This article originally appeared on smallbiz-resources.com.
The very first quarter we began playing the Great Game of Business (GGOB), sales went up 10 percent while our profit in that same quarter increased 142 percent.
Tasty Catering first started playing the GGOB in 2011. We always believed in open-book management, but lacked the depth and involvement the GGOB system promotes.
The Great Game system of running a company relies on complete financial transparency. The object of the Game is to create long-term success for the organization and its people, and the strategy of the Game includes identifying and eliminating weakness while building an organization full of business-minded people.
Why Play the Great Game of Business?
When a company plays the Great Game, employees start to think, feel and act like business owners, and that permeates through every decision they make. In the Game, every employee:
- is given the measures of business success and taught to understand them.
- is expected—and enabled—to act on his or her knowledge to improve performance.
- is given a direct stake in the company’s success.
There is a playing field, rules, a scoreboard, a goal and rewards for winning in any game. Running a business is really just like a game in that there truly is a playing field (marketplace and workplace), rules (government regulations and ethics), scoreboards (income statements, balance sheets and cash flow statements), a goal (profit) and even rewards (profit and bonuses).
Within most companies, only a select few employees have a thorough understanding of these financial metrics (or scoreboards) in addition to knowing what can affect outcomes and create a win or a loss. That is where playing the Game turns into a business game-changer.
The reality of the “numbers” is that every employee helps create them. Whether your company is playing the Game or not, those employees still impact what shows up on the financials or scoreboards. For example, when the sales team does a great job, top-line sales increase. When the production and operations teams run efficiently, Cost of Goods Sold decreases. And, when the facilities employees work “lean,” expenses decrease.
Sure, all of the above actually happening might sound like nirvana to some and might not paint a true picture of the majority status of today’s businesses. That’s because most companies have issues with one, two or all three of the following: increasing sales, controlling production costs, and limiting expenses.
Why Companies Need Financial Transparency
We expect employees to punch in and do their share to help the “team” create a winning company, but we don’t provide those employees with a direct line-of-sight to the financial scorecards. This is akin to having them roll a bowling ball through a curtain utilizing only directions from a manager on how many pins were knocked down on the other side and where to roll the next ball. Another example would be playing a football game without a scoreboard or a clock
The employees are playing blind, which does not help your company reach its potential.
In companies playing the Great Game of Business, a commitment to financial transparency gives employees direct line-of-sight to how his or her attitude, actions, and behavior impact the company’s financial scoreboards both negatively and positively. Most employees can associate well with games when it comes to this topic because games take the “fear of financials” out of the equation.
Some of the typical barriers to the Great Game include: When a company plays the Game, every employee is given a direct stake in the outcome. This comes through a bonus program tied to the company’s success. Ownership sets a minimum profit requirement typically within the industry benchmarks. After the minimum profit is achieved, the “excess” (above the industry benchmarks) is shared quarterly with the employees through a time-tested bonus program. Sharing the bonus quarterly creates early and more frequent “wins” that keep employees energized. If the bonus is missed one quarter, with a little extra effort it can be made up in the next. The bonus is distributed equally through a salary percentage-based system so each employee makes the same percent of his or her salary.
Most companies that think they are “open book” are actually teaching history. If ownership shares income statements, that sharing occurs 10-15 days after the month closes, at best. At that point, the statement is a history lesson that doesn’t allow employees a chance to impact change in the first 10-15 days of that month.
Typical Barriers to Integrating Open-Book Management
Let's dive more in-depth into some of the common challenges ownership faces when implementing financial transparency and open-book management:
Fear of showing numbers to employees because they will know how much profit the business makes. Most employees think that companies make more than double the actual company profit. The first thing Tasty Catering did before starting the Game was ask each member of the company to write down what they thought the company’s net profit was based on current sales. The CFO tallied the average of the employee perception of net profit and the results were astonishing. The employees thought that the company made more than 15 times what the actual profit was. Strike that fear!
Fear of showing numbers to employees because they are embarrassed to show a loss or little profit. Most people, including employees, love an underdog and a challenge. Give employees the chance to pitch in and help, and you will be amazed by the cooperative team spirit that activates to make things better.
Fear that employees won’t understand how the financial scorecards in a company work. Don’t underestimate your workforce. Even if there is an English as a second language barrier, numbers are a universal language and we all have to deal with income statements, balance sheets, and cash flow at home when we pay bills and balance our checkbooks. During the GGOB implementation process, we actually found that front line staff gained an understanding of the financial scoreboards more quickly than our management did!
Fear of competitors getting a hold of their financial scorecards. So what! If they aren’t practicing the Great Game, and if they don’t have your engaged workforce, what are they going to do with your financial information? As an owner, what would you do with your competitor’s financials other than look at them and perhaps be envious—or reassured?
Fear of employees knowing each other’s salaries. This is the one area that’s not transparent with open book management. In the Game, salaries are lumped together by department, area or all in one category, depending on the size of your company, so no one knows exactly who makes what.
Ownership's commitment to the Great Game of Business. Open finances are simple, but not easy. The GGOB requires a strong determination to provide continuing education and transparency in everything but salaries. After a period of time, the company will start to run itself and be much less of an emotional and psychological drain on ownership. Many owners have a tendency to be “flavor-of-the-month” leaders. They start an initiative that’s the “next best thing” in their business, only to see it fade and wane after a period of time or when it’s time to switch flavors.
You’ll notice there are not any barriers stemming from front line employees –they are sitting on the bench, wanting to learn more about business, their hands high in the air begging, “Put me in coach!”
How to Drive Progress Within Your Company
With the Great Game methodology, the Game is 95 percent forward-focused and 5 percent looking back. Weekly all-employee “huddles” are held to predict where the month will end. Each employee has ownership of a line on the income statement on which he or she can affect change by making that number as good as possible. In the huddles, employees forecast how their “lines” will end the month and their numbers are written on a large scoreboard. As the month moves along and more information becomes available, forecasts are adjusted and written on the scoreboard so that all can see how the month is progressing towards the bonus goal.
Gains (or “wins”) are celebrated at each huddle and numbers that need to improve are identified. The next “play,” is called and everyone leaves energized, knowing exactly what has to be done to win the Game–and reach the bonus.
Once a company implements the Game and realizes early wins, the outcomes are incredibly powerful. Departmental silos vanish and different areas of the company begin to work together to increase sales and/or cut costs. The wisdom of the crowd is harnessed.
The Game fosters an atmosphere that stimulates front line leadership, bottom-up innovation, and positive peer-to-peer pressure, teamwork and communication. Employees know exactly where the company stands financially believing they are more part of the team and have more job security. Wealth is created for both the company and employees alike.
Basically, the entrepreneur residing somewhere inside of every employee is unleashed, and when all of your employees care about your business as much as you do, that’s when your Game, your company dynamic and your employee ownership begins to change.