This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Why Your Business Should Be an Open Book

CHICAGO ( TheStreet) -- Most small-business owners have an open-door policy. When you've only got a few employees, holing up alone in an executive suite isn't an option. But being truly open about the state of the business is another matter, and when it comes to sensitive financial information -- such as how much your company made (or lost) last year -- owners prefer to keep mum.

Why? A management approach known as "open book" has been gaining popularity by advocating the opposite approach. In its most simplistic form, it means literally opening the books: letting all employees see the company's financial statements, so they know exactly where you stand.

A management approach known as "open book" advocates letting employees see the company's financial statements, then getting them fully involved in ensuring those statements stay in the black.

But shedding the secrecy surrounding profits is just the first step. Having the knowledge is one thing; it's what your employees do with that knowledge that really matters.

Any employee can be taught how to read a balance sheet or profit and loss statement, says Wayne Baker, a professor of management and organizations at the Ross School of Business at the University of Michigan. "If that's all you do, you haven't given people the tools to take action," he says. "Financials don't provide information in a form that's actionable."

Another problem with focusing solely on finances is that you're looking at the past rather than the future. "Financial statements tell you the history of a company, but not where you're going," Baker says. "It's like driving down the street only looking in the rearview mirror."

The father of the open-book movement, Jack Stack, first put the theory into practice as CEO of Springfield Remanufacturing in the early 1980s. (Stack's principles have since been spun off into a coaching and training company, The Great Game of Business). Studies have shown that companies using the approach achieve better performance and productivity compared with those that don't.

As a comprehensive approach, open book management depends on three key principles, all of which have parallels to the sports world (hence, the "game" of business):

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,072.31 +98.00 0.58%
S&P 500 0.00 -2.75 -0.14%
NASDAQ 4,535.9230 -13.3030 -0.29%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs