The impact of open-book management in small business

Open-book management is the ongoing process of sharing company financials, educating employees on the data, and giving them context to understand how their day-to-day actions impact the bottom line.
manager talking to employee with open book management

Coupled with incentives through stock ownership, employee owners have the skills, agency, and desire to make their company successful.

Central to this belief, every president at a Teamshares network company takes an open-book management approach, which helps drive our vision of creating $10 billion in stock wealth for hard-working Americans forward. 

Opening the books means that each employee owner has access to the high-level financial data of their respective business.

We spoke with UC Berkeley Haas MBA, Mike S., who leads two Teamshares network companies. In both businesses, he’s created a transparent culture where employee owners not only have access to company financials, but have started education to understand the metrics.

This has enabled company growth and a more engaged workforce as Mike shepherds the companies to 80% employee ownership.

What is open-book management?

Open-book management is the ongoing process of sharing financial information with employees including revenue, gross profit, and operating profit. More than just the raw numbers, opening the books is also about educating employees to become more financially fluent and understand how their work impacts the bottom line. 

An organization that practices open-book management has more engaged employees who understand how they can improve their company’s financial performance. 

screenshot of company financials in the TeamsharesOS platform

Open-book management can result in better employee decision-making and, ultimately, a more successful company.

How to educate teams to interpret open-book financials

To see the benefits of open-book management, organizations must continually educate employees on core financial topics and how to interpret them.

When employees are financially fluent, they make better day-to-day decisions and positively impact the business.

Employee owners at each Teamshares network company are given access to an educational and financial platform, TeamsharesOS, where they can track the company’s financial performance in real-time, understand their equity, and improve their foundational knowledge through shareholder education.

Employee owners at Teamshares network companies participate in monthly meetings with financial education, discussions around business performance, and actionable takeaways.

As employee owners start to understand more and more about their business, employee owners are encouraged to discuss:

  • Monthly and yearly financial performance
  • Critical goals such as revenue opportunities or improvements to company culture
  • Feedback for the business

Mike not only shares the company financials with the employee owners during these monthly meetings, but educates them on challenges and opportunities to improve the bottom line.

Apply to become a small business president of an employee-owned company near you.

As he continues shareholder education, the team is becoming more financially fluent and empowered.

Mike recalls a time when an employee owner directly impacted monthly gross profits: “A service writer in the front office noticed we had a lot of old air filters that we were unable to use.”

“They were able to work with one of our key vendors, even though [the parts] were multiple years old, and the vendor was able to sign off [on the return],” he explains.

“I’m pleased that one of our employee owners has enough ownership, foresight, and understanding of how to pull levers, to impact the profit and loss statement.”

An open-book management methodology works beyond just employee-owned companies.

Organizations can successfully implement a culture of ownership to build empowered teams by:

  • Sharing the financials with employees regularly
  • Educating employees on core financial topics
  • Giving teams the tools to interpret the financials
  • Aligning employee and company goals to grow the business
  • Facilitating continuous feedback about the business and individuals

With continued support and education, open-book management helps encourage a culture of satisfied employees and better business outcomes.

Inspiring individual actions to impact company performance

Mike understands that to engage employees in open-book discussions, he must continually exhibit the connection between financials and tangible actions.  

“I try to make financial education as relevant to their work as possible, so they think about ownership in terms of the ways they have the ability to pull to help grow the business and impact the bottom line,” he explains. 

To facilitate learning despite different communication styles, Mike encourages questions in both group and private settings. 

“We’re trying to promote a culture of continuous improvement as opposed to blame.”

“Oftentimes, I field questions but I also let people know that my door is open at any time. Sometimes people aren’t comfortable asking questions in group settings. Making sure I’m available to answer individualized questions is really important to me,” he explains.

The more Mike educates the employee owners on open-book financials, the more confident they are in voicing their opinions to improve the business.

“I’m always excited when folks have questions, because it means they understand, care, and are absorbing some of the content,” he says.

Mike continues to see positive culture shifts with open-book management the more he educates the team.

