INDUSTRIAL RELATIONS: Sharing Information

Most bosses are shy about revealing their companies’ vital statistics. Listed firms must follow strict rules, publishing quarterly results but otherwise being cagey, since no individual investor may receive important information before the general public. Privately owned companies tend to be even more bashful. Bosses keep their numbers hidden from everyone but an elite coterie of managers. Their reasons for doing so range from a desire to keep their profits under wraps to a fear that disgruntled employees could hop to rivals with sensitive data.

However, a school of thought dubbed “open-book management” advocates sharing all or most of a firm’s financial data with employees on a monthly, weekly or even daily basis. Widely promoted since the mid-1990s by the likes of Jack Stack, then the boss of Springfield Remanufacturing Corporation, a firm that refurbished diesel engines, and John Case, a management writer, open-book management doesn’t just require bosses to shed their inhibitions when it comes to revealing numbers. It also involves teaching workers to read company accounts. Open-book managers devise scorecards and other tools that show staff how their individual efforts contribute to the bottom line. They also adopt profit-sharing schemes that let workers share some of the wealth they create. The aim is to persuade employees to behave like owners rather than drones.

The Great Game of Business, a training firm that provides advice on open-book techniques, estimates that at least 4,000 firms worldwide have embraced all or most of these ideas, while many others are flirting with them. One or two big companies, such as Southwest Airlines and Harley-Davidson, have dabbled with open-book management. Its most fervent adopters, however, are smaller private firms.

Since small firms are the most vulnerable during downturns, some observers expect to see books that were opened in good times slammed shut, as bosses try to stop workers from seeing just how bad things are. There is no scientific survey to determine whether this is true. But anecdotal evidence from the companies contacted for this column suggests that many have kept on sharing information during hard times. Some have given workers yet more data to chew on, for two reasons.

One is that transparency can calm jitters. For example, during the recent crisis King Arthur Flour, a Vermont-based flour company, drew up a contingency plan with four stages, the last of which involved lay-offs. At each stage, the plan spelled out clearly what King Arthur had to do to get back on track if it missed its financial targets. By sharing this with workers, King Arthur curbed wild and ill-informed speculation about the company’s future. Jenkins Diesel, a truck dealer in Missouri, started giving staff more details about its financial health after it lost two of its four vehicle franchises when suppliers axed production. Although Jenkins had to make cuts, it was able to demonstrate to staff that it could weather the storm by expanding its service and spare-parts business.

Another reason to keep the numbers flowing is that they can inspire fresh thinking. Mr Stack, whose firm is now called SRC Holdings and employs 1,200 people in various businesses (of which The Great Game of Business is one), says one employee noticed the company had built up a big pile of cash that was earning a paltry rate of interest. The worker suggested that SRC should stockpile copper and other metals it was recovering from its refurbishment work, rather than selling them for cash straight away. If the global economy recovers, this stockpile could command a premium that would far outstrip the amount SRC is getting from banks. Mr Stack gave the proposal a green light.

This is the big promise of open-book management: that it lets workers see the bigger picture. Some enthusiasts want to take it further. For instance, Srijan, a small Indian software company, keeps a Google spreadsheet that employees can check to see what each of their colleagues, including Rahul Dewan, the firm’s founder, is being paid. Dane Atkinson, the boss of SumAll, an American software start-up, wants to do even more. His firm has crafted a corporate “constitution” that lets employees get involved in all kinds of decision-making.

This is all part of a wider picture: breaking down the old barriers between “bosses” and “workers”, so that cooperation is maximized, success is shared – and problems too. Germany’s famed Mittelstand industries rate their cooperative management style as a key to their unquestioned success.

The need for some kind of fair relationship between work and reward across the board within industries is also long overdue. There are many Job Evaluation schemes commercially available, while some local authorities and businesses operate their own. A standard nation-wide system would not only bring stability to the industrial and business landscape, it would also give us the world’s first stable, that is non-inflating currency – as well as other surprise benefits all of which are detailed in Pay, Profit and Price Evaluation.