Posted on Wednesday, July 18th, 2012
Open-book management requires consensus and planning, but implementation isn’t just grit; it can be a fun game. To encourage participation and make the financial statements meaningful, Harrington Group employees played games. Each game was a month long and focused on an individual goal. For example, one month, the game involved reaching a certain overhead rate. If we hit the goal, we would win a prize announced in advance. The first month, if the goal was reached, everyone received $20. Another month, the prize was an ice-cream social in the parking lot.
Games weren’t administered from the top-down. Before each game, all staff members participated in setting the target and choosing the reward. They took ownership over the areas they thought they could improve and voted on something they wanted. All I had to do was teach everyone about how we measure targets in our accounting process. We broke down complex financial statements so each employee understood exactly what they do each day that contributes to success or failure of the month’s target.
In the late 90s, when we decided to implement open-book management, a bad trend had emerged. Collections were taking too long. They were taking more than 100 days and the delay in collecting our revenue made us constantly stressed for cash. Since it was such a large problem, shortening the collection period became a focus of many of the games. By the end of the first year of our open-book management system, our collection period was reduced from 100 days down to the high 70’s. The pressure for cash was relieved.
The process gave Harrington Group employees the motivation to learn about collection periods. The whole company became engaged and encouraged success. They knew how to strive to achieve a reward and the potential for a share in an annual cash bonus. They understood how goals were influenced and measured. In particular, they learned who influenced collection periods. And when the staff understood the power they had in influencing the business’ performance, they got it done. Year after year, our weaknesses became strengths.
By Jeff Harrington, CEO and Founder of Harrington Group, Inc.
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