Becoming an Open Book: Using Financial Transparency to Create Community at Work

Jul 27

Businesses must become Open Book in order to build a culture of care.

What does the Profit & Loss statement have to do with building a culture of care? A lot! Let me explain…

One of the coolest things about my job in Restaurant Operations is that I get to teach baristas, cooks, and managers about financial performance in a small business. Yes, there is plenty of discussion about expenses, cost of goods sold, and cost management. But we also talk about how those things affect the granular: how many napkins go with a sandwich, whether or not to stop buying root beer, and the cost of frying pans. This approach to managing a business by reviewing the financial statements with the folks on the floor and in the kitchen is called “Open Book Management” and financial transparency plays a crucial role in building better work cultures.

At the core of Open Book Management is a desire to break down an information asymmetry that exists in most traditional businesses. Managers and executives have access to the financial information that guides everyday business operations, and the people doing the real work on the floor don’t have access to that information. There’s a real problem with that antiquated way of doing business. To use a cringeworthy corporate phrase, creating value, is something that everybody in the business can participate in. Open book enriches jobs in that way, providing everyone in the business the real tools needed to do great work.

For example, the Profit & Loss statement can feel a little dense when you first look at it. It’s a kind of income statement, so it starts with a period of time that the statement covers, followed by the various sales that the business realized during that period. The most surprising thing for staff, in my experience, is how little “profit” is left at the bottom of the income statement, after costs of ingredients, labor, and overhead. “We spent how much on packaging?!” The restaurants and retail businesses I have run operate on 1, 2, and 3 percent profit margins.

So that’s all great, but what does it have to do with work cultures? Open Book breaks down the toxic “us” vs. “them” in businesses. Managers and supervisors aren’t operating out of different interests than employees. Everyone knows the “score” and can identify when things are going well, when they’re not, and what to do when they’re not. All staff can celebrate the achievements and successes of the team. Managers don’t feel “alone” when facing tough financial problems, and the power of the team’s intelligence and imagination can be used to solve problems. Open Book is also an equity tool that teaches entry-level staff about the business and paves a path forward for internal advancement. Not to mention, it leads to better financial outcomes; a much needed variable for thoughtful small businesses that carry much higher costs than big corporations.

By using the Open Book method, staff have agency to affect real change and the health and wellbeing of staff is centered in decisions. Wages and benefits are measurable and can be right sized to match the success of the team. In truly exceptional businesses that embrace this approach whole-heartedly, staff can drive financial success, great products and services, and improve job quality as the topline grows. Employees can set goals collaboratively and work to achieve them in groups. The team wants a four-day work week? More paid time off? To donate a portion of proceeds to a good cause? When done well, open book levels the organizational playing field for all these visions and more to take shape.

I’ve been fortunate to work for cool, progressive food businesses that understand the value of sharing the numbers and I have been able to see the real implications when it comes to building connected cultures and improving job quality. I now see Open Book Management as a powerful prerequisite for building work cultures where people can work effectively in teams with aligned incentives. Personally, I see the embrace of Open Book as a long overdue paradigm shift in retail and restaurants—one that trusts and empowers employees along the way.