slow and make small amounts of information public to your employees.
You might find that the system works well or that you need to go another route. Either way, make sure to look at all your options before making such a drastic change.