“When you appeal to the highest level of thinking, you get the highest level of performance.” Jack Stack, The Great Game of Business
This week I’ll cover High Involvement Planning, a new way to budget and engage your team in the planning process. I will also share how we implemented open book management and transformed our company.
Critical Numbers
There’s no shortage of numbers you can track in a distribution business. The key is to narrow down the list to only the most important numbers. These are the critical numbers.
A Critical Number is the “the center desk drawer number”. It’s the number that your department managers use to measure their success, productivity or effectiveness.
The goal is to bring those numbers out into the open (get them out of the desk drawer) and report them at the weekly Huddle.
Another way to identify Critical Numbers is to take a minute and write down a number that is meaningful to you. What do you look at? What keeps you up at night? What do you worry most about?
Determine what is most important, measure it, and report it at the Huddle. You may find that someone else in the Huddle has the solution to the problem that’s been keeping you up at night.
High Involvement Planning
The traditional budget process can be a nightmare for everyone involved. A lot of time is spent creating spreadsheets that are outdated as soon as they are done. It’s a waste of time and money for everyone.
High involvement planning is an entirely different approach to the budget process. It empowers department managers and line employees to create their own plan.
Further, the plan is a ‘living’ thing. It is built to adjust and adapt to changes in the business. In this way, the plan is used all the time, instead of being hidden away in a three-ring binder somewhere.
Each department financial plan is shared at the huddles and serves as a weekly reminder of the financial goals of the company. If you are coming up short, everyone can see what is going on and help to fix the problem. If goals are being met and exceeded, everyone can celebrate in the victory.
High involvement planning allows employees to have a voice in the process and to shape the financial direction of the company. Imagine, all those minds working to create and achieve the financial goals of your business.
OBM: How we did it and how you can to
We implemented Open Book management in a time of sales and SKU growth. We were concerned about keeping on top of our financial results, improving communication and maintaining a strong corporate culture. OBM helped us with all of these.
The first thing we did was hold a series of OBM meetings to explain what this was all about. We held group meetings with each department, explained the purpose of OBM, and encouraged questions.
Many people were skeptical about OBM, and assumed this was just another wacky management idea that would fade away after a few months. Others were interested and embraced the concept.
After the group meetings to explain OBM, we started our weekly huddles – weekly meetings on steroids.
The ground rules of our huddles were simple:
- Huddles would be held on the same day and time each week: Tuesdays 7am, no exceptions.
- Each department (sales, admin, etc.) was required to send at least one representative to report their numbers. The manager was not required to attend every huddle, but someone from each department needed to represent.
- The reps were required to do three things: Prepare, participate and lead. Prepare the numbers in advance, participate in the huddle, and lead their department discussion.
For the first few months, I would attend every huddle and assist with putting together the weekly financial scoreboard. The sales department would forecast sales and report their expectations for monthly revenue. The inventory manager would report on the cost of goods, and each department manager would report their actual and forecasted expenses.
At the end of each huddle we had a completed financial scoreboard. The numbers prompted lively discussion about how we were doing, and how we could do better.
While the communication during huddles was primarily done in numbers, there was time each week for sharing other business information.
We talked about new products that were being sold, new customers that had been signed up, and information about the beer industry in general.
The communication in numbers kept us on track financially. The communication amongst department representatives improved our communication, and kept our culture strong.
Employees want to be in the loop about what is going on in the business. They are always looking for details and are starved for information. Open book management is a great way to share information, open up lines of communication across departments, and help to manage the growth in your beer business.
Take the OBM Challenge
So, how do you get started? Take the OBM Challenge. Get a copy of the Great Game of Business by Jack Stack and read the section entitled Player’s Guide: How to get a game going in your organization.
The guide itself is only a few pages long but will fill you with ideas on how to test out open book management in your company.
Sales and SKU growth is exciting, but can leave you feeling overwhelmed. Open book management offers a new way of managing your distribution business so that you can leverage the power of your team and gain control over your financial and operational results.
Take the challenge, and get the book. Take action and test out the ideas so that you can transform the financial results in your business.
