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:
4 Comments
Mr. Dave
Cute, if it is not 100% transparent, meaning the guy next to you knows exactly what the guy next to him knows about his pay/benefits relative to yours, etc. This kind of stuff will present a tremendous distraction, introduce jealously and temptation that were not there before, and result in excellent talent being discouraged from joining or encourage them to leave based on the bickering that is soon to follow. Keep it simple, avoid the “game”
Tim
That’s actually a great point, Mr. Dave. The way PERQ has avoided that kind of conflict has been making each individual’s “bonus number” private. So we’re all working off the same bonus chart and will all receive the same percentage of our bonus number. That number can be very different for different people, but I have no idea what everyone else’s number is.
Tim
As a PERQ employee, I love Open Book Management and after working with it, I couldn’t imagine working anywhere that didn’t implement it. Trust me when I say that it’s hard to implement, however. Showing the score is easy, but making the conscious effort to teach the game and make sure that everyone knows exactly how they impact that score is difficult. I’m impressed at how well the PERQ crew has pulled it off, but I know it comes out of a lot of hard work: studying the business and trying (and failing) with various incentive options.
I’d seriously recommend this strategy to every company.
Scott Hill
Dave,
While we don’t share someone’s individual salary or pay, we do show the collect salary cost we pay as a company. This is a necessary component for all people who work in PERQ to be able to understand the “Game” we are playing…people are our largest investment. However, people in most companies know what other positions make and I’m sure ours is not much different. People talk. What we are after in the leadership of PERQ is to have people understand why someone makes more and that it is performance and the market for your position that determines pay.
The simplest job is one in which you know what you get paid and then work hard enough to not get fired. That’s just a paycheck job. We are after people who want more from the company they work for and we expect more from them. We can always improve on how we communicate and teach the game better and it intentionally isn’t a right fit for just anyone. But for me, showing the game and teaching from it is one of the biggest pleasures I get and I feel the increased engagement from our team is worth the effort in the extra communication.