Effective Small Business Management - an Entrepreneurial Approach - Case Study Example

Open Book Management Brief introduction From the case study, Jack Stack and the entire management of SRC introduced the concept of open book management as a way of turning around the performance of the organization within the shortest time possible. By training and sharing all accounting data of the firm with the employees, the organization sought to equip, empower and motivate its employees into thinking and acting as actual owners of the organization as opposed to mere employees (Scarborough & Zimmerer, 2005, p. 242). Following the successful implementation of the concept, the company has achieved success in terms of financial profitability and growth in operations, thus being an example of how the concept of open book management can be used to turn around the fortunes of organizations. Question 1: Research and explain the concept of open book management. The concept of open book management can be defined as a philosophy that seeks to increase the performance of an organization by involving all the employees in the management process of the organization. Its aim is to achieve improved performance of the firm by getting the employees to make decisions like the owners of the business. In order for this to be achieved, the concept is implemented based on several principles which are outlined as follows. - Implementing employee share ownership programs as a means of sharing the ownership of the organization with the employees. - Introduction of different forms of incentives for the employees. This may take the form of bonus awards which are used to reward the efforts of employees in improving the financial position of the organization. - Reviewing the results of the organization together with the employees on a regular basis as a way of keeping them informed of the progress of the organization. - Training employees to equip them with the right skills and knowledge to understand financial and operational information that will be made available to them. - Sharing all the financial and operational data of the organization with the employees. This practice is important as a way of showing employees how important their decisions are in influencing the performance of the organization in general. By implementing the concept using these principles, the process of managing an organization is turned into a game which both the management and the employees enjoy playing. Question 2: How will application of the concept benefit a business and its employees? Explain. - Increased sense of responsibility. By offering employees access to all information regarding the financial position of the organization, the practice of open book management enhances a sense of responsibility among the employees. This is because they feel a sense of responsibility about the present and future performance of the business. - Increased motivation among the employees. With the knowledge that they are key players in determining the profitability of the business, employees gain increased motivation in their work. Increased motivation may also be derived from the employee share ownership programs which may be implemented as part of the open book management concept. - Reduced corporate bureaucracy and improved decision-making Since employees share the same information about the financial position of the business with the senior managers, they are able to make the right decisions when carrying out their duties. This is beneficial to the organization in the form of improved efficiency and overall transparency in the decision-making process. Question 3: Identify and explain the important conditions for effective practice of open book management. - Training in basic business literacy Since the practice of open book management entails making all the critical financial information about a business available to the employees, there is need for the senior management of the organization involved to develop and initiate appropriate training programs for the employees. The training should cover a wide array of topics with the sole aim of enabling employees to understand basic financial literacy so that they are able to interpret and understand the financial statements of the business without having prior knowledge in accounting. - Availability of other incentives for employees Although sharing financial information with the employees is an important aspect of open book management, this is not enough. For the concept to be fully operational and beneficial to both the employees and the organization there is need for the management to develop other incentives for employees. This may take the form of stock ownership plans as a way of increasing their sense of ownership and responsibility. Also, incentives may be in the form of rewards for the efforts of individual employees towards improving the financial performance of the organization. - Open and sustained communication For effective implementation of the concept of open book management, there is need for the senior management to ensure effective and timely communication of information to all employees within the organization. In the same manner, there is need for a sustained communication of information from the employees to the management. Communication of financial information should be maintained during times of favorable or unfavorable financial performance. This is important to ensure that the concept is successfully implemented and maintained within an organization. Question 4: Why do the majority of business owners prefer not to disclose their business records to their employees? Is this a better practice to open book management? Explain your position - The risk of losing employee morale Since the open book management practice entails sharing all financial information with employees, there is the general risk of employees losing their morale during times when the business is not performing well. Further, since accounting data is by nature highly technical, there is the possibility of employees misunderstanding and misinterpreting it as a result of being overwhelmed by the new information and concepts. - The risk of information leakage Since employees have access to important data about the financial performance of the business under the open book management concept, there is the general risk of this information being shared with unauthorized persons including competitors, suppliers or even customers. Unauthorized sharing of such sensitive information may present different risks to the management of the business. - Disruption of the management practices Many business owners avoid implementing the open book management concept since sharing of all financial information with the employees may disrupt the way the business is actually managed. This may be the case when those who have access to the information lose control over it as well as their responsibilities since the information is made available to all the other employees. Although there are several risks that come with the practice of sharing financial information with all the employees within an organization, business owners can effectively alleviate the risks if special consideration is given to conditions necessary for implementing the practice. Therefore, depending on the nature of a business, the open book management practice can be beneficial since the associated risks can be effectively managed. References Scarborough, N. M. & Zimmerer, T. W. (2005). Effective small business management: An entrepreneurial approach. New York: Pearson Prentice Hall. Read More