I recently got to hear Jack Stack tell his inspirational story of working for, purchasing, and turning around a failing division of International Harvester. The new entity that he helped create, SRC Holdings Corporation, is 100% Employee-Owned and still thriving today.
Jack helped enable the turnaround at SRC by taking the time and effort to teach his employees how SRC functioned as a business. He worked hard to educate his team on how the company makes money and generates cash flow. The theory is that, given this important context, the team members could make smarter decisions and act like owners.
Jack and SRC are one of the most visible success stories for open-book management (OBM).
Open-book Management at Atomic
I’m already a huge believer in OBM. Atomic has been an OBM company for a long time. I believe it’s one of the main reasons Atomic has been consistently more profitable than our peers for the past 18 years.
We’ve implemented OBM in a number of ways at Atomic. Here’s a handful of the major items:
- Econ of AO – We require new hires to attend an internal class called the Econ of AO. The class teaches our team members about basic financial terminology, how Atomic makes money, cash flow considerations, and how to read financial statements. We also provide class participants with an economic model for our company that enables them to run what-if scenarios and explore how different levers impact the financial health of the company.
- Quarterly Results Sharing – Every quarter we report on our financial results and provide profit sharing based on those results. We focus on profit margin as our key metric and show a profit margin scorecard to report on how we did during the previous quarter.
- Empowered Project Teams – Team assigned to a client project teams are given a budget. Then they’re given the autonomy to work directly with client stakeholders to build the best possible solution for that budget. The project team is responsible for their project budget and the success of the engagement.
- Company Radiator – We radiate real-time office utilization, site traffic, and our blogging expectation on a monitor for everyone to see.
- Employee Ownership – We’ve rolled our own ownership model to share the actual ownership of the company.
I’m extremely happy with the OBM practices that we’ve implemented at Atomic. However, I’m inspired to do more. I’ve been pondering the following questions:
- Is Econ of AO enough education? Should we be providing our team with additional education around financial literacy?
- Is reviewing our key metrics quarterly during our results meetings frequent enough? Should we be sharing key metrics more frequently?
- Should we be broadly sharing the various metrics that managers review to monitor the health of the company, or would it be too much disparate data to expose everyone to?
- Are Atoms using our existing financial tools to make decisions? Are we providing the right tools and frameworks to make decisions?
- Individual profit sharing is calculated based on overall company success. We’ve grown to multiple offices and have a distributed organizational model. Individual decisions have less overall impact on the financial results of the entire company than they did when the company was smaller. Is our profit sharing still scoped correctly?
I’m curious to hear what other companies have done. Please share in the comments.