“We’re trying to promote a culture of continuous improvement as opposed to blame. So if someone makes a mistake, instead of blaming, which isn’t effective, we [ask ourselves] how do we learn from this and go forward?”

The empathetic mindset of improvement over blame has empowered Mike’s team to take more ownership of their tasks and associated decisions.

“In our monthly meeting, the lead technician is pushing the fact that efficiency is how we make money,” he continues.

“They’ve been good in emphasizing that point to the team, which ultimately makes their work more tangible and relatable to the bottom line.”

Turning a $1,000 expense into revenue with open-book management

Mike continues to see employee owners make better decisions for the business the more they’re exposed to open-book financials.

He describes a time when an employee owner identified a way to remove waste material for a profit.

“We were paying over $1,000 to remove waste material from our facility, and someone on the team identified that we could have it picked and have a small amount of money paid to us,” Mike explains.

“So instead of paying to have it removed, you’re collecting a few bucks, that’s a pretty big delta if you do it a few times per year. Every $1,000 being added to that bottom line is important.”

“The more we can have illustrative examples of people making impactful decisions, the more it will become ingrained and pervasive in the culture.”

Mike praised the employee owner for identifying the cost savings and used it as an example for the wider group of how identifying small improvements can make a business impact.

“I shared that one of our employee owners was able to discover an opportunity with a decently large impact on our bottom line. It helped show how everyone could look at their own operations with a similar lens and identify opportunities over time,” he says.

“The more illustrative examples of people being empowered to make impactful decisions we have, the more it becomes ingrained and pervasive in the culture.”

Looking beyond open-book financials

Mike explains how the entire ecosystem surrounding a small business influences its success, from employee owners to the community they serve.

“We’re trying to pull as many levers as possible to bring folks into the company’s ecosystem so we can all feel we’re moving the needle while doing work that’s important to us,” he explains.

Mike’s company does various community events throughout the year, including regularly hosting a “random acts of kindness” challenge, where random customers receive a $25 gift card for being a patron.

The effort improves customer retention and creates a compounding message of kindness within the community.

“The company has been a pillar of the community for so long, it’s my goal to keep the momentum going.”

A local paper captured one such customer interaction at the business.“A customer came in for some inexpensive work and was informed of another problem. She told them she couldn’t afford it and two customers who overheard this anonymously paid for her entire bill.” 

“It’s a mobilization of folks behind the company. Whether that’s getting a service or interest in impacting the community,” Mike says.

“The company has been a pillar of the community for so long, it’s my goal to keep the momentum going.”

Open-book management tips for new leaders

All leaders implementing open-book management can create recurring time to discuss financials and how each employee can impact those numbers.

During that time, leaders should encourage questions and provide education and tools for employees to understand financial data.

For new leaders implementing open-book management, Mike emphasizes the importance of relating financial performance back to the employee’s individual tasks to help foster a more collaborative culture.

“The why and the context behind the numbers is key,” he says.

“Open-book management goes hand and hand with collaborative leadership. If folks see the data that their work translates into, they’ll make better decisions and ultimately take actions that impact the bottom line.”

He advises new leaders to have the humility to acknowledge that employees have on-the-ground expertise that leaders don’t, and to empower employees to impact the processes they touch.

Throughout his tenure, Mike has helped employee owners realize how critical their task-level decisions are to company performance and increasing their equity in the business. In leading with open-book management, Mike has seen the company grow and employee owners become more engaged.

Want to lead employees at financially successful companies using open-book management? Apply to become a president of a Teamshares network company and help a small business transition into employee ownership.

Teamshares writers follow strict principles for sourcing credible information within articles. Any outside information including direct quotes, paraphrased information, and concepts that are derived from external sources adhere to our standards for accuracy and transparency.

  • S., Mike. Interview. Conducted by Jessie Baker, 15 Sept. 2022.
    Turcotte, B. (n.d.).
  • Chicopee Random Act of Kindness. Chicopee Register, pp. 2–2.
Join the list for updates

Learn how we’re making employee ownership the future of small business.

Related Articles