As varied as remodeling company owners are, they share several personality traits. Most are independent-minded and strong-willed, and they tend to keep their cards very close to their vests. When it comes to management styles, “my way or the highway” is the prevailing theory.
So it comes as no surprise to learn that few management styles meet with the kind of gut-wrenching negative reaction reserved for open-book management. “I don't want anyone to know how much I make” is among the tamer of the typical responses from company owners who believe that what employees don't know won't hurt them.
Such fears are unfounded. Practicing open-book management doesn't obligate you to tell your employees how much money you make. Of the 10 open-book-company owners interviewed for this article, just 2 said they share information about their salaries with all of their employees.
Nor should you be afraid that you'll be revealing the salaries of your employees. “The point isn't to get down to what individual people make,” says Charlie Gindele, president of Santa Ana, Calif., replacement contractor Dial One/Renewal by Andersen. “It's to get everyone to understand the costs of running the business, and to get them to identify areas where expenses can be cut.” As a management strategy, open book not only helps a company function more efficiently and reduce overhead, it encourages all employees to think more like owners, a boon to any company's bottom line.
But enough about what open-book management is not; what, exactly, does it entail? At the most basic level, being an open-book manager means sharing your company's income statement — or profit and loss statement (P&L) — with your employees on a regular basis. This typically occurs in companywide meetings held at regular intervals, generally no less frequently than monthly or quarterly.
While some companies reveal more than others, open-book remodelers often show only a condensed version of the P&L. “We show them a very abbreviated income statement,” Gindele says, “with seven or eight total line items.” Gindele's direct costs are lumped into one line, while overhead is broken into three; one each for field, sales and marketing, and general administrative expenses.
Many open-book remodelers who choose to share just a summarized P&L with their entire staff supplement companywide meetings with follow-up sessions for managers and other key employees. In those smaller meetings, the income statement is typically expanded so it can be dissected line by line.
Project managers at Olson & Jones Construction, in Portland, Ore., for example, know the exact revenue and gross profit margins on their individual jobs, according to company president Greg Olson. He adds that his PMs see one another's revenues and margins in aggregate on each monthly report.
Other owners choose to share a more detailed statement with the entire team. “All players in our company have access to anything they want, except what others are paid,” says Jim Strite, president of Strite Design + Remodel, in Boise, Idaho. At Strite's company, as at several others that take this approach, individual jobs are compared with the budget. “That way, we can brainstorm as to how we can make corrections before it's too late,” Strite says.
By and large, remodelers who have made the decision to become open-book companies are extremely pleased with the results. That doesn't mean, however, that they don't have concerns. “Every time we have one of these meetings, we print out the profit and loss statement and make copies of it,” says John Hanson, “and then our guys walk off with it.” Hanson, co-owner, with brother Chris, of Hanson General Contracting in Philadelphia, says that while he can't think of anything particularly harmful that would happen if one of his guys accidentally left the P&L lying around a jobsite and the homeowner got hold of it, he still makes sure to put “confidential” on it.
Hanson also worries a little bit about what would happen if he had a falling out with an employee, who then went to a competitor. Chris Ettel, partner at VB Homes, in Virginia Beach, Va., shares these concerns, and has hit upon a solution. “We don't give out too many handouts,” he says. “We do most of it through a PowerPoint presentation.” Hanson says he's considering switching his method to use a projection screen in the meeting room.