“Open Books” innovation in business
René Mendoza, Steve Sheppard y Mark Lester*
Information should not be a tool of power, it should be a means of education
Jack Stack,[i] and hundreds of employees turned into the owners of the Springfield Remanufacturing Corporation, innovated in 1980 the “the Game of Business”, known as “open books management.” This novelty was disseminated to thousands of economic organizations of different types and sizes, in and outside of the United States, particularly to many corporations in that country whose workers became the owners of their corporations. What does this innovation entail? Can it be adapted to enterprises in Latin America?
Every game has rules for scoring and winning, and the team that knows and practices how to score better than others wins. So it is in soccer or in cricket, the team that plays better, scores goals or runs. So it is also in businesses, whose staff are the players, the more they know the rules and play as a team, the more scoring they do, the more money they make, and the more cash they generate. The motivation for this comes from the desire to harness all of the resources possible for success, as well as understanding what a business means for their family and community, from looking beyond the specific job and its pay, and from feeling proud of being part of an enterprise whose numbers – both overall, as well as for each area of the business – they understand: sales, profit and losses, daily production, balance statement…If the company is a coffee exporter, their areas include coffee buying-harvest collection, dry milling, credit, commercialization, administration…Knowing the moves, they know who is on offense, on defense, or in midfield in the business, and they know that they should make an effort based on their “critical numbers” (standards or goals) like sales, cost of raw materials, productivity or cash flow.
This novelty clashes with the myths of traditional businesses (“only the accountants understand the numbers”, “the manager has all the answers”, “the staff should only be concerned about their job”), and proposes a different perspective: no one individual is more intelligent that all the people together; instead of one person who centralizes the information, let the personnel function as a team, generate information and be educated in this game. This allows for collective trust to be built, as well as credibility in the information. From here, if the staff of an area understand that their work is generating profits and losses, then that impacts the balance statement, and that that is connected to the financial rewards that everyone has set when certain goals are met as a company. Then he or she will understand that they are not “a tooth in the grinding wheel”, but an important contributor for the company, their family and society. The more the staff of your organization know, the better they perform, and consequently the company produces with lower costs and has the capacity to offer more unique products or services.
This innovation has been adapted by companies of all sizes and types, and especially by companies where the employees are also shareholders, and they have been successful. In the financial crisis in 2008 many of these companies continued growing, while more traditional firms were shrinking. It does not work in companies with a pyramid-shaped organizational structure, where the leader is on top and the staff down below, and that moves under the spirit of Taylor, separating brains and hands. It requires companies to move toward circular organizational structures (see Mendoza, 2014)[ii] among owners, board members and management, revolving around itself where everyone from the cleaning staff to the manager understand the rules of the game, objectives, goals, and rewards (incentives for all the staff, and not individual incentives, e.g. incentives of x percentage after achieving a 5% increase in earnings as a company), and regular meetings organizing the information of each area and evaluating it in light of their objectives and goals. In this context, when a certain area does not meet their goals, they identify the problems and the remedies, pressure and collaboration is expressed to solve them, because the success of their company and their rewards are in play. This is a model that comes in part from indigenous peoples in the US, the elders and leaders that would meet in circles, where each one expressed their data and perspectives to stay or move to another place, with the role of the chief being to seek consensus, and when there was none, based on what he had heard and his judgement, to make the decision.
This is a game that overcomes Hardin´s[iii] dilemma of collective action, of opportunism (free riding), and that of generating wealth by walking on top of others. It changes the mentality of “employees” to that of “owners.” It recovers the original idea in the US that corporations emerged for the good of the entire society. And it is a game with which businesses are achieving their puprose of making money and generating cash, of producing wealth and having an impact on its distribution.
Can companies and cooperatives of Latin America play this “game” of business? Obviously they can! Nevertheless for companies to achieve it they will have to also overcome other strongly institutionalized myths: “whoever provides information will be crucified,” “the rich are self sufficient,” “God made the poor and the rich, and he made me poor”, “the boss is always right”, “those who mix with business men are disrespectful”. There are businesspeople who would wait until hell freezes over before their staff would buy shares in their companies (“the two don´t mix”), and there are companies whose staff have shares, but continue functioning under a pyramid-shaped organizational structure, with centralized information, and therefore with a mentality of employees and bosses. The teaching that “open books management” left for companies of all sizes and types, is that if you play “the game of business” as a team, with all the players, they will learn more and will generate more wealth; and in the long term the staff that cultivates a mentality of “owners” will organize (incubate) other similar or more democratic companies than the mother-companies, and society will benefit more. Because our lives are brief, and needs and opportunities are infinite, will sign up to play this game?
* René (firstname.lastname@example.org) has a PhD in development studies, is a collaborator of the Winds of Peace Foundation (WPF) (http://peacewinds.org/research/), associate researcher of IOB-University of Antwerp (Belgium) and the Nitlapan-UCA Research and Development Institute. Steve, the current director of WPF, was manager of the Foldcraft corporation bought by its 350 employees. Mark is director of WPF in Nicaragua and of the Central for Global Education and Experience at Augsburg College.
[i] Stack, J., 1992, The Great Game of Business. USA: Doubleday
[iii] Hardin, R., 1982, Collective Action. Johns Hopkins University Press. Baltimore.