PART OF THE CULTURE If successfully implemented, “open book” is more than just a management style; it becomes a company culture. In fact, many remodelers say they made their companies open book to create more consistency with some of their other policies. Most notably, remodelers say that open-book management is an indispensable accompaniment to a profit-sharing program.
Hanson says that he had been distributing part of the company’s profits to employees in an “ad hoc fashion” for about three years. Recently, he established a more formal profit-sharing program as part of the new open-book system. Now, he says, rather than feeling entitled to a bonus, employees understand that how they and the company perform affects the size of their bonus check. “How else would you establish metrics,” Hanson asks, if not by explaining to employees what they must do to reach the goals you set for them?
Hanson isn’t alone in thinking that it isn’t fair to expect employees to reach certain milestones without educating them and giving them periodic updates on their progress. “How else can people feel comfortable that I’m giving them a fair bonus?” says Jerry Burdi, president of DJ’s Home Improvement, in Franklin Square, N.Y. “If you’re going to have a bonus program, there has to be legitimacy to it.”
Burdi has yet to make the switch to open-book management, but is considering it for this reason, among others. Having a bonus or profit-sharing program plays a big part in getting employees to buy in to becoming a more profitable company, which is ultimately why you become an open-book company.
Many remodelers have found that not only is it unfair to keep employees in the dark about bonus programs, it isn’t a smart business move. One of the major selling points of both open-book management and profit-sharing programs is that the more informed the employee, the more of an asset he or she is to the company. Remodelers who have switched their management style with that expectation haven’t been disappointed.
Gindele recalls an incident where a relatively new employee filled a diesel truck’s gas tank with unleaded fuel. The estimated bill to rebuild the truck’s engine was $6,200. Before the company practiced open-book management, the response to this situation would have been what is typical at most remodeling companies: The employee or his supervisor would have explained the situation to Gindele, who would have been left to figure out how to find the money to pay for the repair.
In this case, however, the involved employees put their heads together and went to Gindele with the problem and a solution, suggesting ways to cut costs to save the needed amount.
Strite, who has had his books open for 20 years now, says his first attempt at managing this way actually failed. “I didn’t hire for culture at that time,” he says, noting that he had a key manager who didn’t buy into the process. Since then, he says, “I’m very cognizant of disclosing how we work and what the expectations are during the hiring process.”
Having employees who work well together is particularly important at an open-book company, when it will often be apparent whose performance and whose mistakes are costing the company money. When those situations occur, it’s imperative to have a team that is interested in solving the problem, not pointing fingers.
Olson has only been running his company under true open-book principles for the past year or so. He hasn’t yet gotten to where he wants to be, but he has a clear endpoint in mind: “Eventually, I want everybody in the company to see the bottom line, and to say they have a stake in it,” he says. “I want them to be concerned about the bottom line because of that stake.”