Most firms provide staff ample financial information
By Jennifer Goupil, P.E.
In his 1995 book, Open-Book Management: The Coming Business Revolution, John Case touted, "The beauty of open-book management is that if employees know whether they’re making money, your company will make money." Ten years later, business owners and managers are still debating the pros and cons of the theory. While many agree with the theory’s principles, often there is reluctance in full implementation.
Based upon data collected from the 2005 Best Civil Engineering Firm To Work For Contest, 52 percent of firms agree that they fully disclose to all staff all financial information about projects. However, only 30 percent agree that they fully disclose all financial information to all staff about the performance of the firm.
All firms in our contest disclose portions of both project and firm financials.
Furthermore, the Employee Satisfaction Survey, which is a component of the contest that included responses from more than 14,000 employees, revealed that 74 percent of employees agreed or strongly agreed with the statement, "I am well-informed about important financial information regarding the firm." Additionally, 77 percent of those civil engineering staff who participated in our survey believed that they are well-informed about budget, schedule, and other important information regarding projects.
Communicating financial information and understanding
Applied Pavement Technology, Inc., a pavement engineering firm headquartered in Champaign, Ill., employs 33 people and has four branch offices. According to President Katie Zimmerman, P.E., project managers have direct access to the financial information about their projects in the firm’s accounting system. Additionally, the budget information is distributed so all managers can supervise various aspects of the company.
The system provides detailed information about conference attendance, building costs, marketing expenses, and other expenditures.
Additionally, explained Zimmerman, "Since the bonuses are largely based on corporate performance, everyone in the company is interested in our performance targets (typically revenue and profitability) and progress during the year. This information is communicated via my column in our monthly newsletter. That way, we ensure that everyone is provided the same information." She added that she uses the column to share information about other metrics, such as multipliers, explaining what the metric is, how it is calculated, and how staff can influence the number.
"Sometimes I sponsor contests to help convey a point," she added. "For example, one month I offered a free lunch for two to the individual who could guess the three highest overhead expenses in the company." Once the contest was over, Zimmerman was able to communicate the information to the entire staff and share strategies for managing those accounts.
Open-book management realities
By Saman Chaudry
Despite the frequency with which we hear the virtues of open-book management, many engineering firms still struggle with implementing such a system. Giving your employees access to a broad range of financial data and metrics breeds a culture of trust and motivation, and instills a deeper understanding of how their contribution impacts the organization. Keep the following factors in mind: Access—Everyone in the firm should have access to the data, from administrative staff to the CEO.We frequently see that firms only offer the information to a limited number of people. Educating the entire firm on how the company makes money is critical in empowering the staff to act with financial responsibility and allows your firm to reap the benefits of open-book management.
Hard copy. The information should be provided to everyone in written form so they can review and process the data. The fear of it falling into the "wrong hands" usually prevents firms from doing this. In reality, the "wrong hands" can do nothing with the data.
Provide metrics. Sharing balance sheets and income statements also should be accompanied by graphs (for example, the number of new leads for the month, revenue per month, etc.), ratios (such as average collection period, liquidity ratio, hit rate on proposals, etc.), lists (new jobs won, monthly write-offs by PM, etc.), and other information that does not show up on these traditional statements.
Provide meaning. The full benefits of open-book management can only be realized when employees are offered an interpretation on the numbers. Management’s explanation reinforces the positive behavior that results in financial success and alerts you and the team when something must change to improve performance.