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Opening Up Books to Employees Boosts Profits


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"It was all Greek to me in the beginning," says Mr. Biggs, who has worked for the company nearly 11 years. "It takes a while to understand it all." Now, when Biggs sees the company financial statements, he zeroes in on the cash-flow situation. "That tells you a lot about the health of the company," he says.

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Candy Smalley, who works in the same factory, focuses on material usage and production volume. "We know how many parts we need to move per day," she says. "I can't go and make more sales since I'm on the floor. But I understand where I can make a difference."

Biggs is convinced that "knowing what's going on makes a person a better employee." Peer pressure plays an important role as well, he says. "If I can't get the parts I need, I'm going to come over here and say something."

Biggs says he will take an engine apart himself to get the part he needs. "It's best to get it out and turn it into cash rather than having it sit in the shop," he says.

Despite the general enthusiasm on the factory floor, some workers are not convinced SRC's executives are putting everything on the table. "Some of us still think there's a separate set of books somewhere that we don't see," says one assembly worker.

Stack insists that his only goal is to be as honest as possible and enlist the help of all his employees. Yet he is well aware that most company owners and top managers have little interest in revealing their numbers. "It's a cultural thing," he says.

"Business people get overly concerned that their numbers are going to be used against them," adds CFO Don Ross. But Stack says that has never happened to SRC.

Still, "many companies are reluctant to open books to anybody, particularly employees," management expert Mr. Pell says. "Often it's because managers are making more money and owners are taking more out of the business than they like employees to know."

Living in a glass house

Opening the books does raise employees' expectations, Bredfeldt says. "When you open the books, you begin living in a glass house," she says. "You get a lot of questions." Company owners and managers have to be prepared for that, she advises.

The many firms that have come to SRC to learn about open-book management and to implement it themselves are finding that the payoffs require patience and persistence.

At Mid-States Technical Staffing Services in Davenport, Iowa, the boss began opening the books to everyone three years ago.

Brenda Wiese, the company's bookkeeper, says the new approach makes her job easier. "People know what I'm talking about now," she says.

Under the old system, only Ms. Wiese and the company owner knew the company's financials. Now everyone does.

"It definitely takes extra time" to hold meetings and share information, says Mid-States employee Don Miehe. "But then people know how to react to changes." For Mr. Miehe, it's made a significant difference in his personal life as well.

"Knowing that the company is doing well has given me the confidence to buy a house," he says. "We're closing in about two weeks."