By Bill Fotsch
This is a story I’ve told before, but it bears repeating.
Years ago, long before I heard about open-book management, I was assigned by my employer, J.I. Case, to visit a company then known as Springfield ReManufacturing Corporation, or SRC. “They’re a small but innovative supplier,” my boss told me.
SRC employees, I’d heard, were supposed to know a lot about their business’s financials. Frankly, I was skeptical. So when I came across a shop employee polishing crankshaft journals, I decided to ask him a question.
“Good morning,” I said. “My name is Bill Fotsch. If you don’t mind, I have a question
for you. I’m told that most SRC employees really understand their business. I’m curious: What is the price of that crankshaft you are working on?”
At Case, I thought, asking such a question would probably provoke a grievance for trying to embarrass a union worker. Here, I figured I’d get no answer, and I’d probably wind up explaining the difference between price and cost. The guy looked up. “List price or dealer net?” Then he went on to explain both prices, how they compared with SRC’s cost, and what his own component of the cost was.
SRC, of course, went on to become one of the best-known open-book companies in the world. It now employs more than 1,200 people in 17 business units.
Since that time, I’ve had the chance to help hundreds of companies implement the open-book approach. But I’m constantly amazed by what I hear from employees. One of my clients, for example, was the Zambian Consolidated Copper Mine, which at the time provided thousands of jobs and most of the foreign exchange of Zambia. The company was short of cash, so we had mounted an effort to publicize the cash bottleneck and get employees thinking about how to remedy the situation.
I was walking through a large processing plant, when I came across a man in ragged clothing who was applying grease to the bearings. I asked him what he was doing. He said he was generating cash. At first I thought he might just be telling me what I wanted to hear. So I followed up, asking him to explain how he was generating cash.
He said, “See these bearings? If I don’t put grease on these bearings, they will seize, so they won’t be processing the copper, which is how we generate cash.” I found that I was the student, and he was the professor.
I’ve seen this kind of thing over and over. High-school students at a Chick-fil-A store learning to understand their store’s income statement. Nurses at Johns Hopkins Hospital cardiac care unit learning to manage their unit’s financial performance while delivering world-class patient care. Pilots at Southwest Airlines brainstorming and sharing techniques for saving fuel (in addition to everything else they have to do!) because the price of jet fuel had skyrocketed.
I sometimes hear skeptical business owners say that they can’t share financial information with employees because “they wouldn’t understand it.” I don’t believe it—not for a second. Neither should you.