Open-Book Test

Raising The Stakes

Once your business starts experiencing results is when the third goof arises: not giving employees a piece of the action. "Open-book management won't work unless employees have a stake in the outcome," says Case. "Why should people put out extra effort just to make someone else rich? They won't do it for long unless there's `something in it for me.' " How much extra should you pay? A teenager in a fast-food restaurant might be happy with an extra $10 or $20 a week when the restaurant hits its target goals. Higher-paid workers will, of course, expect more. The only guideline, says Case, is that "it has to be enough of a stake to be seen as more than just a token in the eyes of your employees."

Open-book management sounds intriguing, but isn't there a way to get your feet wet without diving headfirst into these unknown waters? Case confirms there is a way to do just that. "Focus on a short-term objective [and offer] a specific reward for success," he suggests. As a case in point, he tells about a drive-thru restaurant owner who challenged his employees to reduce food costs from 34 percent of sales to less than 30 percent--and he promised to split the savings. He revealed all the numbers to employees, gave a green light to most of their cost-cutting suggestions, and kept them abreast of the changing numbers on a regular basis. The upshot? "In a few months, food costs had fallen below 28 percent," reports Case.

"Open-book management isn't easy to implement," says Case. "But when you do the work, open-book management gets results. It's a very powerful way to run a business."

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This article was originally published in the June 1998 print edition of Entrepreneur with the headline: Open-Book Test.

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