Tuesday, July 24, 2012
Over past couple months, I've had some MAJOR changes in my thinking about empowering and compensating employees. It's based in Open Book Management but with a lot of important twists to it.
My first inspiration, came from reading Ownership Thinking by Brad Hams (published last Fall). He worked with Jack Stack of The Great Game of Business and now has a consulting group that helps companies shift their whole organization with great results. I also heard Brad speak in Boston and then had lunch with him and my partners.
My next inspiration came from Zingerman's (again). While dropping Ari (co-founder) off at the Denver Airport I asked him where he thought my biggest opportunity for growth was, and he said open book management. A couple months later, me and my partners hopped on a plan back to Ann Arbor to spend two full days learning everything we could about how they do open book management and why it makes such a huge difference with employees, bottom-line results, and constantly delivering more value to customers (www.zingtrain.com).
In a nutshell (which will do no one any good, unless they really dive into each further):
1. Weekly meetings with dashboards (see above example)
2. 20% of meeting time spent talking about what happened, 80% on brainstorming improvement
3. Front-line employees "own" the lines on the dashboards - creating more involvement/engagement
4. Plan & Forecast the numbers as a group
5. If team exceeds plan, then a "gain share" on what's made above the plan is shared
6. Everyone learns about revenue, expenses, profits, inventory, and receivables.
Brad Ham's Ownership thinking takes it one step further with having Rapid Improvement Plans running every quarter, whereby the team picks something to improve. Calculates what the improvement is worth to the company and then financially shares part of those improvements with the employees. For example, if a $100k reduction of receivables or inventory is worth a $10k increase in profitability to the company, the employees will share 20% of that improvement or $2k. From a bonus compensation standpoint, what I like is that it is an EARNED bonus and NOT an entitlement that typical profit share or end-of-year bonuses tend to be.
Having spent a couple months now across four different companies, the first benefit I've seen from this is it's a lot more fun for employees to be more involved and have more visibility into the details of how the business operates. Many comment on how they feel they are getting a free MBA. The second benefit is seeing employees start thinking/feeling like owners and operating with more can-do-it-ness. It takes the pressure off of management and is actually more effective at getting results than being a management dictated organization. The third benefit I've seen is seeing an increase in the level of value/satisfaction being delivered to customers. And lastly, seeing real results in the organizations operating more profitably (lower expenses AND higher revenues).
It's a deep lake that will take years to learn how to swim really well in. But for now, being waist deep and going deeper feels really good.