Increasing Profits by Opening the Books - BusinessWeek

keyword, company, ticker

Available on the iPad

SPECIAL REPORT September 23, 2010, 11:56AM EST

text size: T

T
Business Books

Track and share business topics across the Web.

Increasing Profits by Opening the Books
Financial transparency and giving workers at all levels a direct stake in a company's success can help boost efficiency and earnings, says Jody Heymann
By Jody Heymann

Open Source Software Open Innovation Open Government E-Book Readers

All 213 employees at Great Little Box know exactly how profitable the business is. Executives at the Canadian packaging manufacturer discuss the company's finances, production, and sales performance in detail at monthly meetings with staff that ranges from machine operators on the factory floor to senior managers. Such open-book management is tied to the company's profit-sharing strategy: 15 percent of pretax earnings are split equally among everyone at Great Little Box. The company started profit sharing in 1991 because they believed employees would work harder if they felt "they matter and their work matters," says Margaret Meggy, who co-founded the company with her husband and now serves as its human resources chief. She's right. Our research shows that sharing financial information and profits with low-skilled workers helps boost both efficiency and profits. Yet while sharing profits and financial data with top managers is common, it is rare at the bottom of the corporate ladder. Only 1 percent of American companies use open-book finances, according to CFO magazine. At Great Little Box, managers and factory workers alike say the openness motivates everyone to work harder because they want to increase the company's profits—and their own income. And they don't let colleagues slack off because they know that any drop in performance reduces