Open book management is a big card to play, but it puts everyone on your team at the table, and that’s where you want them to be.
One of the trendier ideas in management consulting as of late has been the concept of open book management. It can mean a lot of things to a lot of people, depending on who you ask. I believe that most stodgy engineering firms would be repulsed by our interpretation of what it means at BIG RED DOG. Luckily for us, we’ve been stodge free since we launched in 2009, so there is no harm and no foul in how we do it.
In my last article for The Zweig Letter I discussed our annual business plan process. Everything we do starts with our business plan. We firmly subscribe to the mindset that if we don’t know where we’re going, any road will take us there. So having the business plan and updating it every year should be table stakes for every engineering and architecture firm. In addition to your professional license, this is the minimum ante to see the cards dealt and to play the game.
The leadership at our firm strongly believes that if you expect people to execute your business plan, they must know two things. First, everybody needs to know what the business plan says and what goals have been set. Second, everybody needs to know how the firm’s performance is benchmarking against the written plan, and they need to know it in as close to real time as we can manage.
The information that we share in our open book management report to our team members is the same type of information that we provide to the owners of our firm. We’re unequivocal about sharing the information because if everybody has a sense of how we’re doing relative to our stated goals, then everybody can also take the appropriate actions to help the company perform better for our clients. An added benefit of our approach is that our engineers, planners, and designers, both new and those with significantly more experience, learn the metrics and terminology of what it takes to run a business. The metrics and information we’re sharing is providing some financial literacy to a group of folks that typically have never been trained to speak that language.
So what do we include in our monthly report to the entire staff? We share our revenue performance – what we billed for the previous month overall and our net service revenue. This is displayed in tabular and graphic form so they can observe the trends over the period of several months. We share our accrual and cash basis income results. We share our accrued bonus pools.
We know that cash is king in a people-dominated business. We are a broker of man-hours, after all. So it’s critical to us that we share our liquidity status. Every month our people are updated on how much cash we have in the bank, how much money is owed to us through our accounts receivable, and how much money we owe other people, which is known as accounts payable. The measurement of liquidity for us is cash plus accounts receivable, less accounts payable.
Finally, we share our project wins for the month. That information includes the client information, the project information, the project fee, and who was responsible for bringing it in. By sharing the breadwinners monthly with the entire team we are creating a healthy competition for our team members to be on that list and to have an impressive number of both wins and total new fees coming into the firm.
We’re living in an age where information is real currency. It costs us nothing to spend that information freely for the benefit of our team members and our company.
Will Schnier is CEO of BIG RED DOG Engineering & Consulting. He can be reached at email@example.com.