CEO John Fischer shares Four Steps to Designing an Effective Open Book Finance Scorecard
Open Book Management is based on the idea of reporting important Key Performance Indicators (KPIs). The core of our Open Book Project comes from Jack Stack and the Great Game of Business and our own 12 Laws of Business. According to the third law, “Without Good Finance, You Fail.”
You can’t have good finance without good reporting, and that’s were KPI tracking comes into play. Creating a KPI scoreboard like you see below is what I’m going to talk about today.
KPIs can be financial or otherwise, and we report on them in a weekly employee huddle with a scorecard that sets goals and empowers the team to take action. This allows the team to improve the business and to educate themselves. For instance, we track revenue so everyone can see the financial health. We also have a Bluebird of Happiness that helps keep the mood light at the end of the meeting and tracks our emotional health. For a scorecard to work, it’s all about balance.
“Companies that use Open Book Management consistently rank in the top 10% of all companies surveyed.”
— The Denison Consulting Group
One of the most common Open Book questions is: “How do I choose the KPIs for my scorecard?” Let’s break down the first four steps to consider if you want to begin Open Book Finance.
Four guidelines when starting Open Book Finance
1). What important KPIs are you currently tracking?
Every company is different and will have different levels of reporting and tracking in place. You may discover that your business isn’t even tracking the numbers that truly provide a clear indication of success or failure. You may find that your systems and processes aren’t sophisticated enough to give you the data needed to make informed decisions and learn important lessons. If this sounds like your company, don’t sweat it — this is part of the journey. Start by making incremental improvements in your tracking and reporting, and try starting with the most important and the easiest to implement. When StickerGiant started Open Book Management, it took almost three months to design the systems and processes to accurately report KPIs. That was before we even had a scorecard that worked and that taught the employees the basics of the business — and that’s the point of Open Book Management, to share knowledge and engage employees.
2). Can these KPIs be accurately reported weekly?
If you have a KPI you want to track and put on your scorecard, but it only gets reported monthly or quarterly, figure out how to have the KPI reported weekly by Monday or Tuesday morning for the weekly team huddle. When real-time performance data becomes part of your company culture, you will start to see real engagement. Our weekly huddles put all of the data in front of the whole team on a regular basis. Make the investment of time and accounting to create the systems and processes that will give your team the data they need to learn how to make great business decisions. When StickerGiant was a basement husband-and-wife business, I remember gathering all my receipts and check stubs at the end of the year, putting them in a shoebox for my accountant, and then handing them off so they could do the taxes. Up until that point, I hadn’t been doing any accurate or timely financial analysis all year. No reporting. No forecasting. I had no idea what my sales or profits were, all I knew was if my checking account was going up or down. I’d wait to hear back from the accountant, and I’d know how I did the year before. I was running my business with blinders on. Then I decided it was time for a change. Let’s just say the husband-and-wife team was always playing catch up. Trust me, I have never regretted making the investment in my business, and neither has my accountant. I’ve made their job easier and my business more powerful in the process. Plus, tax time is more enjoyable because we have everything organized and we’ve forecasted the entire year ahead. That’s the beauty of Open Book Finance.
3). Determine the KPIs that the team has the most potential to impact.
Some KPIs are easily changed and affected by employees and some are not. Numbers that the team cannot change are useless and can undermine your efforts to empower the team to take control of the business. This is a huge conclusion to understand. Don’t track numbers that don’t matter. Here is a great example of how we learned this lesson at StickerGiant. Our press department reported a KPI on how much material they consumed every week. This was an inefficient KPI for the press team to report, as they did not control the volume of work that came into their department. This KPI became simply a way for the press team to say “look how busy we are.” When we changed the number to two very different KPIs, everything changed. We added a KPI that reported how many jobs were shipped late and a KPI that reported how many jobs had defects and had to be reprinted. Delayed shipping went from 20% to 3%, which improved the customer experience (that’s our whole business right there, happy customers). Reprints? They dropped from 3% to 1%, and that saved the company the expense of remakes and the associated customer experience. Again, happy customers make a great business run smooth.
4). Choose six KPIs to focus on
Open Book is about learning. Data is fun and some of us really love the deep dive into lots of data. However, business is complicated. If you really want your team to learn how to improve the business by themselves, allow them to focus and really move numbers on their own. When you start out, limit your scorecard to six KPIs. When your company has gotten to ninja level at Open Book, you can add more KPIs. We’re at 24 right now. The KPI lines have fluctuated over the past few years, usually around 20 depending on how we’re feeling about the scoreboard.
This is an ongoing project, and it’s part of the reason that last year Forbes magazine chose to name us one of the their Top 25 Small Businesses of the Year. I’m not a huge fan of patting myself on the back, but this time, it’s all about the team and their focus. I am so proud of the Forbes honor, primarily because it’s the culmination of seventeen years of working on our KPIs and teaching everyone the Great Game of Business. The best part? We’re not even close to done when it comes to playing the game.
If you’re interested in learning even more about the Great Game of Business and Open Book Finance, we offer an open company huddle every Tuesday at 9am. Consider this a standing invitation to transform your business. I look forward to seeing you at the factory. Cheers, John Fischer, CEO and Founder
Founder’s Story on the Sticker Stories Podcast
You can listen to the story of those early days from when I sat down with our podcast team. I had a lot of fun reminiscing because it seems so long ago, but I haven’t forgotten the lessons we learned.
Originally published at www.stickergiant.com on March 8, 2018.
