A company performs best when its people see themselves as partners in the business rather than as hired hands.

-John Case, Inc. Magazine

“Why is it that when private companies share their business data, everyone freaks out?” Scott Hill, Co-founder and CEO of PERQ, said as we examined the performance metrics plastered on a wall next to PERQ’s kitchen. “I mean, nobody gets uneasy when public companies disclose their earnings–they have to, after all–but when a private company does it, people wonder why. I don’t get it.”

Cracking a smile, Hill explained to me how Open Book Management has become core to PERQ’s culture–and success–in the video below.

Open Book Management Turns Business into a Game

“I’m not going to show the score to my team,” Hill said, tongue in cheek. “I’m just going to tell them when to play hard, I’m going to tell them when to be excited, I’m going to tell them when they’re not doing well.”

Yeah, right.

“We believe that business can be played as a game,” Hill said. “And in no other game does it make sense to not show the score.”

The Basics of Open Book Management

When John Case coined the term Open Book Management in the early nineties, he described three principles that would amount to a fundamental shift in business management:

• Know and teach the rules: every employee should be given the measures of business success and taught to understand them
• Follow the Action & Keep Score: Every employee should be expected and enabled to use their knowledge to improve performance
• Provide a Stake in the Outcome: Every employee should have a direct stake in the company’s success-and in the risk of failure

While John Case coined the term, Jack Stack at SRC Holdings made Open Book Management famous. For more info on Open Book Management, including Open Book strategies and the conference for Open Book Management, check out The Great Game.

Just Knowing the Score isn’t Enough

“If you know the score and you’re just playing a game of basketball, people might not care if you win or lose,” Hill said. That’s why simply sharing business data with employees isn’t enough. For Open Book Management to really succeed in practice, employees must be empowered to take independent action and incentivized to do so.

Hill’s game board is updated daily on where the team stands for the day, the month, and the game period, “So everybody always knows how they stand on their bonus opportunity.”

“To me,” said Hill, “There is nothing worse than a bonus being paid out in March for the previous year and no one even knows what they did or how it occurred, it’s just ‘Here’s your bonus for the year.’ You’re not getting the actual performance increase you can have happen when the team understands how the bonuses actually occur and what they can do to improve upon that.”

Questions or Comments About Open Book Management?

If you have other examples of Open Book successes (or failures), or if you want to dig a little deeper into Open Book Management, you know what to do–comments are below.

Special Invitation: We’re Launching PERQ’s new platform, FATWIN, at a very special Verge Pitch Night event on November 20th.

UPDATE: This event is SOLD OUT! But there will be a livestream on the Verge Facebook page. Here’s a sneak peak of the PERQ office: