TGIM: Does It Pay To Open The Books?

19 Dec

Open Book ManagementIt’s Monday and we’re back with another installment of our TGIM series, or Thank Goodness It’s Monday!  Each Monday our posts will focus on employee engagement and we hope to hear your thoughts on Twitter using the #TGIM hashtag or with a reply to us @SageHRMS.

Open-book management, which refers to the idea of opening the books to employees so they can grasp the financial situation of their company, is a fairly divisive subject. While some progressive human resource professionals argue that such policies help breed trust and broaden the stakes to include lower-tier employees, critics argue that it forces contempt and jealousy over profit allocations and merely adds more voices to the fray of corporate strategy.

While both arguments are true in their own right, the extent to which they are – and the efficacy of such policies – really depends on the company at hand. For that matter, businesses need to weigh the ups and downs of an open-book policy and decide whether or not it is right for them.

Some believe that the beauty of open-book management is that it helps companies compete in an erratic marketplace by getting everybody on the payroll thinking and acting like a businessperson, an owner or an investor – rather than like a traditional hired hand.

This involvement with the direct finances of the organization can also lead to improved retention rates and return on employee investment. When employees are given access to the books, they can observe how the business is succeeding or failing. Ideally, if the company is flourishing, it will offer an incentive for workers to stay, as they may be driven toward achieving equity or some higher compensation package.

The more employees understand about their business and, more importantly, about the consequences of their actions, the more likely they are to align their decisions with the interests of the company.

So what are the downsides?

For one, the dissemination of critical company information can be leveraged for devious purposes by unscrupulous ex-employees. Of course, not every worker leaves in a huff of smoke, but an open-book policy can have a detrimental impact on other aspects of running a business. For instance, at large organizations, lower-tier employees might grow resentful of payroll disparity and end up asking for raises in droves.

Accordingly, open-book policies are often reserved for small companies with less than 20 employees. This way, there is already a performance incentive in the alignment of company success and personal financial well-being.

What are some other ways an open-book policy can benefit or harm an organization?

Let us know what you think on Twitter by tweeting with the hashtag #TGIM, or reply to us @SageHRMS.

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